1. Full coverage. Fun fact, there is NO such thing as full coverage. When you hear this term, it is “hopefully” not coming from an agent. When it comes to insurance, there are many options, but no real definition of full coverage. Everyone has a need for different coverage. Insurance is not a one size fits all industry.
2. Deductible. Simply put, your deductible is the dollar amount you agree to pay on any covered loss, before the insurance company will pay anything. For an auto policy, the deductible generally applies only to loss to your car, and does not apply to liability or medical coverage. For a home or renters loss, your deductible is the amount you agree to pay before the insurance company makes a payment for your home or personal property.
3. Liability. This will be on your auto policy, as well as your home or renters policy. Liability coverage simply means that, should you or anyone insured under your policy become legally liable for injury or property damage to another party, your insurance company will pay, on your behalf, to make the victim whole. It is important to remember, even though the insurance company is paying for the damages you caused, YOU are the one legally responsible for the loss. The insurance company’s responsibility to pay the other party ends when your limits are exhausted, meaning if your coverage is not enough to make the other party whole, you are on the hook for the difference.
4. Make whole. This is the very essence of insurance. It means that, in exchange for premiums paid to the insurance company, in the event of a loss, the insurance company will pay to “make you whole”, meaning put you back in the same financial position you were in prior to the loss.
5. Collision. Found on an auto policy, this is an optional coverage that protects your insured vehicle from it’s collision, or “upset” with another object. That could be a tree, house, or any stationary object, but usually refers to the collision of your insured vehicle with another car. Your chosen deductible applies here.
6. Comprehensive. This is also found on an auto policy and is sometimes referred to as “other than collision”. It generally refers to theft of the insured vehicle, but is also used for claims such as broken glass or vandalism. In most states, it also means hitting, or colliding with, an animal. As with collision, your chosen deductible applies.
7. Actual cash value. This is found on auto policies, and some home and renters policies. It refers to the settlement option the insurance company uses to resolve claims. Cars are usually settled at actual cash value, meaning that in the event of a total loss, the insurance company pays you the depreciated value of the car, and not the amount to buy a new car. To explain, assume you purchased a new car in 2015 for $25,000. In 2021 the depreciated value may be $10,000. In the event the car is involved in a loss and is declared unrepairable (total loss), the depreciated value of $10,000 is your settlement. Various other fees such as tax, title and registration may increase the settlement as well.
8. Replacement cost. The opposite of actual cash value, replacement cost means you are replacing an item such as a car, with the value of a brand new version. While auto policies are usually actual cash value, home policies and renters insurance should always be full replacement cost. Using a similar example to #7 above, if in 2015 you purchased that new flat screen tv you always wanted for $1500, and today it had depreciated to be worth only $300, if it was stolen, you would get the full replacement cost of a replacement tv.
9. Credit based insurance score. Generally, this differs from your fico score, and is a number assigned to you which represents your risk of filing a claim based on your credit history. In some states, insurance companies are banned from using this practice. It is widely used in NV, however.
10. Scheduled personal property. Found on a home or renters policy and sometimes referred to as a floater, this is used when an insurance company only offers limited coverage for certain items, such as jewelry. For example, while a home policy may pay whatever it costs to replace that $25000 tv you bought yourself, the policy may limit the theft of your $25,000 Rolex watch to $2500 (this varies from company to company). So you purchase a “floater” or scheduled item to cover the full cost of your tv!
I hope this help you understand insurance definitions better. If you need an insurance quote just contact us at (702) 541-0882.
Jim Grant
Licensed Insurance Agent
All Risk Insurance Solutions Inc
(702) 541-0882
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