Mark ThompsonEvery field has its jargon, and homeowners insurance is worse than most. This glossary covers the 38 terms that come up again and again in our guides and in the questions readers send us. Definitions are short on purpose: enough to unblock you, with links to deeper guides throughout the site when you want the full story.
Additional Insured
A person or organization added to your homeowners insurance policy who receives some of the same protections as the primary policyholder. Mortgage lenders are often listed as additional insureds to protect their financial interest in your home.
Actual Cash Value
A method of calculating claim payments based on what your damaged or stolen item is worth today, accounting for depreciation. This is typically lower than replacement cost because it reflects the item’s age and condition.
Appraisal
A professional evaluation of your home’s value or the value of damaged property after a claim. Insurance companies may order appraisals to verify the amount they should pay on a claim.
Arson
The intentional and unlawful act of setting fire to property. Homeowners insurance does not cover losses from arson committed by the policyholder.
Casualty Coverage
The part of your homeowners policy that protects you against liability if someone is injured on your property or if you accidentally damage someone else’s property. This coverage pays for medical expenses and legal costs.
Claims Adjuster
An insurance professional who investigates claims and determines how much the insurer should pay. They inspect damage, review your policy, and verify the claim is covered.
Comprehensive Coverage
Insurance that covers damage to your home and belongings from events other than collision, such as theft, vandalism, or natural disasters. This is a standard part of homeowners policies.
Deductible
The amount of money you agree to pay out of pocket before your insurance company pays for a covered loss. Choosing a higher deductible typically lowers your premium.
Depreciation
The decrease in value of your belongings and home over time due to age and wear. Insurance companies account for depreciation when calculating actual cash value claims.
Dwelling Coverage
The part of your homeowners insurance that pays to repair or rebuild the structure of your home if it’s damaged by a covered peril. This is the foundation of most homeowners policies.
Endorsement
An addition or modification to your standard homeowners insurance policy that changes coverage or adds protection for specific items. Common endorsements cover valuable items like jewelry or artwork.
Exclusion
Something specifically listed in your policy that is not covered by insurance. Common exclusions include flood damage, earthquake damage, and wear and tear.
Fair Market Value
The price at which a property would sell in the open market between a willing buyer and seller. Insurance companies sometimes use this to determine the insurable value of your home.
Flood Insurance
A separate insurance policy that covers damage caused by flooding, which is not covered by standard homeowners insurance. Homeowners in flood-prone areas often purchase flood insurance through the National Flood Insurance Program.
Homeowners Insurance
A type of insurance that protects your home and belongings against damage and loss, and covers liability if someone is injured on your property. Most mortgage lenders require homeowners insurance before approving a loan.
Indemnification
The principle that insurance should restore you to the same financial position you were in before a loss, but not allow you to profit from the claim. This prevents people from intentionally damaging property to collect insurance money.
Insurance Premium
The amount of money you pay for your homeowners insurance coverage, usually charged monthly or annually. Your premium is based on factors like home value, location, and claims history.
Insured
The person or people covered by an insurance policy. Usually this is the homeowner and anyone living in their household.
Insurer
The insurance company that provides coverage and pays claims. The insurer collects premiums and is responsible for meeting the terms of the policy.
Liability Coverage
Insurance protection that covers legal responsibility if you accidentally injure someone or damage their property. It pays for their medical bills and legal costs if they sue you.
Loss of Use Coverage
Insurance that pays for temporary living expenses if your home becomes uninhabitable due to a covered loss. This covers hotel stays, meals, and other necessary costs while your home is being repaired.
Named Peril
A specific type of damage or loss that is explicitly listed as covered in your insurance policy. For example, theft and fire are named perils in most homeowners policies.
Occurrence
A single event or accident that causes damage or injury and results in an insurance claim. Insurance policies typically cover multiple occurrences during the policy period.
Open Peril Coverage
Insurance that covers all types of damage except those specifically listed as exclusions in the policy. This is broader than named peril coverage.
Personal Property Coverage
The part of your homeowners policy that covers your belongings inside the home, such as furniture, clothing, and electronics, if they’re damaged or stolen. The amount of coverage is typically a percentage of your dwelling coverage.
Policy Limits
The maximum amount your insurance company will pay for a covered loss under your policy. You choose your policy limits when you purchase insurance based on your home’s value.
Policyholder
The person who owns the insurance policy and pays the premium. The policyholder has the right to make changes to coverage and file claims.
Premium
The price you pay for insurance coverage, typically on a monthly or annual basis. Your premium is calculated based on risk factors like your home’s age, location, and your claims history.
Replacement Cost
A method of calculating claim payments based on what it would cost to replace your damaged or stolen item with a new one today, without accounting for depreciation. This typically pays more than actual cash value.
Rider
An addition to your homeowners insurance policy that extends coverage for specific items or situations not fully covered by the standard policy. Jewelry riders and earthquake riders are common examples.
Risk Assessment
An evaluation by the insurance company of factors that might lead to claims, such as your home’s age, construction, location, and your claims history. This assessment determines your premium.
Standard Homeowners Policy
A typical homeowners insurance package that covers dwelling, personal property, liability, and additional living expenses. This is the most common type of homeowners insurance.
Underinsured
When your homeowners insurance coverage limits are too low to fully replace your home or belongings in the event of a major loss. This can leave you personally responsible for expenses above your policy limits.
Underwriting
The process an insurance company uses to evaluate your home and situation to determine whether to offer coverage and at what price. Underwriters assess risk and set your premium based on their findings.
Uninsured
A situation where you have no insurance coverage for a particular type of damage or loss. Common uninsured perils include flooding and earthquakes in standard homeowners policies.
Vandalism
Intentional destruction or damage to property by someone other than the owner or occupants. Most homeowners policies cover vandalism as a named peril.
Waiver
A written agreement where you voluntarily give up a right or requirement under your insurance policy. For example, you might waive coverage for a specific item in exchange for a lower premium.
Water Damage
Damage to your home caused by water, which may be covered or excluded depending on the cause and your specific policy. Sudden water damage from burst pipes is usually covered, but flooding typically is not.