Homeowners Insurance Lingo Explained

In the world of home owners insurance an ample amount of technical, legal and business lingo exists.  Before filing a homeowners insurance claim, purchasing home owners insurance or deciding which home insurance company to use, familiarizing with some of these insurance terms  can assist with understanding your insurance policy.  A few of these home insurance terms are listed and described below.

Proximate cause: If damage involves a dynamic scenario where the cause of the accident is dependent on a condition it is said to have proximate cause. For example, a thrower of a baseball pitches a ball at a person who does not know how to catch or hit a baseball, is fearful of fast moving objects and who is standing in front of a window. It may be claimed the proximate cause is the pitcher of the ball.

Actual cash value Vs Replacement cost: Actual cash value covers a declining amount of repair or damage costs whereas replacement cost will use more current valuation to determine how much coverage benefits are awarded. Generally, replacement cost coverage may be more advantageous if the cost of coverage is not excessively high.

Subrogation: Subrogation is the setting forth of an insurer to obtain claim costs from a party that was the cause of damage. This in effect seeks to procure costs from the direct cause of the damage if that damage cost is indeed recoverable and not from an act of nature.

Insurance endorsement: A home owners insurance endorsement is a change to an existing policy and may also involve an adjustment to the qualification for and amount of coverage in a home owners insurance policy.

Exclusion: Exclusions are those items, events and/or property that are not covered by a home owners insurance policy. An insurance policy can have many exclusions that the insured may or may not be aware of.

Red-Lining: Red lining involves selective home insurance coverage by insurance providers based on pre-existing characteristics of the property and/or the people seeking to obtain insurance coverage.

Rescission: When rescission is used against an insurance policy the insurer is claiming a right to cancel a policy based on ill provision of information from the insured either during the time of purchase or thereafter.

The above terms serve as an example of the type of language used in the insurance industry. These and other terms contain meanings that could significantly affect the terms and nature of a home owners insurance policy, and do not include more commonly known terms. For example, premium, deductible, PMI Insurance, perils coverage and umbrella insurance are relevant but often times better known home owners insurance terms.

A.W. Berry -HomeownersInsurance.org Expert A.W. Berry is a published personal finance writer with an interest in all kinds of money matters. His professional background in finance, marketing and sales directs his reporting to pertinent local issues.