Insurance 101: Property and Home Insurance Terms to Know

When it comes to your home and property insurance, there may be a lot of terms you aren’t familiar with. To better help you understand, we’ve put together a list of some of the most common insurance terms related to property insurance.  

Home insurance terms

Actual Cash Value/ Replacement Cost  Actual Cash Value coverage pays for the value of the property at the time of the loss, factoring in depreciation. This is as opposed to replacement cost coverage.  Replacement cost coverage refers to the cost to repair or replace damaged property without factoring in depreciation. This type of coverage applies to the house, also called dwelling, and personal belongings.

When it comes to resolving insurance claims, there are two ways that an item or possession can be replaced. Let’s say that the item being replaced is a 10-year-old TV. If that TV is insured under a ‘replacement cost policy’, you’ll receive either a brand-new version of your TV, or a brand-new version of a comparable model. If it’s covered under an actual cash value policy, this coverage takes into account how much the TV has depreciated since it was new, and you’ll receive a 10-year-old TV in response to your claim (typically as a cash equivalent).

Additional living expenses coverage This covers the cost incurred if the home becomes uninhabitable due to a covered loss. This type of coverage is standard in most homeowners’, condo, and renters’ insurance policies, and includes meals and hotel stays. This type of policy is also referred to as loss of use coverage.

Appraisal Appraisals are often conducted to get an accurate estimate of the cost to rebuild a home, settle claim valuation disputes, and provide sufficient coverage for personal belongings.

Endorsement An endorsement, also known as a rider, adds, deletes, excludes or changes insurance coverage. An endorsement/rider can also be used to increase standard limits of coverage and take precedent over the original agreement or policy.

Liability If you are liable for something, it means you’re legally responsible for it and under your home insurance, liability coverage could protect you financially if you’re found liable for certain unintentional actions or events. Harmful acts that are done on purpose, like violence, libel or slander, aren’t covered.

Market value This value refers to how much a property will sell in the market. It is important to understand that this is not the value that insurers would use to insure your property. An Insurer would use the cost to replace your building with the same finishings and fixtures you had at the time of loss. It’s important to note the difference.

Medical payments coverage (property) This type of policy covers the medical expenses of guests who are accidentally injured within a property’s premises, regardless of who is at-fault. Coverage does not include the members of the owner’s household.

Other structure This refers to structures within the property’s premises that are not directly attached to the house such as a garage, fence, or shed. Some types of structure may also be called an outbuilding. Depending on the policy, these may be covered under homeowners’ insurance.

Scheduled personal property coverage This type of rider allows the homeowner or property owner to raise the amount of their policy limits to cover for high-value items such as jewelry, artwork, musical instruments, and other collectibles.

Water backup coverage This optional coverage pays out for damages caused by backed-up drains, clogged sewer lines, and failed sump pumps. It is important to remember that it’s the resultant damage that is typically covered as a result of one of these events. This is just one of the many optional water coverages available. We will talk more about water damage coverage and the different types of coverage in an upcoming blog.

GIO is an independent body set up to help Canadians find a fair resolution to disputes with insurance providers. GIO can provide advice on dealing with your insurance company as a first step. If you are not satisfied with the decision from your provider, GIO may be able to help resolve your concerns. 

 

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