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Homeowners Insurance Definitions A Additional Living Expense Any necessary increase in living expenses incurred by the insured, so the household can maintain its normal standard of living. Abandonment Clause A clause in fire insurance policies and other property forms that prohibits the insured from abandoning partially damaged property to the insurer in order to claim a total loss. Account Premium Modification Plan A rating plan for Fire, Property Damage and Time Element coverage's. The maximum credit or surcharge is 25%, and it is available to risks which develop a three-year premium of at least $5,000. Accounts Receivable Insurance Insurance against the loss that occurs when an insured is unable to collect outstanding accounts because of damage to or destruction of the accounts receivable records by a peril covered in the policy. Additional Living Expense Insurance A contract to reimburse the insured for increased living costs when loss of his property forces him to maintain temporary residence elsewhere. Examples of these types of expenses are the cost for a hotel or motel, the extra cost for restaurant meals, and the cost of using a Laundromat. The term Extra Expense Insurance is defined with regard to additional expenses incurred by businesses. After Charge A charge sometimes included in fire rates for commercial buildings. It is usually added for conditions which can be corrected by the insured, such as failure to have the proper types of fire extinguishers. Agreed Amount Clause Under this clause, the insured and the insurer agree that the amount of insurance carried will automatically satisfy the coinsurance clause. The effect is to eliminate the necessity of determining whether or not the amount carried is equal to the stated percentage of the actual cash value indicated in the coinsurance clause. Allied Lines Various insurance coverage's for additional types of losses, and against loss by additional perils, which are closely associated with and usually sold with fire insurance. Examples include coverage against loss by perils other than fire, coverage for sprinkler leakage damage, and business interruption coverage. The fire insurance field consists of coverage's for "fire and allied lines." Amount Subject The maximum amount which underwriters estimate can possibly be lost under the most unfavorable circumstances in any given loss, such as a fire or tornado. Contrast with Probable Maximum Loss. Appurtenant Structures Buildings on the same premises as the main building insured under a Property Insurance policy. Most Dwelling Property Insurance policies cover appurtenant structures under most circumstances. Arbitration Clause The provision in a Property Insurance contract which states that if the insurer and insured cannot agree on an appropriate claim settlement, each will appoint an appraiser, and these will select a neutral umpire. A decision by any two of the three prescribes a settlement and binds both parties to it. Automatic Reinstatement Clause A stipulation in a Property Insurance policy which states that after a partial loss covered by the policy has been paid, the original limit of the policy will be automatically reinstated. Average Clause A clause providing that similar items in one location or several locations which are insured by a policy shall be covered in the proportion that the value of each bears to the value of all. Previously known as the "Pro Rata Distribution Clause" and the "Average Distribution Clause." Average Rate A rate for a policy established by multiplying the rate for each location by the value at that location and dividing the sum of the results by the total value. B C Consequential Loss/Damage (1) An indirect loss arising out of the policyholder's inability to use the property over a period of time, as opposed to a direct loss that happens almost instantaneously. Business Interruption, Extra Expense, Rents Insurance, and Leasehold Interest are the most common coverage's included under the category of Consequential Loss coverages. (2) A loss not directly caused by a peril insured against, such as spoilage of frozen foods caused by fire damage to the refrigeration equipment. See also Indirect Loss, and contrast with Direct Loss. Contents Rate The Fire Insurance rate on the contents of a building rather than on the building itself. Coinsurance Clause A clause requiring the insured maintains insurance on the property at least equal to a stipulated percentage of its value in order to collect partial losses in full. D Debris Removal Clause A provision that may be included in a Property policy contract to provide the insured with indemnification for expenditures incurred in the removal of debris produced by the occurrence of an insured peril. Ordinarily a Property policy covers only the direct damage caused by an insured peril. Demolition Clause A provision that excludes liability for costs incurred in demolishing undamaged property, often necessitated by building ordinances requiring that structures must be demolished after a certain degree of damage has been sustained. Demolition Insurance Insurance written to cover the cost of demolition excluded by a demolition clause. It may be endorsed to Property Insurance for an additional premium. Direct Loss/Damage A loss which is a direct consequence of a particular peril. Fire damage to a refrigerator would be a direct loss. Spoiling of food in the refrigerator as a result of the fire damage would be an indirect loss. Contrast with Indirect Loss and Consequential Loss. E Earth Movement A peril including landslide, mud flow, earth sinking, rising or shifting, and earthquake. Usually excluded on homeowners' and commercial property policies. Earthquake Insurance Insurance covering damage caused by an earthquake as defined in the contract. Easement An interest in land owned by another that entitles its holder to specific uses. Electrical (or Electrical Apparatus) Exemption Clause A clause providing that damage to electrical appliances caused by artificially generated electrical currents is recoverable only if fire ensues and then only for the damage caused by the fire. Explosion Insurance Insurance against loss of property due to explosion but not including explosion of steam boilers, pipes, and certain pressure instruments. Most commonly written as part of the Extended Coverage Endorsement. Extended Coverage (EC) A common extension of property insurance beyond coverage for fire and lightning. Extended coverage adds insurance against loss by the perils of windstorm, hail, explosion, riot and riot attending a strike, aircraft damage, vehicle damage, and smoke damage. At one time EC was added by endorsement. In recent years it has been included on many forms as either an optional coverage or as part of the minimum coverage's provided. F FAIR Plan Fair Access to Insurance Requirements. A pooling plan reinsured by the United States government that makes insurance available to those in inner-city or other high risk areas who cannot obtain insurance through normal channels. Coverage's for fire and allied perils is available, with considerably high limits, after inspection of the premises. Fire Combustion which is rapid enough to produce a flame or glow. A fire, for purposes of Property Insurance, must be "hostile," which means it is not in a place in which it is intended to be. Fires in their proper contained area are called "friendly fires" and are not covered under most basic Property Insurance policies. Fire Department Service Clause A provision in a Fire Insurance policy that provides the insured with indemnification for charges he incurs due to action by a fire department to save his property. It is useful for property located outside the jurisdiction of the nearest fire department and where the call will be answered only for a fee. Fire Marshal A public official responsible for the prevention and investigation of fires. The marshal and his office are usually financed by a tax on the premiums of Property insurers. Fireproof A term used in describing building construction. It refers to buildings which are of such construction as to be practically undamageable by fire. However, the term is a misnomer, since no building is completely undamageable by fire, and it is gradually being replaced by the words "fire resistive." Fire Insurance Contract prescribed by each state insuring against direct loss by fire, lightning, and other defined causes. Fire Resistive Construction A building which has exterior walls, floors, and roof constructed of masonry or other fire-resistive materials. Fire Wall A structure (wall) which is designed to seal off fires within a building. Flood A general and temporary condition of partial or complete inundation of normally dry land areas from (1) overflow of inland or tidal waters, (2) the unusual accumulation and runoff of surface waters from any source, or (3) abnormal, flood-related erosion and undermining of shorelines. Flood also means inundation from mud flows caused by accumulations of water on or under the ground, as long as the mud flow and not a landslide is the proximate cause of loss. Flood Insurance Coverage against damage caused by the rising or overflowing of bodies of water. This is available through a national insurance program and must be bought separately. Frame A type of construction. A frame building is primarily made with wood frames and joists. G H Homeowner's Policy A form of package policy including fire and other perils, theft insurance, and comprehensive personal liability. The premium is stated as one amount. Household Personal Property The term given to household goods, furniture and personal belongings of residents of a farm dwelling. The Farm Property Coverage Form uses the term "household" to distinguish it from the separate coverage for "farm" property. I Insurance-to-Value The amount of insurance written on property is approximately equal to its value. J K L Loss Payable Clause A provision in Property Insurance contracts that authorizes payment to persons other than the insured to the extent that they have an insurable interest in the property. This clause may be used when there is a lien or loan on the property being insured, and it protects the lender. Loss of Use Insurance Coverage to compensate an insured for the loss of use of his property if it cannot be used because of a peril covered by the policy. M Mobile Home Policy A Homeowners policy written on a mobile home which is permanently situated. Mortgagee Clause A clause in an insurance policy that makes a claim jointly payable to the policyholder and the party that holds a mortgage on the property. N National Flood Insurance Program (NFIP) Federal program providing flood insurance for fixed property. Under a "dual" program coverage may be written directly by the NFIP or by private carriers whose losses may be reimbursed by the NFIP. O Other Structures Structures, such as a garage or storage shed, which are separated from an insured dwelling by a clear space, or are connected only by a fence or utility line. Dwelling and Homeowner policies provide coverage for other structures. P Premises The building insured or containing the insured property. Depending on policy conditions, it may also include an adjacent area. Property Damage Physical injury to, destruction of or loss of use of tangible property. Property Insurance First party insurance of real and personal property against physical loss or damage. Q R Real Property The earth and all attached land and buildings, also known as real estate. Replacement Cost Coverage for replacing property with new material; depreciation is not taken into consideration. Residence Employee An employee of an insured whose duties are related to the maintenance or use of the insured residence premises. Residence Premises Principal residence of the named insured. S Scheduled Property Listing specific personal property for a stated insured value. This is usually considered for valuable items that are subject to limited coverage. T Tenants Policy A form of homeowner policy sold to person(s) who rent their living quarters. U V W X Y Z