Filing an insurance claim can be a complex process. One of the best things you can do to prepare for it is to know the meanings of the most commonly used terms.
Actual Cash Value (ACV) – Put simply, Actual Cash Value is the value of an item at the time it was damaged by the insured event. ACV is calculated as Replacement Cost Value (RCV) less depreciation. Start with what it will cost to replace an item at today’s prices and then deduct from that value according to the age and condition of the item. Depreciation is usually figured as a percentage of its actual age or as the percentage of the expected life of an item
Adjuster – The insurance representative who handles your claim. Most adjusters work for a specific insurance company and are responsible for seeing that claims are paid fairly and in accordance with the policies. Not to be confused with an insurance agent.
Agent – The primary job of an insurance agent is to sell insurance policies on behalf of one or more insurance companies. Some work for a specific insurer; others may represent a number of different insurance companies. Not to be confused with an adjuster.
Claim – A request for payment for a loss under the terms of an insurance policy. Can be made by either a person insured by the policy or someone else.
Claimant – A person who makes a claim. Most commonly refers to someone who makes a liability claim against a party based on legal liability.
Depreciation – Decrease in the value of an item due to age, usage, wear and tear or obsolescence. Most things decrease in value as they age. Depreciation is the amount that a given object has decreased in value over time. Used by insurers to evaluate the Actual Cash Value of an item for purposes of evaluating claims.
Exclusion – A cause of loss that is not covered by an insurance policy. Common exclusions in property insurance policies include earthquake, flood, nuclear explosion or radiation, war and normal wear and tear over time. Excluded causes of loss are specifically outlined in every policy.
Indemnity – The process of making a person or entity financially whole following a loss. In short, it means putting that party into generally the same financial condition that it was in prior to the event.
Insured – A person who is covered by an insurance policy. Some are specifically identified on the policy, while others are covered if they fall under certain categories set forth in the policy.
Insuring Agreement – A statement in an insurance policy that states what types of coverage are provide by an insurance policy. This is usually a broad statement that is restricted by other provisions in the policy.
Lawsuit – An action filed in state or federal court, whereby one party brings action against another for alleged civil wrongdoing. Must generally be filed by an attorney licensed by the bar in the state where the action is filed. Should not be confused with filing a claim, which simply involves making a request for financial restitution through the terms of an insurance policy.
Liability – Legal responsibility for financial harm to one party due to the negligence of another.
Negligence – Failure to act as a reasonably prudent person would be expected to act. If this failure is the proximate cause of specific financial loss, the negligence can be said to have resulted in liability.
No-Fault Insurance – A type of insurance available in many states that requires insurers to pay certain types of medical claims regardless of who is at fault for an injury.
Replacement Cost Value (RCV) – The actual cost to replace a damaged piece of property with another of like kind and quality (LKQ) at current market prices.
