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Financial Literacy - Insurance
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Understanding insurance needs

Glossary of homeowners insurance terms

If you're thrown off by homeowners insurance terms, look up their definitions using this handy glossary.

6 must-know homeowners insurance terms
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1. Blanket insurance -- A policy that covers common areas of a co-op, condominium or a neighborhood governed by a homeowners association. Such a policy doesn't cover dwellings or contents of dwellings, but areas owned in common.

2. Flood insurance -- A policy that pays the homeowner for damage caused by rising water. It does not reimburse the owner for falling water, such as rain falling through a hole in the roof, but pays for damage stemming from flooding.

3. Hazard insurance -- Insurance coverage that compensates for physical damage to a property from natural disasters such as fire or other hazards. Depending where a piece of property is located, lenders may also require flood insurance or policies covering windstorms (hurricanes) or earthquakes.

4. Homeowners insurance -- A policy that includes hazard coverage, covering loss or damage to property, as well as coverage for personal liability and theft.

5. Liability insurance (homeowner) -- A policy that protects owners against claims by other parties of negligence, personal injury or property damage.

6. Mortgage insurance -- Also known as MI or PMI, meaning private mortgage insurance. A policy that protects the lender by paying the costs of foreclosing on a house if the borrower stops paying the loan. Although mortgage insurance protects the lender, it is paid monthly by the borrower. Mortgage insurance usually is required if the down payment is less than 20 percent of the sale price.

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-- Posted: Aug. 20, 2007
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