Top 30 Insurance Terms Homeowners Should Know During the Claims Process and in Their Policy Declarations Pages
Understanding your Homeowners Insurance policy and the claims process can be challenging, especially when confronted with unfamiliar terminology. Admittedly, all of these terms - and more - are covered in our Insurance Guidebook where specific examples are also presented as well. That said, this detailed guide pairs well with the financial terms in the ensuing articles so we decided to include these here for quick reference. In short, this article will walk you through the top 25 insurance terms that homeowners are likely to encounter in their policy declarations pages (dec pages) and during the claims process.
1. Declarations Page (Dec Page)
The Declarations Page is the section of your homeowners insurance policy that provides a summary of your coverage. It includes essential information such as the policyholder’s name, the insured property address, the coverage limits, deductibles, Premium amounts, and the Policy Period. The dec page is often the first place you’ll look to understand your policy details.
2. Premium
A Premium is the amount you pay for your insurance policy, typically on a monthly, quarterly, or annual basis. The premium is determined based on various factors, including the value of your home, location, coverage limits, and any additional endorsements or riders.
3. Deductible
The Deductible is the amount you must pay out of pocket before your insurance coverage kicks in for a Claim. For example, if you have a $1,000 deductible and your claim is for $10,000 in damage, your insurance will cover $9,000 after you pay the deductible.
4. Coverage Limits
Coverage Limits refer to the maximum amount your insurance company will pay for a covered loss. These limits are specified for different types of coverage, such as dwelling coverage, Personal Property coverage, and liability coverage. It’s crucial to ensure your coverage limits are adequate to protect your home and Assets.
5. Replacement Cost Value (RCV)
Replacement Cost Value (RCV) is the amount it would cost to replace or repair your damaged property with new items of similar kind and quality, without accounting for Depreciation. For example, if your roof is damaged in a storm, RCV coverage would pay to replace it with a new roof of the same quality, regardless of its age.
6. Actual Cash Value (ACV)
Actual Cash Value (ACV) is the value of your property at the time of the loss, accounting for depreciation. For instance, if your ten-year-old roof is damaged, ACV coverage would reimburse you for the value of the roof minus ten years of wear and tear.
7. Endorsement (or Rider)
An Endorsement (or Rider) is an addition or amendment to your insurance policy that provides additional coverage or modifies the terms of your existing policy. Common endorsements include water backup coverage, Earthquake coverage, and scheduled personal property coverage.
8. Exclusion
An Exclusion is a specific condition or circumstance listed in your policy that is not covered by your insurance. For example, standard homeowners insurance policies typically exclude damage caused by floods, earthquakes, or wear and tear. Understanding your policy’s exclusions is essential to avoid surprises during the claims process.
9. Peril
A Peril is a specific risk or cause of loss covered by your insurance policy. Common covered perils include fire, theft, vandalism, windstorms, and hail. Some policies offer coverage for “named perils,” meaning only those explicitly listed are covered, while others offer “all-risk” or “open perils” coverage, which covers all risks except those specifically excluded.
10. Liability Coverage
Liability Coverage protects you against financial loss if you are found legally responsible for causing injury to someone else or damaging their property. This coverage can help pay for legal fees, medical expenses, and damages awarded in a lawsuit. Liability coverage is a critical part of your homeowners insurance, as it can protect you from significant financial liability.
11. Personal Property Coverage
Personal Property Coverage provides protection for your belongings, such as furniture, electronics, clothing, and appliances, in the event they are damaged or stolen. This coverage typically applies both inside and outside your home, such as when traveling.
12. Dwelling Coverage
Dwelling Coverage is the portion of your homeowners insurance that covers the structure of your home, including the walls, roof, Foundation, and attached structures like garages or decks. This coverage helps pay for repairs or rebuilding if your home is damaged by a covered peril.
13. Loss of Use Coverage
Loss of Use Coverage (also known as Additional Living Expenses or ALE) covers the additional costs you may incur if your home is uninhabitable due to a covered loss. This coverage can help pay for temporary housing, meals, and other living expenses while your home is being repaired or rebuilt.
14. Claim
A Claim is a formal request made by the policyholder to the insurance company for payment of a loss covered by the insurance policy. When you file a claim, the insurance company will investigate the loss, determine coverage, and, if approved, issue a payment to help you recover from the damage.
15. Adjuster
An Adjuster is a representative of the insurance company who investigates claims, assesses the damage, and determines the amount of compensation the insurer will pay. Adjusters can be staff adjusters (employed by the insurance company), independent adjusters (contracted by the insurer), or public adjusters (hired by the policyholder).
16. Depreciation
Depreciation refers to the decrease in value of your property over time due to age, wear and tear, or obsolescence. In insurance, depreciation is used to calculate the Actual Cash Value (ACV) of your property, which is the amount you would receive if your claim is settled based on the ACV rather than the Replacement Cost Value (RCV).
17. Subrogation
Subrogation is the process by which your insurance company seeks reimbursement from the party responsible for the damage after paying your claim. For example, if a neighbor’s tree falls on your house and causes damage, your insurer may pay your claim and then pursue the neighbor or their insurance company for the cost of the damages.
18. Mortgagee Clause
The Mortgagee Clause is a provision in your homeowners insurance policy that protects the lender’s (mortgagee’s) interest in the property. If a covered loss occurs, the insurance company may issue payment to both you and the lender to ensure the Mortgage is paid off before any remaining funds are disbursed to you.
19. Hazard Insurance
Hazard Insurance is another term for the part of your homeowners insurance policy that covers the structure of your home and its contents against specific hazards or perils, such as fire, windstorm, and theft. It is often required by mortgage lenders as part of the overall homeowners insurance policy.
20. Replacement Cost Endorsement
A Replacement Cost Endorsement is an add-on to your policy that ensures you receive the full cost of replacing damaged or destroyed items, without Deduction for depreciation. This endorsement is particularly important for personal property, as it helps ensure you can replace your belongings with new items of similar quality.
21. Coinsurance Clause
The Coinsurance Clause is a provision in your homeowners insurance policy that requires you to carry a certain amount of coverage, usually at least 80% of the home’s replacement cost. If you fail to meet this requirement and suffer a loss, the insurance company may reduce your claim payment proportionally.
22. Ordinance or Law Coverage
Ordinance or Law Coverage provides additional protection for the increased costs of rebuilding or repairing your home to meet current building codes or laws after a covered loss. For example, if your home is damaged by fire and must be rebuilt to comply with updated building codes, this coverage can help cover the additional expenses.
23. Scheduled Personal Property
Scheduled Personal Property refers to items that are individually listed and insured on your policy for a specific value, often through an endorsement. This is typically used for high-value items such as jewelry, art, antiques, or collectibles that may exceed the coverage limits of a standard policy.
24. Endorsement
An Endorsement is an addition or modification to your insurance policy that changes the terms of coverage. Endorsements can be used to add, remove, or alter coverage, such as adding coverage for specific items or expanding protection to include additional perils.
25. Loss Assessment Coverage
Loss Assessment Coverage provides protection for homeowners who live in a condominium or Homeowners Association (HOA). It helps cover your share of any special assessments levied by the HOA for damages or liability claims that exceed the association’s insurance coverage.
26. Settlement Check (Insurance Payment)
A settlement check is a payment issued by an insurance company to a policyholder, contractor, or other party as part of an insurance claim. It represents the agreed-upon amount the insurer is paying to cover losses or damages under the terms of the policy. Settlement checks may be issued in a lump sum or in multiple disbursements and can be made payable to one or more parties—such as the homeowner, mortgage lender, or contractor—depending on the circumstances of the claim and any legal or financial interests involved.
27. Scope of Loss
A scope of loss is a detailed document that outlines the full extent of damage to a property following an insured event. It includes descriptions, measurements, quantities, and estimated costs for all necessary repairs and replacements, often broken down by room or building component. The scope of loss serves as a foundational tool during the insurance claims process, helping adjusters, contractors, and policyholders agree on what was damaged and what it will take to restore the property. It may also distinguish between covered and non-covered items and typically aligns with the terms of the homeowner's insurance policy.
28. Inventory Worksheet
An inventory worksheet is a document used to list and organize personal property items—typically after a loss such as fire, theft, or natural disaster—for the purpose of filing an insurance claim. It includes details such as item descriptions, quantities, purchase dates, original costs, estimated current values, and supporting documentation like receipts or photos. The inventory worksheet helps policyholders and insurers determine the total value of lost or damaged belongings and is essential for verifying and processing personal property claims under a homeowners insurance policy.
29. Xactimate
Xactimate is a widely used software program developed by Verisk that provides detailed cost estimating for property damage repairs, primarily in the insurance and construction industries. It allows adjusters, contractors, and restoration professionals to create itemized estimates based on localized pricing for labor, materials, and equipment. Xactimate helps standardize the claims process by offering detailed estimates that insurers use to evaluate and settle property damage claims. It supports line-item breakdowns for everything from roofing to plumbing to interior finishes.
30. Certified Policy Jacket
A certified policy jacket is an official, insurer-issued copy of a homeowner's (or other) insurance policy that includes all standard policy forms, endorsements, declarations, and conditions—along with a certification from the insurance company verifying its authenticity. It serves as the legal foundation of the insurance contract, detailing what is covered, excluded, and the rights and obligations of both the insurer and the policyholder. A certified policy jacket is often requested during claims disputes, litigation, or mortgage processing to ensure that all referenced policy language is accurate and enforceable.
31. Statement of Loss
In property insurance claims, the Scope of Loss describes the extent and nature of the damage, while the Statement of Loss is a formal document reporting the total financial value of the loss. The scope of loss is the “what” and “how”of the incident and the statement of loss is the “how much”. The statement of loss can also be known as the Proof of Loss and can be issued by either the insured or the insurance company depending on requests and circumstances. In the case of the insured, this is usually a sworn statement acknowledging the damages outlined in the scope of loss, and in some cases may be required to move forward with the claim process. In addition, an insured may periodically request a statement of loss from their insurance carrier to ensure funding is being issued against certain coverages and each party is aware of when a limit may be reached.
Wrap-Up
Navigating your homeowners insurance policy and the claims process can be much easier when you understand the key terms involved. These 25 terms are some of the most important you’ll encounter, and we have plenty of additional information on these within the Insurance Guidebook. That said, familiarizing yourself with these terms will help you make informed decisions about your coverage, ensure you’re adequately protected, and simplify the process of recovering from a loss.
There is quite a bit more info in our Glossary but hopefully these get you started before we move into deeper financial terms.