Insurance 101 – Key Terms

Jul 11, 2018, 8:39 AM

Here’s a little dictionary of some of the most common terms you’ll see and hear when working with Hastings Mutual.

Like any business, insurance has its own special language. Here’s a little dictionary of some of the most common terms you’ll see and hear when working with Hastings Mutual, and property and casualty insurance in general.

Insurance Terms You Need to Know

Actual Cash Value (ACV): What property (like a house or car) is worth, used to determine what Hastings Mutual will pay in the event of a loss. A payment made for the current value of an item, almost the opposite of Replacement Cost. A policy that pays ACV for a 20-year-old refrigerator pays out the price of a 20-year-old refrigerator, not a brand new one. The premium is usually lower than in a policy paying replacement cost.

Agent: A person who acts on behalf of an insurance company like Hastings Mutual. Our agents work independent of the company as owners of (or producers for) local agencies. But agents offer our products, and contact our office for help if they need it. You’ll work with your local independent insurance agent when you work with Hastings Mutual.

Commercial Lines: Hastings Mutual’s business insurance covers businessowners, contractors, metalworkers, auto repair shops, and much more.

Coverage: Exactly what will be paid for by Hastings Mutual in the event of a loss.

Declarations Page: A document that is issued with your Hastings Mutual insurance policy that describes what your policy covers and related information, like your policy number.

Electronic Funds Transfer (EFT): A system to automatically withdraw funds from a bank account to pay your insurance policy premiums. You can set up an EFT for your Hastings Mutual policies here at our website.

Endorsement: Something that can be added to a basic Hastings Mutual policy. It’s often optional coverage for a specific type of property (computers or boats, for example), or higher limits of coverage.

Farm Lines: Agriculture is a significant part of life for everyone in our six-state area (Illinois, Indiana, Iowa, Michigan, Ohio, and Wisconsin). Hastings Mutual policies cover farm equipment like trucks, and heating and cooling systems. They can also cover accidental releases of pollution, among other things.

In Force: A policy that is in force is paid up to date and is active.

Invoice: A document describing the current status of your policy and the amount you owe to keep it in force. Hastings Mutual invoices are most often paid monthly, though some policies are billed annually or semi-annually (twice a year).

Liability: Something you are responsible for, often by paying for it in money or services.

Personal Lines: Hastings Mutual personal coverages can apply not only to your home or your car, but also items like jewelry, keys, and even property you own where someone else is living (like an apartment or condominium).

Policy: A contract between an insured and the insurer, which describes the requirements for the insured to keep the policy in force and what the insurer will pay, and under what circumstances.

Policyholder: An individual or business that is the subject of a Hastings Mutual insurance policy, also called the insured. Another individual may pay and/or own the policy on behalf of the policyholder.

Premium: The amount paid to keep an insurance policy in force for a specific amount of time. Premiums are paid at different times, from once a month to once a year.

Property and Casualty (P&C): Hastings Mutual insurance coverage is for personal possessions like vehicles as well as property like buildings. Other types of insurance cover health care, or pay survivors if the insured dies.

Replacement Cost: A payment made for the full value of an item, almost the opposite of Actual Cash Value. A policy that pays replacement cost for a refrigerator pays out enough to buy a new refrigerator, even if the fridge is 20 years old. In return, the premium is usually higher than in a policy paying Actual Cash Value.

Umbrella: An insurance policy that provides coverage above and beyond the value of a standard policy.

Underwriting: The process insurance companies use to determine who can be covered by insurance, the amount of coverage they are eligible for, and how much premium they will be charged.

From “Glossary of Insurance Terms,” National Association of Insurance Commissioners
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