Glossary
Actual Cash Value
The policy pays for the cost to repair or replace the damaged property at the time of loss, less depreciation. Example: A building has a roof with a 20-year life expectancy destroyed by hail 5 years after its installation, and the cost to replace the roof at the time of loss is $10,000. The current replacement value of $10,000, less depreciation of $2,500 (25%), equals the actual cash value of $7,500.
Annuity
A contract with an insurance company that guarantees current or future payments in exchange for a premium or series of premiums. The interest earned on an annuity contract is not taxable until the funds are paid out or withdrawn. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, penalties may apply. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have fees and charges associated with the contract, and a surrender charge also may apply if the contract owner elects to give up the annuity before certain time-period conditions are satisfied.
Appraisal
A formal assessment of a property’s value at a specific point in time, performed by a qualified professional.
Asset
Anything owned that has a current value that may provide a future benefit.
Audit
In accounting, the formal examination of a company’s financial records by a qualified professional to determine the records’ accuracy, consistency, and conformity to legal standards and established accounting principles. In taxes, the formal examination of a tax return by the Internal Revenue Service or other authority to determine its accuracy.
Beneficiary
The person or entity who will receive benefits from a life insurance policy, qualified retirement plan, annuity, trust, or will upon the death of an individual.
Bodily Injury
Bodily harm, sickness, or disease, including death that results therefrom.
Book Value
The value of a company’s assets minus its liabilities, preferred stock, and redeemable preferred stock.
OR
The value of a specific year, make, model of a vehicle in a certain condition, according to Kelly Blue Book.
Business Personal Property
Anything over which a business has legal title. This could include items such as desks, computers, office furniture, tools, industry specific items, etc.
Business Interruption
Replaces business income lost as a result of an event that interrupts the operations of the business, such as fire or natural disaster.
Buy-and-Hold
An investment strategy that advocates holding real estate or securities for the long term and ignoring short-term price fluctuations in the market.
Claim
A request for payment under the terms of an insurance policy.
Coinsurance or Co-Payment
A policy provision under which an insurance company and the insured party share the total cost of covered medical services after the policy’s deductible has been met.
Collision
The upset of the covered vehicle or a non-owned auto, or their impact with another vehicle or object, such as a tree.
Combined Single Limit (Liability)
The limit of the policy may be applied to either bodily injury or property damage, wherever needed, or in any combination.
Compound Interest
A process under which interest is computed both on an account’s principal and on any gains reinvested in prior periods. This is contrasted with simple interest, in which interest is calculated only on the principal amount.
Comprehensive
Also known as “Other Than Collision”. Any other cause of loss which is not defined as a collision and which is not otherwise excluded in the policy. This includes, but is not limited to the following causes of loss:
- Missiles or falling objects
- Fire
- Theft or larceny
- Explosion or Earthquake
- Windstorm
- Hail, water, or flood, including flash flood
- Malicious mischief or vandalism
- Riot or civil commotion
- Contact with a bird or animal
- Breakage of glass. If glass breakage is caused by a collision, the insured may elect to have it considered as a loss caused by collision.
Convertible Term Insurance
A term life insurance policy under which the policyholder has the right to convert the policy to permanent life insurance, subject to limitations. Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
Corporation
A legal organization created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. Corporations are taxable entities—they are taxed separately from their members or shareholders. Corporations are able to borrow money and to make a profit separately from their members or shareholders.
Credit Score
A statistical estimation of how likely a potential borrower is to pay his or her debts and, by extension, how much credit he or she should have.
Declarations Page
Policy statements regarding the applicant and property covered. Basically a summary of the limits of your policy.
Deductible
Portion of the insured loss (in dollars) paid by the policy holder/insured.
Deed
A legal document that confirms ownership of an asset or that confirms the passage of an interest, right, or ownership in the asset from one person or legal entity to another.
Deferred Annuity
A contract with an insurance company that guarantees a future payment or series of payments in exchange for current premiums. The interest earned on an annuity contract is not taxable until the funds are paid out or withdrawn. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have fees and charges associated with the contract, and a surrender charge also may apply if the contract owner elects to give up the annuity before certain time-period conditions are satisfied.
Disability Income Insurance
An insurance policy that pays a portion of the insured’s income when a specified disability makes working uncomfortable, painful, or impossible.
Dwelling
The structure on the residence premises, described on the Declarations Page, including structures attached to the main building such as an attached garage, carport, etc.
Dwelling Coverage
The coverage amount in your homeowner policy that is to rebuild the structure of your home including anything permanently attached. At Arrow Insurance we recommend you add Extended Dwelling Coverage if possible.