Property Insurance

Question 1

Act of God

Answer 1

A natural occurrence, such as earthquake or hurricane

Question 2

Actual cash value (ACV)

Answer 2

The replacement cost of property, minus the diminished value from its age, use or wear.

Question 3

Contract of indemnity

Answer 3

Property insurance that restores the insured to their original financial condition after a loss happens.

Question 4

Class Action Lawsuit

Answer 4

In a typical class action, a plaintiff sues a defendant or a number of defendants on behalf of a group, or class, of absent parties. This differs from a traditional lawsuit, where one party sues another party for redress of a wrong, and all of the parties are present in court

Question 5

Declarations page

Answer 5

A page in your policy – usually the front page – with basic information such as your name and address, description of the property location insured, effective dates of the policy, amount of coverage and the premiums.

Question 6

Exclusions

Answer 6

Losses not covered because they are specifically excluded by the policy.

Question 7

Increased cost of construction

Answer 7

Added costs of rebuilding a damaged or destroyed building where local laws require the use of more expensive materials, services or methods than the original. This may also be referred to as building ordinance or law coverage.

Question 8

Malicious mischief

Answer 8

Deliberate damage or destruction of another person’s property. For insurance purposes, it is typically covered under vandalism.

Question 9

Named (or specified) peril

Answer 9

Events named in a policy such as vandalism, windstorm, fire or sprinkler leakage. A named-peril policy only covers those specific events, rather than all potential losses. These policies are usually cheaper because they cover fewer risks.

Question 10

Physical hazard

Answer 10

The features of a property that are vulnerable to damage. Building construction, electrical wiring and the heating/cooling system are examples of physical hazards.

Question 11

Property

Answer 11

Anything that has value. There are two types: real property and personal property.

Question 12

Real property

Answer 12

Land and the permanent things on it, such as buildings, outdoor fixtures, machinery and equipment.

Question 13

Personal property

Answer 13

All other property not classified as real property, and which is easily moved. This includes furniture, clothing and household goods.

Question 14

Replacement Cost Value (RCV)

Answer 14

The actual cost of replacing damaged or destroyed property with new property, in contrast to ACV. Refers to the amount it takes to replace damaged or destroyed property with new property, without consideration for depreciation.

Question 15

Salvage

Answer 15

Property damaged beyond repair, which is taken over by an insurance company (after the claim is paid) in order to reduce its loss by “salvaging” the remaining value of the property.

Question 16

Territorial Rating

Answer 16

A method of classifying risks by geographic location to set a fair price for coverage. Often used in conjunction with other rating factors.

Question 17

Valued Policy

Answer 17

A specific amount paid to the insured in the event of a complete loss. Also known as an “agreed amount.”