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Renters Insurance Glossary

Illustration of a Renters Insurance Glossary

A

Actual Cash Value (ACV)

The monetary value needed to replace an item at the time of loss, subject to depreciation.

Actuary

The person who calculates premium rates, risks, etc. for the pricing of insurance policies.

Additional Living Expense (ALE)

Coverage that provides reimbursement to the insured for costs incurred from hotel or motel stays, food, and other related costs during a time the insured’s residence becomes unlivable.

Adjusted Basis

A property’s modified cost after an official has determined the value based on property renovations and/or depreciation.

Adjuster

A representative from the insurance company that evaluates the property along with insurance liability costs.

Aggregate

The maximum amount of money an insurance company will pay during a policy agreement.

Agent

A company representative that sells insurance policies.

All Risks Policy

A policy that covers the insured from most property damage caused by peril, except those specifically listed in the insurance agreement.

Applicant

A person or company applying for an insurance policy.

Appraisal

The process where a property’s value and/or degree of damage is calculated, usually determined by an independent party.

Assigned Risk

A risk that requires liability obtained from the state due to it being too high to be accepted by the insurance market.

B

Binder

The legal tie to an insurance policy.

Binding

Being legally tied to an agreed upon policy.

Broker

A person that represents the insured when negotiating business from an insurance company.

C

C.L.U.E. Database

Acronym for the Comprehensive Loss Underwriting Exchange: a database by LexisNexis® containing insurance claims history which allows insurance companies to access information regarding their consumers.

Cancellation

A notice that informs the insurance company of a disagreement between the filer against the insurance company.

Cancellation Notices Before Renewal

A notice that informs the insured that their policy is subject to cancellation unless they renew their policy by a specific date.

Carrier

An insurance provider.

Casualty Insurance

Coverage for victim injuries (not including the insured), covered by liability insurance.

Claim

A request for payment to be granted according to the insured’s signed policy.

Claimant

A person, aside from the insured, that makes a claim for payment due to a loss.

Claims Adjuster

A person that determines the cause of a loss, whether the loss is covered by the insurance policy, the value of the loss, and how much of the loss is payable by the insurance policy.

Complaint

A notice that informs the insurance company of a dispute between the filer against the insurance company.

Conditions

The expectations, rights, and duties of the insured and the insurance company under the policy.

Contract

A legal agreement between two consenting parties.

D

Declaration Page

A summary of your auto insurance coverage, the insurance provider’s information, the start and end dates of the coverage, and the coverages provided within the contract.

Deductible

The payment threshold that the insured is responsible for before any payment is made from the insurance coverage.

Delinquent

A bill or policy that is overdue in payment or renewal.

Depreciation

A decrease in property value due to wear and tear or becoming obsolete.

Draft

A check that requires approval from the insurance company before being cleared at the bank.

Dwelling Policy

An insurance policy that operates like a renters insurance policy to cover personal property and structural damage to a home, but does not provide liability coverage.

E

Earned Premium

Coverage that is provided throughout the insurance policy period.

Earthquake Insurance

Coverage for loss of possessions and home damages incurred by an earthquake.

Effective Age

The age of a property based on an appraiser’s evaluation of the property’s condition and maintenance.

Effective Date

The start date of an insurance policy.

Endorsement

An amendment made to an insurance contract in order to alter the original terms.

Escrow

A document that allows a third party to hold funds (to be used for purchasing property) until the agreed arrangements have been met.

Expiration Date

The end date of an insurance policy.

Exclusion

An event, peril, or circumstance that is not covered in your insurance policy.

F

FAIR plans

The FAIR Plan’s acronym stands for Fair Access to Insurance Requirements and is set in place by state to allow individuals to receive minimum insurance requirements when turned down by insurance companies due to their property being “high-risk.”

Field Representative

An employee of the insurance company that contacts insurance agents and brokers within a specific territory.

Flat Cancellation

The cancellation of an insurance policy before the insurer has assumed liability, resulting in the insured getting his/her premium refunded since they were never covered under the policy.

Floater

Optional coverage for possessions that get moved. These are usually high-value items that may or may not be fully covered under standard renters insurance.

Flood Insurance

Coverage for loss of possessions and home damages caused by a flood.

Fraud

A deliberate misrepresentation for gain.

G

Grace Period

A period in time (usually one month) in which a policy with an overdue balance remains in effect.

Group Policy

A renters insurance policy that is sold through a special group insurance trust or employment-based group wherein members are included in a master policy. The individuals involved receive certificates of coverage from the master group insurance plan.

H

Hazard

An act, item, or occurrence that increases the chance of a loss.

Home Inventory

A record of personal possessions for renters insurance purposes to ensure that policyholders purchased enough coverage and to swiftly process claims. This can include receipts, photographs, or video recordings of the belongings.

I

Inflation Protection

A benefit that automatically adjusts insurance limits to account for increases in costs to rebuild or repair a property.

Installment Fee

A fee charged when making monthly installment payments of an insurance premium rather than paying the full term up front.

Installment Premium

One or more payments made by the insured until the entire insurance premium is fully paid.

Insurable Interest

The insured’s concern for financial (or other) gain from keeping a damaged object or property. Also can apply to the life of a victim involved in the incident.

Insurance

Coverage by contract wherein one party agrees to replace or reimburse another for loss under the terms of the agreement.

Insurer

The company that provides the insurance policy and coverage.

Insuring Agreement

The portion of an insurance policy that spells out what perils or hazards are covered by the insurance company.

J

Justified Complaint

Vindication of a complaint filed against an insurance company.

L

Liability Coverage

Coverage that covers the costs for damages to a residence and/or costs for medical bills due to an injury that occurred in the residence. Actual coverage will vary by provider.

Lapse in Coverage

A period of time when an insurance policy’s coverage was not in effect.

Liability Insurance

Coverage that protects the insured from financial loss from liability claims by transferring the financial burden to the insurance company.

Liability Investigation

The collection of information to determine the cause of an accident.

Loss of Use

Coverage that pays the insured’s cost for food, housing and related daily needs after an incident of the home occurs.

Loss History

Record of past insurance claims filed by the insured.

Loss Ratio

The method that insurance companies use to succeed in covering current losses out of a current premium.

M

Market Value

The current value of your home/property, including the price of your land.

Master Policy

An insurance policy that covers multiple locations and/or properties.

Master Policy

An insurance policy that covers multiple locations and/or properties.

Manual Rating

The manner used to determine the cost of an insurance policy using predetermined rates, usually from a manual.

Material Damage

All property damage related losses that are covered in your insurance policy.

N

NAIC Number

A number issued by the National Association of Insurance Commissioners (NAIC) for each individual underwriting company.

National Insurance Crime Bureau (NICB)

A renowned U.S. non-profit organization dedicated to fight insurance fraud and other insurance-related crimes.

Negligence

Failure to take reasonable care to protect others from potential harm.

No-Fault Insurance

An insurance policy that covers medical expenses, funeral expenses, loss of income, and other coverage regardless of who is at fault in an accident (only available in certain states).

Non-renewal

A notification that states that insurance coverage will no longer continue after the agreement’s expiration date.

O

Occurrence

A loss that happens during a specific place and time or over a period of time.

Ordinance or Law Exclusion

Some renters insurance policies may exclude costs of repair or replacement of damaged property that requires upgraded materials according to current building codes. Standard policies might only cover the cost of repair/replacement according to the cost of the original grade materials, requiring the insured to pay the difference unless they have purchased additional coverage.

P

Package Policy

An insurance policy that contains multiple coverages that are available separately. Renters insurance is considered a package policy in most cases since standard plans include property, liability, and theft coverages.

Peril

The cause of a loss such as a collision, fire, or natural disaster.

Personal Property

Separate belongings that are not part of the structure of a residence, such as clothing and furniture.

Personal Property Coverage

Insurance that covers to replace belongings that have been damaged or destroyed within the rented residence.

Personal Liability Insurance

Coverage that protects the insured from financial loss from liability claims by transferring the financial burden to the insurance company.

Policy

The insurance agreement and the expected coverage.

Policy Limit

The maximum amount an insurance company will pay for a loss covered by the insurance policy.

Policy Rewrite

Placing an insurance policy back into active status after a lapse in coverage.

Public Insurance Adjuster

An independent contractor that works for the insured to make sure he/she receives fair coverage for damages.

Premium

The amount of money charged by an insurance company to provide coverage.

Premium Notice

A bill that provides the price and date due to continue insurance coverage.

Primary

The insurance policy that will respond first in the event that a loss is covered by more than one policy.

Pro Rate Cancellation

Cancelling a policy before its expiration and returning an amount of the premium to the policyholder proportional to the uncovered days of the policy. Also known as pro rata cancellation or short-rate cancellation.

Property Damage

Partial or full destruction of a residential or commercial property.

Property Damage Coverage

Coverage that pays for the property damage caused by the insured and any legal defense costs if the insured is sued.

Proximate Cause

The event that started the unintended events that led up to the loss.

Q

Quote

The statement of an offer of an insurance premium that will be charged for the requested coverage.

R

Rate

The basic rating units used by insurers to calculate your final premium.

Rating

The determination of the cost of a premium based on risk characteristics and calculation of the chance of a loss.

Rated Policy

Non-standard property coverage due to high risks related to the property.

Reciprocal

The information that is transferred from one state to another.

Reinstate

When a policy is back in force without lapse after a cancellation or expiration.

Release

A legally binding contract signed by a claimant or third party that dismisses the insurer of any liability or further liability of a specific claim.

Renewal

An offer to continue insurance coverage beyond the policy’s expiration date.

Renewal with Lapse

When a policy is renewed past the expiration date, after a period without coverage.

Renters Insurance

A form of property insurance that protects your personal property in a rented apartment, condo, or home from unexpected circumstances such as theft, fire, or sewer backup damage, and pays for lost or damaged possessions. Renters insurance also protects the renter from liability if someone is injured on their property.

Replacement Cost Coverage

Insurance that reimburses the cost for the insured’s possessions that were lost or destroyed in the insured’s home.

Replacement Cost on Contents

A specific kind of renters insurance that insures for actual replacement cost rather than based on the calculation of the depreciated cash value or market value. Generally a costlier policy than the standard renters insurance agreement.

Rescinded

A policy that has been canceled and cannot be reinstated.

Rescission

When the renters insurance provider voids a policy all the way back to the effective start date and returns all paid premiums back to the policyholder, as if no coverage existed at all.

Return Premium

A partial or full refund of a paid premium due to cancellation, rate reduction, or similar reasons.

Risk

The chance of loss to the insured that’s related to the insurance policy.

S

Scheduled Items

Valuables covered by a rider or additional purchased coverage on a standard homeowners insurance policy.

Sub-limit

A specified amount that is less than the maximum limits on a renters insurance policy that applies to certain types of property or coverages, usually named on your policy.

Surcharge

An additional charge to a premium used to offset an increase of exposure that usually isn’t factored within normal rates.

T

Term

The period of time wherein the insurance policy is issued and active.

Territory

The geographic location(s) used to determine insurance ratings.

U

Underwriter

An individual who accepts (or denies) insurance application and determines premium cost upon acceptance.

V

Voided

A policy that has been canceled and cannot be reinstated.

W

Written Premium

The amount of premium charged for a policy that has already become effective.