Home Insurance Terms Glossary

Actual Cash Value (ACV) – This term describes the amount needed to repair or replace damaged portions of your home after depreciation. For example, your insurance company will deduct for the age and condition of a 12-year-old roof with a 15-year life expectancy. Most insurance policies are written on an ACV basis unless another form of valuation is specified (see “Replacement Cost” below).

Claim – A request for reimbursement for a loss. In order to be paid, a claim must be the result of a loss that is covered by the policy. For example, a home insurance policy will not pay for flood damage if flood peril is not covered by the policy.

Deductible – This is the amount a policyholder must pay out-of-pocket for each claim or loss before the insurance company will begin paying. Deductibles may be a specific dollar amount (i.e., $1,000) or a percentage of the home’s value at the time of the loss.

Depreciation – This term describes the decrease in value of your home or personal property due to normal wear and tear from the time your home was built or the personal property was purchased.

Endorsement – Also known as a “rider,” this term describes a change added to the home insurance policy that modifies its original terms.   

Exclusion – A person, event, situation or condition specified in the home insurance policy to which coverage under the policy does not apply. A common example of an exclusion found in a standard home insurance policy is flood damage.

Liability – A legal obligation.

Loss of Use (a.k.a. “Additional Living Expense”) – This term describes coverage that pays for certain additional expenses – such as lodging and food – while your home is undergoing repair.

Medical Payments – Coverage for medical expenses up to a specified limit for persons accidentally injured at your home. It applies regardless of fault, but does not apply to injuries sustained by you or anyone living with you. Other exclusions usually apply.

Named-Perils Policy – Also known as a “Basic” or “Broad” form policy, this type of policy covers losses resulting from any peril that is specifically named as a covered peril in the policy.

Peril – The action, event or condition that causes a loss. Examples of perils include fire, wind and theft. The home insurance policy will specify which perils are covered.

Replacement Cost – This term describes the amount needed to repair or replace damaged property with materials of similar kind and quality without deducting for depreciation.

Special-Form Policy – A policy that covers losses resulting from any peril that is not specifically excluded from coverage.

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The information and definitions contained herein are for informational purposes only and are not applicable in all states. This is not an insurance contract. As other terms, conditions and exclusions apply, please read the official policy issued to you by your insurance provider for full details about the coverages. The information and definitions provided on this site do not alter or modify the terms of any insurance contract. If there is any conflict between these definitions and the provisions of the applicable insurance policy, the terms of the policy control.

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