Renter’s Insurance Glossary

Renter’s Insurance Glossary & Definitions

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For most people renter’s insurance is the one of the cheapest insurances you can buy. Most typical renter’s insurance policies are around $10-25/month.

There are certain things in life which seem to have their own “secret code” or language, computers for one, music, and also insurance including renters’ insurance. Now then, some of these terms and definitions are really straightforward, so don’t think that I’m insulting your intelligence in any way, shape, or form, but in order to have a complete glossary of terms and definitions, you have to include absolutely everything – or at least try to.  When you sort out your own renters insurance policy (which you really should do sooner rather than later) then here are some of the terms which you’ll need to fully understand.

 

  • ACV or Actual Cash Value –  this means that your stuff will be replaced at cost, minus depreciation, so if your TV was five years old for example,  you won’t get the price of a new one!
  • Additional Living Expenses – this is often an optional extra on your renters insurance policy and covers any additional living expenses if your home is inhabitable for example, whilst it is being repaired. This may include motel or hotel fees, as well as restaurant expenses etc. Now don’t go mad, there’ll be a limit.
  • Adjuster – the adjuster is generally an employee of the insurance company who you need to make into your new best friend – they evaluate claims, assess damage and decide if you’ll get a pay out and how much.
  • Administrative Expense Charge – one of those sneaky ways that you have to pay a little bit more, a one off charge to cover the expenses of setting up the insurance policy – how does that work?
  • Agent – this is possibly the salesperson who will sell you your policy in the first place, they sell rent insurance policies through agencies.
  • Annual Limit – this is the most cash your insurer will pay to you in any one calendar year.
  • Appraisal – right, this can mean both before and after really, it’s the evaluation to determine how much the items of insured property are worth in order to work out the premiums, but can also mean determining the amount of any loss.
  • Arbitration – now then, it’s a sad fact of life that not everybody always agrees about things, and arbitration might be needed to determine the value of the loss, for example, in a disputed claim. Arbitrators are independent, objective experts (and could also be a candidate for a new best friend).
  • Binder – this is kind of the temporary insurance contract (one that was prepared earlier) which has to do the job of the proper insurance policy before it is ready. You can get one of these after you’ve made a payment of your premium, it means that you’re covered, but that the real insurance policy is still being prepared.
  • Cancellation – there are a million and one reasons why you might wish to cancel your insurance policy before it has reached full term, or why the insurance company might (non payment of premiums for starters).
  • Claim – you claim to recover any losses for property covered by your insurance policy.
  • Conditions – this is a lot of the small print, stating your rights and duties, as well as those of the insurance company.
  • Coverage – this really means insurance and, more specifically, how much insurance “cover” your policy provides. This can either refer to the dollar amount or the types of loss which are covered by the policy.
  • Declarations Page – is the front page of the policy where all of the basic information is written – name of policy holder – name of insurance company – date –  policy number – type of cover – what’s covered and what isn’t.
  • Deductible – be careful with this one, it can be a bit tricky. Really the amount deductible is the amount that the policy holder agrees to pay towards the insured loss, before the insurance company has to pay. If you agree to a higher deductible it can make your premiums lower, but then again, if you agree to a deductible of say $500 and you put in a claim for $600, you’re only going to get $100. It’s a bit of a balancing act, don’t get caught out.
  • Depreciation – is the amount of value your property loses due to age, wear and tear etc (see ACV above).
  • Effective date – the calendar date when your policy becomes effective.
  • Endorsement – is anything which is amended on the policy a bit later, changing the terms of your policy contract.
  • Exclusion – any loss or event which your policy definitely does not cover, it’s excluded you see.
  • Floater – this is a separate policy which you might want to take out to cover items of particular value, covering the property even if it has “floated” away from the rental property.
  • Grace Period – this is a pre-specified period of time when the insurance policyholder will maintain your cover while you pay off any overdue balance – you know, the amount of time you can fall behind on payments before your cover lapses. You generally get around 30 or 31 days but check this out, especially if you go through any lean periods occasionally (and who doesn’t?)
  • Insured – the person who has the insurance policy. When you’re talking about rental insurance it’s usually the person named on the lease for the property, you know, the person who’s actually living there.
  • Liability Coverage – this is coverage for any property damage or bodily injuries.
  • Limit of Liability – is the maximum amount which you will have to pay in damages in the event of any loss.
  • Limits – is the maximum amount, the very most insurance which will be paid for any covered loss.
  • Material Misrepresentation – naughty naughty, this is generally when policy holders hold back certain bits of information about themselves which they know that the insurance company would want to know and may affect their ability to get affordable insurance cover.
  • Medical Payments Insurance – is cover for anyone who is accidentally injured while they are on your property, including those who live there.
  • Non Renewal – is different from cancellation, because non renewal of a policy means that it did run full term, but that the policy holder deliberately chose not to renew it, or on the other hand, the insurance company to allow the present policy to run full term but choose not to deal with the insured in future for some reason.
  • Peril – something which could cause damage or loss – theft, explosions, fire, vandalism, aliens (no, they’re probably excluded).
  • Premium – is the amount that the insured agrees to pay to the insurance company in return for an agreed amount of cover.
  • Qualifying Event – something which triggers your need to claim – a burglary, fire or burst pipe for example.
  • Replacement Cost on Contents – this is the opposite of the Actual Cash Value. If you have this endorsement you will get the cost of replacing an item without worrying about depreciation – so in our example from the top of this page, you’d get the value of a brand new TV even if yours was 5 years old.
  • Rider – same as an endorsement really, anything written which changes or restricts the original insurance policy contract
  • Risk – is generally how likely something is going to happen during the period of the insurance policy.  This is the basic principle which insurance companies live by, minimizing risk (ie maybe fitting a burglar alarm) might help to reduce your premiums, but if you are classed as a high risk, maybe because you live in an area where burglaries are at a high rate, then your premiums might be higher.
  • Total Loss – something which nobody ever wants to think about, a loss which is so large and complete that there is nothing of any value left, everything is lost or destroyed. This can also mean that you are due the maximum pay out amount on the policy.

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