When it comes to insurance, there are a lot of terms that can be confusing because the context is generally not part of our everyday life.   Understanding some basic terms will help you insure yourself properly and understand why some policies may be a lot better than others!

Actual Cash Value, Depreciation, and Replacement Cost – these terms are related to property insurance and Actual Cash Value is value of the property at the time of the loss. Depreciation is a decrease to the value of property due to age, wear and tear, or other cause.  Since Actual Cash Value equals Replacement Cost Minus Depreciation, when comparing an actual cash value policy with a replacement cost policy, the replacement cost policy better coverage and likely cost more.

Replacement Cost Cap – Many Homeowners Insurance Policies have a Replacement Cost Cap that exceeds the limit on the policy.  This provides extra coverage at the time of loss should the replacement cost limit purchased not be high enough to repair your property.  The higher the percentage, the better the coverage!

Deductible – this is the amount that the policyholder agrees to pay before the insurance company covers a loss.  When comparing insurance policies, make sure you choose a deductible that you can afford should you have a loss.  Higher deductibles will lower your premium.

Scheduled Property – this is property listed on your policy with a description and a value.   A common example is an engagement ring.  The insurance company and the insured agree that a loss to a scheduled item will be covered as scheduled.  Items that are not scheduled may be subject to sub-limits on the policy. In the case of jewelry, many Homeowners policies have a $1,000 limit for unscheduled jewelry, so scheduling a $10,000 engagement ring helps to insure that you have enough coverage.

These are examples of terms that you may hear when buying insurance.  There are many more!  We encourage you to call us when going over your insurance policy and/or you are looking for quotes.

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