Actual Cash Value (ACV): Actual Cash Value (ACV) is computed by subtracting depreciation from the replacement cost. The depreciation is usually calculated by establishing a useful life of the item and determining what percentage of that life remains. This percentage times the replacement cost gives the ACV.
As an example: a man purchased a new mobile home for $60,000 five years ago and it was destroyed in a fire. His insurance company says that all mobile homes have a useful life of 30 years. A similar home today costs $55,000. The destroyed home had 84% (25 years) of its life remaining. The ACV equals $55,000 (replacement cost) times 84% (useful life remaining) or $46,200.
Adjacent Structures: Structures that are not considered part of the home itself, that are located adjacent to the home; for example a storage shed or garage.
Agreed Value: An amount agreed upon by the insured and insurer as the value of the property insured in case of a total loss.
Comprehensive Coverage: This is the most inclusive home insurance policy; it covers both the building and its contents for all risks, except for those specifically excluded.
Deductible: The deductible is the amount of expenses that must be paid out of pocket before an insurer will pay any expenses.
Endorsement: An endorsement is a written document attached to an insurance policy that modifies the policy by changing the coverage afforded under the policy. An endorsement can add coverage for acts or things that are not covered as a part of the original policy and can be added at the inception of the policy or later during the term of the policy. Also Known As: Rider, addendum, attachment.
Limit: The limit is the maximum amount of money an insurance company will pay for each component arising out of a claim; for example, if the insured limit on your mobile home is $50,000 but you incur a loss of $65,000, the insurance company would pay up to $50,000.
Loss – Partial: In insurance, damage that neither destroys the insured good or property nor renders it useless; repairing the loss would be more cost effective than replacement.
Loss – Total: a total loss or write-off is when the loss more cost effective to replace than repair.
Owner Occupied: A home that is occupied by it’s owner, as opposed to a rental home that would be occupied by a tenant.
Personal Liability: Coverage that protects you from a loss to a third party that you are held legally responsible for. Personal liability coverage helps cover the costs associated with the loss that you may be obligated to pay for.
Personal Property: Personal belongings and the contents in your home, such as furniture, clothing, jewelry, electronics, etc.
Premium: The amount to be charged for a certain amount of insurance coverage is called the premium.
Rental: A home that is occupied by a tenant, as opposed to an owner occupied home that would be occupied by the owner of the home.
Replacement Cost: Replacement cost is the actual cost to replace an item or structure at its pre-loss condition. When a mobile home is covered by a replacement cost value policy, the cost of a similar mobile home which can be purchased today determines the compensation amount for that item.
For example: A man purchased a new mobile home for $60,000 five years ago and it was destroyed in a fire. A similar home today costs $55,000. The man will be covered up to $55,000 (replacement cost) to replace the home.
Seasonal: A home that is used seasonally – for example a vacation home in the mountains that would only be used during the winter, or a house in the desert to be used during the summer.
Tenant: A person that rents a property from someone else.