“Personal Insurance” is a term used to categorize various insurance products, all of which are centered around your personal risks. You’re likely familiar with some of these policies, including Homeowners Insurance, Auto Insurance, Renters Insurance, Travel Insurance, just to name a few. The main take away is that Personal Insurance allows you and your family to go about your day without risking significant financial loss from both major and minor accidents.
As part of our glossary series, we are on a mission to make Insurance more approachable. This means defining some of our jargon. Here are a few Personal Insurance terms that frequently spark question marks.
Actual Cash Value: There are a few different ways carriers calculate your protection, centered around how they will value your insured property (including your home, vehicle(s), and even personal belongings) after a damaging event. Actual Cash Value is one of these ways. This is not based on market value. Rather, a typical formula looks something like this… the Replacement Cost MINUS Depreciation (according to an insurance carrier’s formula) EQUALS Actual Cash Value. This is usually not enough to rebuild your house in the event of a total loss.
Auto Limits: Every policy has limits, or the maximum amount of money an insurance company will pay toward a covered event. There are two ways an insurance company can organize Auto policy limits:
Full Coverage: While this is not an official policy, carriers use this term to describe a well-rounded Auto Policy that accounts for multiple scenarios. Here are a few coverages that can create a “Full-Coverage” effect.
Full Glass: You can add this Auto Insurance coverage to help pay for the replacement/repair of your vehicle’s windows and windshield. Glass damage can sometimes be accounted for in Comprehensive Coverage (defined above), but depending on your deductible, it may be worth adding Full Glass protection to your policy’s language.
Hired/Non-Owned Auto: This is a Commercial Auto coverage that applies liability protection to both non-owned vehicles (like employee cars) and rented or borrowed vehicles that are being used for business purposes.
Liability Only: This is one of the most basic Auto Insurance policies you can purchase. It only covers 3rd party injuries or property damage if an accident occurs. This means that if your car needs repairs, you or your passengers need medical attention, or a rental car is required, you would pay out of pocket. For broader coverage, we recommend a “Full Coverage” policy (defined above).
Replacement Cost: There are a few different ways carriers calculate your protection, centered around how they will value your insured property (including your home, vehicle(s), and even personal belongings) after a damaging event. Replacement Cost is one of these ways. Time and use can dramatically depreciate the value of assets, so Replacement Cost requires the insurance company to help rebuild/replace your assets based on what they are worth “today,” regardless of depreciation. Replacement Cost is sometimes 40-50% more coverage and typically costs more for this reason.
Need further clarification on any of these terms? We are just one phone call or email away!