Homeowners insurance glossary

Any area that has a 1% chance of experiencing a base flood in any given year; also called base floodplains

An act of God is a term insurance companies use to describe events that are outside of human control.

What it costs to repair or replace property minus depreciation, deterioration, or obsolescence

A person or organization added to an insurance policy to receive some of the policy's protections

An adjuster is an individual who investigates claims for an insurance provider.

An insurance company that is licensed in the state to write and sell certain types of insurance.

Animal liability insurance helps cover damage or injury caused by your four-legged friends.

Annual percentage rate is the yearly interest charged on a loan that includes the interest rate plus any costs rolled into the loan, such as closing costs or origination fees 

An appraisal is a professional assessment of an item’s value.

Assignment of benefits is an agreement that gives your claims benefits to someone else.

A balloon payments is a large, lump-sum payment made at the end of a loan that allows borrowers to pay lower installments throughout the loan’s term.

Base flood elevation refers to the height floodwaters are expected to reach during a 100-year flood.

An insurance binder is a temporary or interim insurance policy that an agent or insurance company issues before issuing the actual policy. Binders are enforceable contracts and can act as evidence that you have coverage.

Bodily injury is harm caused to a person’s physical condition, including pain and illness.

Catastrophic coverage is insurance for floods, earthquakes, hurricanes, and other high-cost natural disasters.

Catastrophic ground cover collapse coverage helps pay for repairs to a home after layers under the ground’s surface abruptly collapse and other conditions are met. This coverage is only available in Florida.

An insurance claim is a request made to an insurance company asking for payment on a loss under a policy

Closing costs are fees you pay when you close escrow on a house, such as mortgage insurance premiums, appraisal fees, and property taxes.

A coinsurance clause is a provision that requires you to carry coverage equal to 80% of your home’s value.

The date of issue is the day your insurance company creates your insurance policy.

Your declarations page is the first page of your insurance policy that lists key information about your coverage, such as policy limits and deductibles.

An AOP deductible is the amount of money that you’re responsible for covering in certain insurance claims. “AOP” stands for all other perils and applies to claims involving events like fire and theft.

Depreciation is the decrease in the value of property over time due to use or wear and tear.

The designated catastrophe area is a portion of the Texas seacoast where the Texas Commissioner of Insurance has found that wind and hail insurance is not reasonably available.

A DP1 policy is a type of home insurance that protects rental or vacant homes from nine named perils, typically for its actual cash value rather than its replacement cost.

A DP2 policy is property insurance that covers rental properties for 18 different types of damage, usually on a replacement-cost basis.

A DP3 policy is a type of dwelling property insurance policy designed for homes used as investment properties or homes with older roofs.

A dwelling is the primary structure on a property, plus any attached structures; it's typically listed on your home insurance by its address.

The date when an insurance contract is in force and effective

An insurance endorsement is an amendment to your insurance policy that updates its information, increases coverage or limits, or reduces or excludes coverage.

A specialty market where people who have been denied coverage can usually find policies

Anything that isn’t covered in an insurance policy. Insurers may exclude perils, situations, hazards, or properties to narrow a policy’s coverage.

A state-run program designed to ensure every homeowner can get insurance and that is usually the last option for homeowners who can’t get coverage

Coverage typically found in a landlord insurance policy. It can that helps cover lost rental income if the property is uninhabitable because of a covered claim

Fire Hazard Severity Zones are areas in California that appear on fire zone maps and where physical conditions create moderate, high, and very high degrees of wildfire risk

Fire insurance helps cover your losses if an accidental fire damages your property.

A first notice of loss (FNOL) is a report you submit to your insurance company to initiate a claim.

A flood elevation certificate is a document that describes your home’s vulnerability to floods that an insurer may use when calculating flood insurance premiums.

Flood Zone A is a low-lying area near a lake, pond, or other large body of water that has a 26% chance of flooding during a 30-year mortgage.

Homes in Flood Zone AE may be close to floodplains, rivers, and lakes or in a low-lying region. 

Flood Zone AH describes areas close to water hazards that have a 1% chance of experiencing shallow flooding between one and three feet each year, usually comes in the form of ponding

Flood Zone AO is a high-risk flood zone often found near rivers and streams that may see floods between one to three feet deep.

Flood Zone B is an area with moderate risk flood zone that has approximately a 0.20% chance of a flood each year.

Flood Zone C is an area with less than a 0.20% risk of an annual flood, which means it's above the 500-year flood level.

Flood Zone V is a coastal area with an increased chance of flooding, especially from wind-driven waves

Flood Zone VE is a coastal area with an increased chance of flooding due to storm waves and tidal surges

Flood Zone X is an area with low-to-moderate flood risk as determined by the Federal Emergency Management Agency (FEMA).

Flood zones are areas the Federal Emergency Management Agency labels based on their likelihood for flooding.

A home insurance policy your mortgage lender buys when your coverage lapses or is cancelled

Fungi and mold insurance is coverage for damage caused by fungi, mold, bacteria, and wet or dry rot.

Golf cart insurance is an endorsement that can cover costs if you cause property damage or bodily injury while using your golf cart; some also cover damage to the cart itself

A grace period is the time between a missed payment due date and when your insurance company cancels your policy for nonpayment.

Hazard insurance is portion of your homeowners policy that protects the actual structure of your home from common perils.

HO1 is a named-perils insurance policy that provides coverage against 10 perils for an owner-occupied, standalone home and its contents.

An HO2 policy is a type of home insurance that can cover your home and personal property against 16 named perils.

An HO3 is a type of home insurance policy that covers your home and other structures on an open-perils basis, and your personal property on a named-perils basis.

A renters insurance policy that protects a renter’s personal property on a named perils basis and covers their personal liability.

An HO5 policy covers your home, other structures, and belongings on an open-perils basis; it’s also called the comprehensive form.

HO6 is an insurance policy for condo owners that covers their unit from the walls in, including items inside the unit, their personal liability, and more

Also known as MH3, an HO7 policy protects the structure of mobile and manufactured homes for all perils except those listed as exclusion.

A home insurance for older buildings where the replacement costs potentially outweigh the market value; also called the modified coverage form

HOA fees are charges assessed by a community’s homeowner association to maintain common areas and to pay for amenities.

A commercial insurance policy that covers the exterior of a condo and common areas; condo owners typically need their own insurance to complement this policy

A third-party, unbiased assessment of your property’s value based on other comparable properties in the neighborhood

Home inspections are visual examinations of houses that include all the major components to make sure things are operational and to note if repairs are necessary

A home loan is money you borrow to purchase a habitable property, such as a house, condo, or apartment, that allows you to finance the purchase of the property by making payments over time.

Home warranties are contracts between homeowners and warranty companies that help cover costs if a home’s systems or appliances malfunction.

A hurricane deductible is a separate deductible that applies specifically to damage caused by hurricanes. It's often based on a percentage of your home’s value.

Hurricane screen enclosure insurance is an endorsement that adds coverage to your home insurance policy for a screen enclosure for your pool or patio.

Identify fraud insurance covers expenses related to having your identity stolen, such as attorney and tax advisor fees, credit report fees, and loss of income. This type of insurance is often purchased as an add-on.

An insurable interest is a financial stake in the person, business, event, or property that’s being insured

An insurance agent is an intermediary between the people who want to buy insurance and the carriers that develop the policies.

An insured is often a person or entity that has a financial interest in a property and has the right to the proceeds from a claim in the event of a loss.

An insurer is a company that provides protection from the financial repercussions of certain losses, such as theft or fire, in exchange for premiums.

A jewelry appraisal is an official report documenting the value of a particular piece of jewelry or watch

The time between the cancellation, nonrenewal, or expiration of an insurance policy and when new coverage is in place

The maximum amount that an insurance company pays for a specified loss, such as damage to your home or accusations that you caused someone else harm

The amount someone would pay for a home on the open market; typically confirmed by an appraisal when someone wants to buy it

A situation that exists in contracts when one party has either entered the contract in bad faith or has an incentive to take abnormal risks

An insurance moratorium is an official hold on issuing new policies or changing coverage for existing policies in response to an approaching storm, ongoing wildfires, or civil unrest.

The person or entity that is protected by an insurance policy

The NFIP is a national program administered by FEMA that provides flood insurance.

Negligence is acting in a way that no reasonable person would act, disregarding prudence and safe practices.

A signed letter that states you haven’t experienced any losses that could lead to claims.

The term an insurance company uses when it's decided to discontinue your policy once the current term expires

An event that causes damage or physical injury to a third party and triggers a claim on an insurance policy

Ordinance or law coverage helps you upgrade your home or building methods when you're required by law or ordinance to to meet current codes after a loss.

A peril is a specific risk, or cause of loss, covered by an insurance policy.

In insurance, personal reports refer to documentation of your 7-year loss history that gives insurers insight into how "risky" it might be to insure your home. A personal report is sometimes called a claim history report or CLUE insurance report.

An insurance policy is a legally binding contract between you, the policyholder, and your insurance company.

Your policy term is the time you’re covered by an insurance policy. This may also be called the policy period.

A poliyholder is a person who buys an insurance policy and who has the right to change, cancel, or continue coverage and who receives the policy's benefits.

The amount of money you pay for an insurance policy

Private mortgage insurance is a coverage conventional lenders may require when homebuyers don't make a down payment of 20%.

Proof of insurance is documentation from an insurance company or its agent that shows you have an insurance policy. Homeoner often need proof of insurance to get a mortgage.

Property and casualty insurance describes products that cover losses stemming from your possessions or injuries and damage you cause to others

A fire protection class is a grade given to a home based on the community's fire fighting abilities. It can be a major factor in determining your home insurance premium.

An estimate of what your policy will cost

Real property is a section of land, anything attached to the land, like a building or a fence, and the bundle of rights owners have to use, enjoy, and improve the land as they see fit.

Recoverable depreciation is the difference between replacement cost and actual cash value (ACV).

Reinsurance is a way for insurance companies to transfer some of the risk they take on when they sell insurance policies, particularly in catastrophe-prone areas.

An insurance renewal is your opportunity to continue your coverage for another term or switch to another insurer.

Replacement cost is the amount it would cost to replace or rebuild an item using similar quality materials and goods that are currently available.

An insurance rider is a provision that adds benefits to or amends the terms of a basic insurance policy; riders may provide additional coverage options, but they may also restrict or limit coverage.

Scheduled personal property coverage is an endorsement that increases protection for specific valuable items.

Sinkhole insurance is coverage for damage to your home, other structures on your property, and your personal items within these structures if they're damaged by a sinkhole on your property.

Subrogation is the act of substituting one party for another. When subrogation occurs, the party that’s taking the place of the other also accepts the original party’s legal rights and duties.

Theft is the act of intentionally taking someone's personal property to deprive them of its use.

The way insurance companies evaluate the risk of offering coverage to applicants

Vandalism is willful or malicious behavior that causes someone else’s property to be altered, defaced, or destroyed.

Walls-in insurance is a type of coverage that condo owners buy to protect their individual units.

Water backup and sump overflow coverage is an endorsement that can be added to your homeowners insurance to help pay for damage caused by backed up sewers, drains, and sump pumps.

Wind mitigation is the process of making your home more resistant to wind damage that can help you save you a lot of money on your home insurance.

A wind/hail deductible is the amount you’re responsible for when your home is damaged by wind, hail, tornado, wind-driven rain, or similar events.

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