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Renters Insurance Definitions

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Agent: A person authorized to act on behalf of or as the legal representative of another (the principal). An agent represents the insurer in negotiating, servicing, or issuing insurance. An agent may be an independent contractor or an employee of the insurer. An agent is also known as a Salesperson or Producer.

Application: A printed form created by an insurer that provides information about a person who wants insurance. An insurer relies on this information when insuring the person. The application captures the terms of the agreement, and provides the insurer's underwriter with information they need for accepting or rejecting the prospective insured and rating the desired policy. After an insured signs an insurance application and an insurer issues (accepts) it, it becomes a legally binding contract.

Appraiser: A person who determines the value of the property.

Betterments: See Improvements.

Cancel: To terminate or end a contract or a policy.

Claim: The amount a policyholder believes he or she has coming from an insurance company as a result of some fortuitous event insured against.

Condominium: A multi-unit building in which individual units can be purchased and sold. Individual owners have a percentage interest of the total property owned jointly by all unit owners.

Coverage: The protection against financial loss provided by an insurance contract.

Dec: See "Declarations Page".

Declarations Page: The declarations page forms part of the policy that contains basic information such as when, where and to whom the policy applies. More specifically it will have the policy number, the named insured, mailing address, effective dates, agent's name, insured vehicle or structure, mortgages, rating information coverage, endorsements, limits and premium charges.

Deductible: The amount of the loss that an insured must first pay before the company pays the balance on a loss/claim.

Depreciation: The reduction in value of property due to wear and tear or becoming obsolete. Also, see Actual Cash Value.

Dwelling: A structure intended for people to live in.

Effective Date: The starting date of the policy or the date when the company would be liable for a loss under the policy.

Endorsement: A written change form that amends and becomes part of the insurance policy. Also can be known as a "rider" or "supplementary agreement".

Exclusion: Something not covered by a policy that is described in the wording of the policy.

Fire: In insurance, the fire must have a flame in order to be called a "fire." It is further defined as a persistent chemical reaction that occurs rapidly and releases heat. For insurance coverage purposes, a fire must be "hostile," not "friendly."

Fire Resistive: Refers to buildings made of steel and concrete or other nonflammable materials. The proper term for "fireproof".

Fire Wall: A fire resistive wall erected to slow or stop the spread of fire.

Flood: When water overflows its natural boundaries or the unusual runoff of surface water.

Flood Insurance: Insurance against damage done by the rising or overflowing of bodies of water.

Frame: Refers to the construction of a building built of lumber.

renter Policy: A package policy that protects dwellings by combining property coverage with Comprehensive Personal Liability insurance.

Housekeeping: A category of hazards that may create or increase the probability of a loss. Pertains to the general care, cleanliness and maintenance of a property. For example, a collection of dirt and rubbish and poor care of property may cause fires.

Inflation: Automatic specified increases (e.g. 4%) in renters insurance property (dwelling) coverage during a policy period to avoid underinsurance caused by the appreciation in a building's value due to inflation. Most insurers use what is called an "Inflation Guard Endorsement" to provide this coverage.

Improvements: Additions made to real estate that improve its value and are more than just repairs. Also known as Betterments.

Insurance: The transfer of risk or chance of loss from one party (the insured) to another party (the insurer). The insurer promises to pay the insured an amount of money for economic losses that result from an unexpected event during the time for which the insured has made a premium payment to the insurer.

Insurance Contract or Policy: A contract between an insured and an insurer, who agrees to indemnify the insured for loss caused by specified events.

Insured: The person protected under an insurance policy and entitled to recover in case of a loss under the terms of the insurance policy.

Insurer: The insurance company or other organization that provides insurance coverage and services.

Inventory: A list of one's possessions, usually personal possessions.

Lapse: A termination or end of a policy due to the insured not paying the premium amount.

Larceny: Theft of personal property.

Lessee: A tenant who has signed a lease.

Lessor: A person who rents his or her property to another under the terms of a contract called a "lease".

Liability Insurance: Insurance which agrees to pay for or on behalf of the insured sums they may be legally required to pay as damages to others due to negligence on the part of the insured. This insurance may cover bodily injury to another or damage to the property of others. See Property and Casualty Insurance.

Limit: The most the insured or an injured party may collect under the terms of the policy.

Loss: The amount the insurer is required to pay due to an unexpected event happening, which has been insured against.

Loss Payee: Someone designated in a loss payable clause who receives insurance payments in the event of damage to property. The loss payee must have an insurable interest. Loss payees include automobile lien holders and property mortgagees.

Medical Payments Insurance: Insurance that pays the cost of medical care to an injured person regardless of whether or not the policyholder is legally required to do so.

Mutual Insurance: Protection written by insurers who are owned and directed by its policyholders. Mutual insurers are required by law to hold surplus funds so that they are able to pay all legal debts.

Named Insured: The person(s) actually named or designated in the policy as the insured.

Named Peril Policy: A policy in which the various hazards insured against are listed, such as Wind, Hail, Fire, etc..

Negligence: When a person doesn't exercise reasonable care in a given situation, he or she may be considered to be negligent. One can be negligent as a result of doing something or of not doing something, that would prevent said situation. However, there must be a duty to act or not act imposed by law (i.e., some states do not require someone to render assistance to someone who needs help. Because the law does not impose a duty, an individual cannot be held liable in some states for failing to render assistance.)

Open Peril: A form of insurance that protects against risks of loss except for specifically excluded risks. Open Peril policies have exclusions or limitations that pertain to the insured property, persons or protected interests, and/or certain causes of loss.

Over-insurance: Insurance in amounts greater than the value of the property insured.

Perils: The cause of a loss or losses. Examples include accident, explosion, collision, flood, fire, theft, negligence, etc.

Personal Property: Refers generally to property, goods, clothes, and documents. Personal items that have no business use and/or are not a part of commercial operations.

Physical Hazard: Danger of loss arising from the condition, occupancy, or use of the property insured. Examples of physical hazards that may increase the probability or amount of loss from an insured peril include unsafe or unclean conditions, cheap or flammable building materials, etc.

Policy: A formal written contract of insurance.

Policy Jacket: The outer covering of an insurance policy, which usually contains the common provisions of the policy.

Policy Year: The year (12 month period) beginning with the effective date of the policy or with the anniversary of that date. This is almost always different from the calendar year, which always starts on January 1. See also Term or Period.

Policyholder: The person (or other entity, such as a business) who pays a premium to the insurer for protection as provided for under the insurance policy.

Premises: The building identified in the policy.

Premium: The amount of money an insurance company charges to provide coverage that a policy provides.

Property and Casualty Insurance: Insurance that provides protection against accidents.

Property Insurance: The insurance of real and personal property against physical loss or damage.

Real Property or Real Estate: Land and whatever is erected, growing upon or affixed to the land, such as buildings or structures.

Renewal: A policy issued to continue the one that expired.

Replacement Cost Insurance: Insurance that pays the cost to restore or replace the damaged or destroyed property without deducting depreciation. There are exclusions and limitations to this insurance.

Rider: Not a term used in Property Insurance. See Endorsement.

Standard Form: A form used to write insurance that has been adopted and is used by a large number of insurance companies.

Subrogation: In insurance, subrogation substitutes one party (insurer) for another party (insured) in order to pursue any rights that the insured may have against a third party who is liable for a loss paid by the insurer.

Tenant or Renter Policy: A form of renters insurance sold to persons, mostly apartment dwellers, who rent their homes. A tenant or renter policy combines broad personal property and personal liability coverage. It is like a renters policy, except that it does not include property coverage for the structure itself.

Term or Period: The length of time for which a policy is written. For property policies, the policy period or term is typically 12 months.

Third Party Interest: A party (other than the policyholder and the company) having some interest in the policy, typically as mortgagee or lien holder. This term is also used to refer to the relationship between a lender, the policyholder, and the insurer.

Underinsurance: Less than enough insurance to cover the amount of loss that the policyholder may suffer.

Underwriter: One who accepts or rejects risks for an insurance company.

Unoccupied: A building is "unoccupied" if no one is in it, but the furniture and other belongings are there and the occupants plan to return. A "vacant" building, however, has neither occupants nor any furnishing inside of it.

Vacant: A building with nothing in it is "vacant". If the furniture and other belongings are still inside and the owner intends to return, the building is "unoccupied".

Valued Policy Statute: A policy in which the company agrees that the property insured is worth the amount of insurance placed on the property. Thus, in the case of total loss, the company pays the face amount or value of the policy.