Shop for any type of insurance whether that be home, health, auto, life or dental, and you will hear of numerous terms that may not be familiar to you. Many consumers simply ignore the jargon, honing in on the cost of the insurance instead. Not all insurance terms are universal either with insurers using their own terms to describe products they sell. The following are among the top terms you should keep in mind when buying insurance.
Actual Cash Value
Along with actual replacement cost, actual cash value is often used when shopping for automotive or home insurance. The actual cash value looks at the cost of repairing or replacing what has been damaged, then subtracts depreciation and wear and tear. For instance, that new car you paid $19,000 for last year might be worth just $14,200 after deductions have been taken and the deductible applied.
The actual replacement cost appeals to many consumers as it replaces what you purchased with something that is new. That $19,000 car might retail this year for $20,880, what this coverage allows you to get despite the increased cost. You should also know that you will pay much more for replacement insurance than for cash value insurance.
You have auto club insurance, but you may also have emergency assistance with your car insurance. This insurance is also usually offered with RV, boat and classic car polices.
Emergency assistance comes to your aid in the event that your vehicle breaks down. Typically, it includes lock-out service, towing and in some cases it covers your transportation needs. Keep in mind that this type of insurance when used can drive up your rates unlike your auto club membership that has nothing to do with insurance.
Equipment Breakdown Coverage
When you purchase a previously used home you expect that certain things will need to be updated or replaced. Your due diligence found a number of problems that the previous homeowner corrected before you closed on the home.
As most any home buyer will tell you it is common for a problem to crop up soon after you take ownership. Unfortunately, you will be stuck with the repair bill or the replacement cost for that expensive oven that quit working. That is, unless you have equipment breakdown coverage with your homeowner’s insurance, what covers that loss. Most homeowners do not have that type of coverage, something you can include when you shop for a policy.
You may never had heard of your insurance score. In fact, it is rarely shared with consumers and it is not a number you will see when you review your insurance policy.
An insurance score works in much the same way as your credit score. It represents a three-digit number that insurers use to calculate risk. The lower your score, the higher your premiums. Ask your insurer for your insurance score and how that number was determined.
Single Loss Deductible
If you bundle your insurance, meaning you have two or more insurance policies with the same company, you usually save money up front. Typically, consumers buy auto and home insurance with one company, and are given a rate based on that bundle. Separate deductibles apply, however.
The term “single loss deductible” kicks in if your bundled insurer underwrites its policies as such. For instance, if your home catches fire and your car is in your garage when the fire occurs with both damaged or destroyed, only a single deductible is charged. Your insurer then waives the auto deductible, saving you money.
There are other insurance terms that may not be familiar to you. It is important that you review your insurance policy closely to discover what coverage you are getting. Deductibles, exclusions and co-pays may apply, significantly affecting your overall costs. Check out DailyU for additional self improvement articles.