Frequently Asked Questions about Protecting Your Property: A Home Insurance FAQ

The process of purchasing protection for your property in home insurance can be a maze of terms and conditions that can throw you a curve unless you are prepared. This home insurance FAQ will give you the definitions of some of the terms you will encounter when you shop for an insurance policy.

Actual Cash Value: Actual cash value usually means amount of money that the item would bring on the open market with depreciation, i.e. if your 5 year old couch is stolen, your home insurance would reimburse you for its value if it were re-sold.

Claims Process: A claim is a request for payment from your home insurance company based on the coverage stated in your policy. It is the set of rules and procedures required by your home insurance company for policyholders to receive reimbursement for damages to your home or personal possessions.

Deductible: The deductible is the amount of money that represents the level of risk you are willing to manage for your home property and personal possessions. This is the amount of money you pay for any damage that occurs before the insurance coverage is applied. The deductible you pay for your home insurance will decrease the amount of premium you pay. The higher amount of deductible you pay the few claims you will need to file with your home insurance company.

Flood Damage: Home insurance policies do NOT cover flood damage that result from a river exceeding its banks, they cover the type of "overflow water damage' that occurs when a water pipe breaks. But there are conditions that must be met and each home insurance policy outlines the limitations to claims in the "Exclusions' section.

Flood Insurance: Flood insurance is available to protect homeowners from flood damage through the National Flood Insurance Program which is backed by the federal government. It can be purchased through a private insurer or any licensed casualty insurance agent.

Liability Coverage: Home insurance protects you from lawsuits if a person is injured on your home property or as a result of your actions. It provides medical payments to the injured person and also covers damage that you cause to another person's property.

Peril: A peril is any condition that can cause damage or financial loss such as windstorms, fire or robbery.

Replacement Cost: The amount of money required to replace an item at the current market value without depreciation, i.e. if your 5 year old couch is stolen, your home insurance would reimburse you for its value at the price it would cost today.