Insurance is designed to protect you and your assets. Maximize the value of that protection by making sure you know what these important insurance terms mean.
This is the value of an item at the time of loss, measured by replacement cost less depreciation.
Sometimes called a claims examiner, this person investigates the claims you file, decides if the claim is covered, and determines how much you’ll be paid under a settlement.
When you have multiple insurance policies (homeowners, auto, boat, umbrella, etc.) all with the same carrier, it’s called bundling. Besides lower premiums, bundling may provide additional benefits, such as having to pay just one deductible for claims that involve two policies (a tree falls, damaging both your garage and the vehicle inside, for example).
When you have a loss that is covered by the terms of your insurance policy, you can file a claim, a formal request to your insurance company asking for payment. Once the company confirms the claim, you’ll be paid according to the terms of your policy. For example, if you have a deductible, it will be subtracted from the payment you receive.
This is the benefits of your insurance, the protection you have against losses that are covered under your policy. For example, while your homeowners policy typically covers loss from fire or theft, it may or may not include coverage for damage caused by flooding.
Loss to your property or harm to yourself or others. This differs from the term ‘damages,’ which describes the money that one person must pay another when they are determined to be at fault for a loss.
The amount of money you must pay out of pocket before your regular insurance coverage takes over to cover a claim. A deductible can be a flat amount (say $1,000) or it can be a percentage of the total (like 20%). Deductibles vary according to the type of loss. Your deductible for a comprehensive auto claim (to replace a broken windshield, for example) will likely be different from your deductible for an auto accident. Higher deductibles lower your premium and vice versa.
When the value of an item decreases over time due to age, use, or other factors, it’s called depreciation. It’s determined by the difference between Replacement Cost and Actual Cash Value.
This person sells and services policies for several different insurance companies. However, they represent the insured rather than the insurance company.
The written contract between you and your insurance company.
This is your cost of coverage—the amount you must pay for your insurance policy. Your premium is based on the risk factors associated with your coverage. For example, if you have teen drivers in your family, your auto premium will be higher than if the insurance just covered you. Your premium also depends on the deductible and coverage limits you’ve chosen.
The amount you would pay today to replace an item, which is different from its Actual Cash Value or Market Value. Many homeowner policies offer optional coverage which allows claims to be settled on a replacement cost basis.
The period of time your policy is in effect, typically a year (although it can vary).
Umbrella coverage provides additional liability protection over and above that which is already provided by your auto, homeowners, and other insurance policies. The insurance takes over when your other policies reach their coverage limit.
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