Resource Center

Resource Center

Welcome to the Resource Center

Insurance can be complicated at times, and terms and conditions of insurance are not easy to understand. By educating our policyholders about the basics of their First American Insurance policy, we will help you become an educated insurance consumer.

The Resource Center provides vital information to help policyholders and consumers understand options to select a policy, coverages, what is not covered such as earthquakes and floods, and information required to file a claim. To help you determine your auto, homeowners, landlord, condo, renters, and umbrella needs, First American, our agents, and our brokers want you to use this knowledge as power when you tailor your policy to fit your needs.

Basic Types of Insurance Coverage

Homeowners Insurance (HO-3)

A homeowners insurance policy contains two sections. Section I provides property coverage, and are noted by Coverage A, B, C, and D on your policy declarations page. Section II provides liability coverage and is noted by Coverage E and F. Coverage on your policy includes the following six coverages:

Coverage A – Dwelling/Structure

Provides property coverage that protects your house and any attached structures if your property is damaged by a covered loss. Attached structures include a garage, a deck, or a front or back porch which may be covered by the dwelling portion of your policy.

Coverage B – Other Structures

Provides coverage for other structures on your property not attached to your dwelling or home. Items covered include a detached garage, guest house, patio, or a shed. Coverage B is 10% of the limit for coverage A. More coverage is available for an additional cost.

Coverage C – Personal Property

Provides coverage for your personal property and contents inside your home. Personal property coverage includes items owned by you and family members who live with you. This coverage also covers your personal property while traveling in the U.S. or abroad. Basic coverage C is 50% of the limit for coverage A, and you can purchase more coverage for an additional cost.

There are two types of settlement options for your personal property in the event of a loss. You will receive Actual Cash Value or Replacement cost. Actual Cash Value will replace or repair your property minus depreciation. Replacement Cost will provide the full value to replace your property without depreciation. Make sure you select the appropriate option (if available) when you purchase your insurance policy.

Coverage is limited for the following high value items:

  • Cameras
  • Coins
  • Fine Arts
  • Furs
  • Golf Equipment
  • Guns
  • Jewelry
  • Musical Instruments
  • Silverware, Goldware, and Pewterware
  • Watches

You can purchase more coverage for the items listed above and/or schedule these items separately by providing documentation including but not limited to an appraisal from a qualified and credentialed appraiser, picture of each item, and a copy of original purchase receipt.

Coverage D – Loss of Use

Provides an additional living expense in the event your home is damaged by a covered loss and damage makes your home unlivable. This coverage pays for the reasonable increase in expenses to maintain your standard of living for a certain amount of time. These expenses include but are not limited to housing, food, and storage for personal property in your home while repairs are performed. Coverage D is typically 20% of the coverage A limit.

Coverage E – Personal Liability

Provides coverage in the event you or family members in your household are legally responsible for bodily injury and/or property damage to others. It pays for your legal defense against a liability claim (lawsuit), and it also pays any court judgment against you for covered losses up to the policy limit. Coverage E examples include:

  • A guest at your home slips and falls in your walkway or driveway
  • Your dog (not an excluded breed) bites a person or another dog
  • A negligently maintained tree on your property falls on your neighbor’s home

Liability coverage will not protect you from all situations, such as an intentional act or punitive damages.

Coverage F – Medical Payments to Others

Pays reasonable and necessary medical expenses for people injury on your property. This is known as no-fault coverage because all bills are paid up to your policy limit for this coverage whether you are legally responsible or not. Coverage does not pay for injuries to you or members of your household. This coverage is not a substitute for health insurance, and business activities are excluded.

Make sure you read the exclusions in your policy for all coverages listed above.

Condominium Insurance Unit Owner (HO-6)

A condominium insurance policy (HO-6) provides coverage for the unit owner. Coverage includes interior of the unit (often referred to as a studs-in/walls-in policy), personal property, loss of use, personal liability and coverage for special assessment against the owners. Basic condo insurance consists of the following five coverages:

Coverage A – Dwelling

Provides insurance for the “interior” real property not covered in the master policy of your association. Coverage includes walls, flooring, fixtures, and cabinetry, and this type of policy is known as a walls-in policy. A review of your association’s master policy can help determine what is covered, and how much dwelling coverage you need.

Coverage C – Personal Property

Personal property coverage provides insurance for personal items damaged, lost, or stolen due to a covered loss. Coverage includes everything that is not permanently affixed to the interior of the unit such as clothing, computers, furniture, TV’s and other electronics, appliances, rugs, bikes, etc…

To protect yourself, complete an inventory of your personal property to estimate how much coverage you will need. Most people underestimate the value of their personal property, and when a claim is filed, you may not have enough insurance coverage to replace clothing, furniture, computer, TV’s, and all the small items that add up. Personal property insurance starts with a minimum of $25,000 coverage, and you can purchase more coverage for an additional cost.

There are two types of settlement options for your personal property in the event of a loss. You will receive Actual Cash Value or Replacement cost. Actual Cash Value will replace or repair your property minus depreciation. Replacement Cost will provide the full value to replace your property without depreciation. Make sure you select the appropriate option (if available) when you purchase your insurance policy.

Coverage is limited for the following high value items:

  • Cameras
  • Coins
  • Fine Arts
  • Furs
  • Golf Equvipment
  • Guns
  • Jewelry
  • Musical Instruments
  • Silverware, Goldware, and Pewterware
  • Watches

You can purchase more coverage for the items listed above and/or schedule these items separately by providing documentation including but not limited to an appraisal from a qualified and credentialed appraiser, picture of each item, and a copy of original purchase receipt.

Coverage D – Loss of Use

Loss of use is important if a covered loss makes your condo unlivable. This coverage pays for the reasonable increase in expenses to maintain your standard of living for a certain amount of time. These expenses include but are not limited to housing, food, and storage for personal property in your condo while repairs are performed.

Coverage E – Personal Liability

Provides coverage in the event you or family members in your household are legally responsible for bodily injury or property damage to others on or away from your property. It pays for your legal defense against a liability claim (lawsuit), and it also pays any court judgment against you for covered losses up to the policy limit. Coverage E examples include:

  • A guest at your home slips and falls in your condo hallway
  • Your dog bites a guest on your property
  • A pipe bursts in your condo and floods your neighbors condo

Liability coverage will not protect you from all situations, such as an intentional act or punitive damages.

Coverage F – Medical Payment to Others

Pays reasonable and necessary medical expenses to your guests for any injury caused by you or a resident member of your household or a pet regardless of where the injury occurred. This is known as no-fault coverage because all bills are paid up to your policy limit for this coverage whether you are legally responsible or not. This coverage does not pay for your injuries or injuries to members in your household, and this coverage is not intended as a substitute for health insurance.

Loss Assessment Coverage

Provides protection for special assessments levied against condo owners for covered losses incurred in your complex. In some cases, loss assessment coverage can cover your share of the master policy deductible. A basic limit of $1,000 is provided, but you can increase your coverage up to $50,000 for an additional cost.

Landlord/Rental Property Insurance (DP-3)

Dwelling & Fire Policy (DP-3) is a policy for a 1-4 family unit dwellings, which are either owner (California) or tenant occupied (all other states) structures. If you own a rental property or a multi-family house (2-4 family units) and live elsewhere, you will need to purchase a Dwelling & Fire Policy (DP-3). This policy will cover losses for the structure of the dwelling, personal property left for tenant use, fair rental value, personal liability, and medical payments to others.

If you have tenants in your rental property, make sure you have the right policy. If you have tenants in your home under a homeowners (HO-3) policy, you may provide the insurance company with cause to deny your claim. A landlord/rental property insurance policy includes the following six coverages:

A – Dwelling/Structure

Provides property coverage that protects your house and any attached structures if your property is damaged by a covered loss. Attached structures include an attached garage, a deck, or a front or back porch, and may be covered by the dwelling portion of your policy.

Coverage B – Other Structures

Provides coverage for other structures on your property not attached to your dwelling or home. Items covered include a detached garage, guest house, patio, or a shed. Coverage B is 10% of the limit for coverage A. More coverage is available for an additional cost.

Coverage C – Personal Property

This coverage extends to all of the personal property and contents kept at the rental property which are owned by the landlord. This includes items stored on the property by you, as well as furnishings provided by the landlord for tenant use.

Coverage D – Fair Rental Value

In the event a covered loss occurs to your rental property, and your tenants are unable to reside in the dwelling, we will reimburse you for lost rent from tenants while your damaged home is fixed, rebuilt, and made livable again.

Coverage L – Personal Liability

For an additional premium, premises liability can be added to your policy. Coverage is provided in the event you or family members in your household are legally responsible for bodily injury or property damage on or away from your property. It pays for your legal defense against a liability claim (lawsuit), and it also pays any court judgment against you for covered losses up to the policy limit. Coverage L examples include:

  • Tenant is injured due to a broken step, covered hole, or loose floorboard
  • Negligently maintained tree falls on your neighbor’s home

Liability coverage will not protect you in all situations, such as an intentional act or against punitive damages. Make sure you read all the exclusions listed in your policy.

Coverage M – Medical Payments to Others

Pays reasonable and necessary medical expenses for guests injured on the property. This is known as no-fault coverage because all bills are paid up to your policy limit for this coverage whether you are legally responsible or not. This coverage does not pay for your injuries or injuries to those (other than a “residence employee”) who regularly reside on any part of the property (your tenant).

Renters Insurance (HO-4)

If you live in an apartment, a rented condo, or a rented house, renters insurance will provide protection for your personal property as well as liability protection in the event someone is injured in your home. A basic renters policy protects your personal property for covered losses such as theft or damage, and the policy may pay for temporary living expenses if your rental is damaged and unlivable. If someone is injured because of your negligence, renters insurance can help protect you against the cost of a liability lawsuit. A standard renters insurance policy includes the following coverages:

Coverage C – Personal Property

Personal property coverage provides insurance for personal items damaged, lost, or stolen due to a covered loss. Coverage includes everything that is not permanently affixed to the interior of the unit you rent such as clothing, computers, furniture, TV’s and other electronics, appliances, rugs, bikes, etc…

To protect yourself, complete an inventory of your personal property to estimate how much coverage you will need. Most people underestimate the value of their personal property, and when a claim is filed, you may not have enough insurance coverage to replace clothing, furniture, computer, TV’s, and all the small items that add up.

There are two types of settlement options for your personal property in the event of a loss. You will receive Actual Cash Value or Replacement cost. Actual Cash Value will replace or repair your property minus depreciation. Replacement Cost will provide the full value to replace your property without depreciation. Make sure you select the appropriate option (if available) when you purchase your renters insurance policy.

Coverage is limited for the following high value items:

  • Cameras
  • Coins
  • Fine Arts
  • Furs
  • Golf Equipment
  • Guns
  • Jewelry
  • Musical Instruments
  • Silverware, Goldware, and Pewterware
  • Watches

You can purchase more coverage for the items listed above and/or schedule these items separately by providing documentation including but not limited to an appraisal from a qualified and credentialed appraiser, picture of each item, and a copy of original purchase receipt.

Coverage D – Loss of Use

Provides an additional living expense in the event your rental unit is damaged by a covered loss and the damage makes your home unsafe or unlivable. This coverage pays for the reasonable increase in expenses to maintain your standard of living for a certain amount of time, and include but are not limited to housing, food, and storage for your personal property while repairs are performed.

Coverage E – Personal Liability

Provides coverage in the event you or family members residing in your household are legally responsible for bodily injury or property damage on or away from your property. It pays for your legal defense against a liability claim (lawsuit), and it also pays any court judgment against you for covered losses up to the policy limit. Coverage E examples include:

  • A guest slips and falls on the patio or in the home you rent
  • Your dog bites a guest in the condo you rent
  • Water overflows your bathtub and floods your neighbor’s apartment

Liability coverage will not protect you in all situations, such as an intentional act or against punitive damages. Make sure you read all the exclusions listed in your policy.

Coverage F – Medical Payments to Others

Pays reasonable and necessary medical expenses to your guests for any injury caused by you or an insured member of your family or a pet regardless of where the injury occurred. This is known as no-fault coverage because all bills are paid up to the policy limit for this coverage whether you are legally responsible or not. You can purchase more coverage and increase your limit up to $5,000 for an additional cost. This coverage does not pay for your injuries or injuries to those (other than a “residence employee”) who regularly reside on any part of the property (your tenant).

Auto Insurance

Auto insurance is a contract between you and the insurance company that covers your legal obligations and certain types of financial losses, resulting from the ownership or use of an insured vehicle if the vehicle is involved in an accident or sustains property damage. All states require the owner of a vehicle to carry auto insurance or some level of liability coverage. As the owner of a vehicle, when you purchase insurance, you will pay a monthly, quarterly, or annual premium. Generally, your premium will be determined by your driving record, driving experience, vehicle usage, location where the vehicle is used, and the type of vehicle covered.

For your premium, you will receive an insurance card with effective and expiration dates for the coverage term, and this card should be kept in your vehicle as proof of insurance. Auto insurance policies contain two sections of coverage. The first section provides liability coverage for bodily injury and property damage in an accident, while the second section provides coverage for physical damage to your vehicle.

Liability Coverage

This is one of the most important coverages, which is required in all 50 states under the Financial Responsibility Law. If you get into an accident because of your negligence or driving behavior, the coverage will pay damages to the other party (property damage and bodily injury). Liability coverage pays for bodily injury, property damage, lost wages or income, pain and suffering, and any lawsuits or defense costs as a result of the accident.

Basic auto liability insurance includes the following four coverages:

Bodily Injury Liability

Coverage will protect you against medical expenses related to death or hospital costs. If a lawsuit is filed, coverage is provided for losses related to the accident, and in addition to the maximum limit of expenses your policy covers, you may also receive coverage for you defense costs if the lawsuit goes to court. Liability coverage can be listed on your policy as a Combined Single Limit or as a Split Limit.

  • Combined Single Limit – Lists one maximum amount the insurance company will pay to cover all liabilities related to the accident. Recommended Combined Single Limit liability coverage is $300,000 per accident with $100,000 property damage
  • Split Limit – Lists the maximum amount the insurance company will pay for specific type of liability coverage. For example, if you have 15/30/5 policy, the limit on your policy is $15,000 per person for bodily injury, $30,000 per accident for bodily injury, and $5,000 per accident for property damage coverage. The dollar amounts listed in the example are the maximum amounts the insurance company will pay per person or accident. If the cost for the accident exceeds these limits, you will be responsible for the difference. Recommended Split limit liability coverage limits are $100,000 per person, $300,000 per accident, and $100,000 property damage
Property Damage Liability

Coverage protects you against the cost for damage to any car, cars, or property involved in the accident. This coverage will pay repair or replacement expenses for another person’s property when the insured is legally responsible for a covered loss. Expenses for repair or replacement costs are paid up to the coverage limit.

Medical Payments

This coverage protects you, your family, and other passengers riding in a vehicle. Coverage pays reasonable and necessary medical expenses if the insured or others in the vehicle are injured due to a covered loss. Medical expenses will be paid up to the limit of the coverage selected by you. This coverage will also protect the insured and other members in the household while riding in another person’s vehicle. Medical payments coverage is there to make sure passengers in your vehicle receive some protection in the event you are involved in an auto accident. Medical expenses must be incurred within three (3) years for the date of the accident.

Uninsured Motorists Bodily Injury

Coverage is designed to protect the insured and other passengers in a covered vehicle in the event they are injured in an accident by a motorist who is uninsured and legally liable for the insured's injuries. It will pay medical and related expenses up to the coverage limit selected by you. This coverage is not required, but it will protect you against expenses incurred due to uninsured motorists. If you do not accept this coverage, you will be required to sign a rejection waiver.

Underinsured Motorist Bodily Injury

This coverage is designed to protect the insured and other passengers in a covered vehicle if they are injured in an accident by a driver whose coverage is insufficient to cover injuries anyone in the vehicle has sustained. The policy will compensate the injured party for the difference between the injury sustained and the liability coverage provided by the insurance company of the driver who is liable for the accident. Keep in mind…Coverage may be limited to prevent the insured from receiving the full amount of coverage purchased through the insurance company. Most insurance policies define the underinsured driver as an individual with less coverage than the insured’s underinsured coverage limit. This coverage only applies when the limit of the insured’s underinsured coverage exceeds those of the at fault drivers bodily injury limit. If you do not accept this coverage, you will be required to sign a rejection waiver.

Comprehensive Deductible

This coverage will protect the insured’s vehicle. Coverage pays for repair or replacement expenses as a result of damage caused by hazards other than a vehicle collision or accident. Some hazards include theft, glass breakage, fire, vandalism, wind, hail, or damage cause by hitting a stray or wild animal. In the event of a total loss, you may receive up to the actual cash value of the vehicle, less the deductible amount selected by you. Your comprehensive deductible will not cover mechanical breakdown or normal wear and tear on your vehicle.

Collision Deductible

Collision coverage will protect the insured’s automobile. This coverage will pay repair or replacement expenses for any damages caused by a collision, accident with another vehicle, or if your vehicle rolls over. In the event of a total loss, you may receive up to the actual cash value of the vehicle, less the amount of deductible selected.

Collision Deductible Waiver

This coverage will waive the collision deductible when the insured’s vehicle is involved in a covered accident with a driver who is uninsured, legally responsible, or at-fault.

Underinsured Motorist Property Damage

Will pay for damages to the insured’s vehicle when a covered accident is caused by a driver who is underinsured, legally responsible, or at-fault. Coverage will pay up to an amount selected by you.

Rental Reimbursement

Pays for the use of a rental car while your vehicle is being repaired for a covered loss. This coverage provides a daily amount limit and a day limit for a rental car. For example, rental reimbursement coverage may have a limit of $30 per day, for a maximum coverage period of 30 days for the insured to use on a rental car.

Towing and Labor

Pays for reasonable and necessary towing and labor costs under the terms of the policy. Will pay for basic towing, manual labor, and gas delivery on the covered vehicle. The insured or insured family members on the policy must be subject to the breakdown, and the vehicle which broke down must be listed on the policy.

For additional coverage options not listed above, please consult with your agent or broker.

Personal Umbrella Policy

A Personal Umbrella insurance policy provides additional liability coverage over and above your underlying auto, home, and other insurance policies. If you are at fault in an auto accident and caused serious injury to the other party, or if someone is injured on a property you own and can prove damages, you may be sued and exposed to potentially devastating liability claims or judgments. If you lose the lawsuit, the judgment could easily exceed the limits on your auto, home or landlord policy.

For example, if your Auto policy has a Bodily Injury limit of $300,000 per accident, and a lawsuit judgment against you amounts to $2 Million, you would be responsible for the additional $1,700,000. That’s where Umbrella coverage kicks in.

Personal Umbrella policy limits are typically available in increments of $1 million all the way up to $5 million.

When you are consider a Personal Umbrella policy, you need to think in terms of your protection beyond your personal assets.

Disclaimer

The information provided is for information purposes only. The terms, conditions, and verbiage contained in your insurance policy are legally binding and supersede information provided on this website. The information provided on this website does not create any obligations, or rights on the part of the insured, First American Property and Casualty Insurance Group, or an agent or broker. Lastly, the examples and definitions contained are not a substitute for actual the insurance policy provided by First American Property and Casualty Insurance Group.

Basic Insurance Terms and Definitions

Actual Cash Value

An amount equivalent to the fair market value of stolen or damaged property before the loss. Usually, actual cash value equals the current replacement cost minus depreciation (based on age, condition, time in use, and obsolescence). For vehicles, this amount may be determined using vendors such as Kelly Blue Book and True Market Value, which provide an estimate of current market value based on many factors.

Additional Living Expenses

Extra expense incurred by you when your property is inhabitable due to a covered loss. It covers expenses such as hotel rooms, restaurant meals, and laundry costs to permit the insured household to maintain its normal standard of living. In most cases, your insurance company will reimburse you for these costs.

Agent

A license person or organization authorized to sell insurance for an insurance company.

Automobile Insurance

Coverage on a car and risks associated with driving or owning a vehicle. Coverage can include collision, liability, comprehensive, medical, and uninsured/underinsured motorist insurance.

Binder

A temporary agreement that provides coverage until a policy is written or delivered to the consumer.

Bodily Injury

Any physical injury to a person. The purpose of liability insurance is to cover bodily injury to a third party resulting from negligent or unintentional acts of the insured party.

Broker

A licensed person or organization paid by you to look for and find insurance on your behalf.

Broker Fee

Amount of money charged by a broker to look for and find insurance on your behalf. The fee is earned and is not refundable. Prior to the fee being charged, it must be disclosed and agreed to by the insured, and this fee is not part of your insurance premium. It is a contractual agreement between you and the broker.

Burglary

A loss as a result of forced entry into your property.

California Automobile Assigned Risk Plan (CAARP)

Provides insurance when a driver is unable to purchase private passenger or commercial liability auto coverage due to a poor driving record.

Cancellation

The termination of insurance coverage during the policy period. Termination may be voluntary, involuntary, or mutual in accordance with provision contained in the contract. Flat cancellation occurs when a policy is cancelled as of its effective date without any premium charge.

Claim

Notice or demand by an insured or another party to an insurance company under the terms of a policy, a loss may be covered.

Claimant

A first of third party who asserts the right of recovery for an injury or loss.

Claim Adjuster

A representative who works at an insurance company who is trained to examine your claim and your home for damage due to a covered loss. The adjuster will provide a repair estimate based on their expertise, knowledge, and market value of your property at the time of the loss.

Collision Coverage

Damage to your vehicle sustained in a collision with another car or any other object, whether object is movable or not.

Collision Deductible Waiver

Waves your collision deductible if you are hit by a negligent or uninsured motorist.

Commission

Portion of the premium paid to the agent by the insurance company as compensation for service provided.

Comparative Negligence

A percentage of fault shared by each driver in an accident when both drivers contribute to causing the collision.

Comprehensive Coverage

Coverage for any direct or accidental loss, or damage to your vehicle and its normal equipment. This coverage includes fire, theft, or malicious mischief.

Declarations

First page of your insurance policy that contains the following: full legal name of your insurance company, your name and address, policy number, effective and expiration dates, premium payable, limits of insurance, property covered by policy, deductibles paid by you in the event of a loss, and any lien-holder information.

Decline

When an insurance company refuses to accept your request for insurance coverage.

Deductible

The amount of the loss the insured is responsible to pay before benefits from an insurance company are payable. You may choose a higher deductible to lower your premium, but this will result in higher out of pocket cost if a loss is incurred.

Depreciation

Decrease in value due to age or wear and tear of property.

Endorsement

Amendment to the policy used to add or delete coverage. This amendment is also referred to as a “rider.”

Exclusion

Causes, conditions, or people listed in the policy which are not covered.

Expiration Date

Date when the policy or coverage ends.

FAIR Plan

The California FAIR Plan is an association of all property insurers licensed to conduct business in California. It is designated to make property insurance more readily available to consumers who have a difficult time obtaining insurance from private insurers because their property is considered “high risk.”

First Party

The policyholder (insured) in the insurance contract with the insurance company.

Fraud

Dishonest and willful attempt to obtain insurance or submit a claim for money through misrepresentation of a material fact.

Fire Insurance

Coverage for a loss or damage to a building and content as a result of a fire.

Flood Insurance

Insurance coverage for losses resulting from a flood that are not provided in a homeowners or renters policy. For information about flood insurance, property owners or renters should contact their insurance agent or call the National Flood Insurance Program’s toll free information line at (800) 427-4661.

Good Driver Discount

Eligibility for a Good Driver Discount means all drivers of insured vehicles must have the following: license for 3 or more years, have no more than one point on their driving record, and is not involved in an “at fault” accident which results in bodily injury or death.

Hazard

Circumstances that increase the probability or severity of a potential loss.

Homeowners Insurance

A combination of coverages selected by you which cover the risks of owning a home. Coverage can include a loss due to fire, burglary, vandalism, earthquake, and other perils. Generally, earthquake coverage is not included in your homeowners policy. You must purchase this coverage separately.

Insured

Policyholder or individuals listed on the policy who are protected in the event of a claim or loss.

Insurer

The insurance company that provides insurance to the insured.

Liability Insurance

Coverage for all sums that an insured is legally obligated to pay due to bodily injury, property damage, or other legal liabilities covered by an insurance policy. Coverage is also provided for legal liability resulting from injuries or damage sustained as a result of an auto accident.

License

Certificate of authority issued by the Department of Insurance to an insurer, agent, broker, or broker-agent to sell and administer insurance.

Limits

Maximum amount of benefits the insurance company agrees to pay in the event of a specific loss.

Material Misrepresentation

Occurs when an applicant or policyholder makes a false statement of any material (important) fact on the application.

Medical Payments

Pays reasonable expenses incurred for necessary medical services because of bodily injury caused by an accident and sustained by you or any other person on the insured property or in an insured vehicle.

Nonrenewal

Occurs when an insurance company decides to not renew your policy at the end of the policy period.

Peril

A peril is a cause of loss. Examples of a cause of loss are fire, theft, or hail.

Policy

A written contract of insurance coverage between you (insured) and the insurance company (insurer).

Policy Limit

The maximum amount a policy will pay overall or under a specific coverage.

Premium

The amount of money an insurance company will charge for insurance coverage for your policy.

Producer

Term used by the insurance industry which designates agents and brokers.

Pro-Rata Cancellation

Occurs when a policy is terminated midterm by the insurance company, and the earned premium is calculated for the period the coverage was provided.

Property Damage

Damage to another person’s property as a result of a negligent or intentional act of the insured.

Quote

An estimate for the cost of insurance based on information supplied to the insurance company by the applicant. The quote may change based on information obtained and verified through credit reporting agencies, motor vehicle reports, or driving record.

Recision

Cancellation of a policy back to its effective date resulting in a return of all premiums charged.

Rental Reimbursement Coverage

Coverage that pays your expenses to rent an auto if you have a loss covered under the Comprehensive or Collision portion of your auto policy. Coverage provided is based on a daily amount of expense allowed up to a maximum limit.

Replacement Cost

The cost to repair or replace an item owned by the insured. If you do not have personal property replacement cost coverage, your insurance company will only pay actual cash value or market value at the time of the loss. In most cases, this does not cover the cost to fix or replace the item owned by the insured.

Replacement Value

The full cost to repair or replace damaged property owned by the insured with no deduction for depreciation. This coverage reimburses the insured up to policy limits and is subject to contract provisions.

Reinstatement

Occurs when a lapsed policy is restored to an in-force policy. Reinstatement of a policy may be effective after the cancellation date which creates a lapse of coverage. The insurance company may require evidence of insurance and payment of any past due premiums before the policy is reinstated.

Rider

A rider is also known as an endorsement. A rider is an amendment to the policy which is used to add or delete coverage.

Short-Rate Cancellation

When the policy is terminated or cancelled by the insured prior to the expiration date.

Salvage

Damaged policyholder property legally signed over to the insurance company in a loss settlement. Then insurance company will sell salvaged property in order to reduce the overall monetary loss of the claim settlement.

Subrogation

The process of recovering the amount of damages paid out to a policyholder due to a claim from a legally liable party. When a company pursues the legally liable third party, all money paid including the policyholder’s deductible will be included in the recovery process.

Third Party

An individual other than the policyholder or the insurance company who has suffered a loss, and may be able to collect compensation under the policy due to the negligent acts or omission of the policyholder.

Total Loss

Damage or destruction to real or personal property to the extent it cannot be repaired for rebuilt to its original condition prior to the loss. When the cost is too high in comparison to the value of the property prior to the loss, and insurance company will write the property off as a total loss.

Underwriting

The process of selecting applicants based on a set of criteria which classifies the insured based on appropriate risks. If the applicant is deemed an unacceptable risk based on a set of criteria, the application for insurance will be rejected.

Underinsured Motorist Endorsement

Addition to your auto policy that covers an insured who is involved in a collision with a driver who does not have enough liability insurance to pay for the damage to the insured vehicle.

Uninsured Motorist Coverage (UMC)

Provides coverage for a policyholder involved in a collision with a driver who does not have liability insurance or have sufficient liability limits to pay for damages. UMC comes in two parts: Uninsured Motorist Bodily injury (UMBI) and uninsured motorist property damage. See both definitions below.

Uninsured Motorist Bodily Injury

Will cover you and your passengers for bodily injury caused by a negligent and uninsured motorist, hit-and-run driver, or by a driver whose insurance company is insolvent.

Uninsured Motorist Property Damage

Coverage will pay for damage to your vehicle up to the limit selected by you in the event you are involved in an accident by a negligent and uninsured motorist.

Workers Compensation Insurance

Coverage which provides benefits for medical care, death, disability, and rehabilitation for employee job related injuries or conditions without regard to who is at fault.

Insurance Fraud

Insurance Fraud occurs when someone misrepresents a material fact, knowingly distorts the truth, or lies to gain some advantage or benefit from an insurance to which they are not entitled. This also includes an individual who denies an insurance benefit that someone is due and entitled to. The type of insurance fraud or details of the fraud will dictate if the issue is handled by an administrative arm of the Department of Insurance or the Fraud Division which handles criminal acts.

Typical insurance fraud includes:

  • Inflating legitimate claims
  • Misrepresenting material facts on an insurance application
  • Submitting claims for accidents, damages, or injuries which never occurred
  • Staging accidents
  • Professionals and technicians inflating the cost of service for insurance related claims

Insurance consumers should be aware that insurance fraud costs insured billions of dollars annually. These costs are transferred to consumers and business that pay a hefty price through high premiums. Auto and homeowners insurance policies may stay high because insurance companies may pass the cost of insurance fraud to policyholder.

Help Us Help You

Consumers can help us reduce cost by reporting any suspicious claims, accidents, or insurance transactions. When presented with a suspicious situation, ask plenty of questions, review the details collected, and contact the authorities.

Help First American Property and Casualty insurance group keep your premium low by reporting Insurance Fraud.

Disclaimer

The information provided is for information purposes only. The terms, conditions, and verbiage contained in your insurance policy are legally binding and supersede information provided on this website. The information provided on this website does not create any obligations, or rights on the part of the insured, First American Property and Casualty Insurance Group, or an agent or broker. Lastly, the examples and definition contained are not a substitute for actual the insurance policy provided by First American Property and Casualty Insurance Group.