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Colorado Insurance Blog

Insurance Claim Terms Broken Down

The claims process can be difficult to navigate, especially when the insurance company is throwing around terms you’ve never heard.

Here’s a breakdown of some of the common terms relating to insurance claims:

Adjuster

An adjuster is the trained claim representative assigned to help you if you file a claim. They’ll examine the damage to your covered property and review your policy to determine what coverage you have. The adjuster is also responsible for issuing payment for your claim.

Actual Cash Value (ACV)

Actual Cash Value (ACV) coverage takes depreciation into account at the time of the loss. If you have ACV coverage, your policy won’t pay to replace what is damaged. Instead they will pay the depreciated value, which subtracts for age and condition. ACV is calculated by subtracting depreciation from the replacement cost.

Depreciation

Many items lose value over time due to age, wear and tear and the manufacturing of newer and better products. That reduction in value is known as the depreciation. Cars are notorious for depreciating as soon as they are driven off the lot, but many household items also depreciate.

Replacement Cost

The cost to actually replace a lost or damaged item, regardless of age and condition at the time of loss. For example, if you bought a TV 10 years ago for $300 but it costs $700 to buy a comparable TV today, Replacement Cost coverage would pay the full $700 to replace the TV if you had a covered loss.

Deductible

Your deductible is the amount you have to pay before your insurance company will payout for a claim.  The insurance company will generally subtract the deductible from the total payout.

If you have a $1,000 deductible and had a claim for $4,000, the insurance company would issue payment for $3,000 and you’d be responsible for the other $1,000.

Policy Limits

The dollar limits for each coverage on your specific policy. The policy limits are the maximum amount your policy will pay out under each coverage for a loss. Many policies also have “sublimits” for certain classes of property, like jewelry, coins, or other valuables.

Subrogation

If someone else is responsible for causing damage to your property, your policy may pay for the damage and then seek reimbursement from the responsible party. If the insurance company has received reimbursement, you may get some or all of your deductible back.

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