We agree with you – insurance can be really confusing. With all the lingo and various terms used within the industry, and documents available to you, we understand why one might find them self confused . No worries though, we are here to help demystify the beast that is insurance!
It’s important to note that understanding various terms and elements of insurance is a huge leap forward towards better protecting your small business. How exactly? This allows you to be more informed on what your small business insurance policy covers and what it may not cover in the event of a claim. By being informed, you are better protecting your business, your employees, and your bottom-line.
Here are some common insurance terms you may have come across or seen in your previous and/or current insurance policy:
Actual Cash Value.
The cost of buying an item that is the same age and condition of your existing item, meaning that the depreciation is factored in.
A person or organization that is added to your policy to protect them from any liability arising solely from your operations. For example: Your landlord or someone you’re doing work for may require this.
A penalty imposed by the insurance company if your property is under-insured. You need to make sure you’re insuring the true replacement cost of your property up to at least the percentage specified by the insurance company to avoid this penalty (typically 80-90%).
Insurance value is different from market value. It is based on the actual cost to repair or replace your property in the event of a loss, not what you would receive if you were to sell that same property.
A person or organization listed on your policy because they have a financial interest in it, such as your mortgage company.
Minimum and Retained Value.
The portion of your insurance premium that the insurance company will not refund you in the event you cancel the policy.
The actual cost to buy a new item of similar kind or quality in the event of loss or damage to your existing item.