Glossary of Terms

The 100% rule in homeowners insurance typically refers to policies that require homeowners to insure their property for 100% of its replacement cost to receive full reimbursement in the event of a loss.

An additional insured in homeowners insurance is a person or entity added to a policy to receive liability protection and coverage benefits. This is useful for individuals who have a financial interest in the property but are not the primary policyholder.

Additional replacement costs in homeowners insurance refer to coverage that extends beyond the standard dwelling limit to account for unexpected increases in rebuilding expenses. This is often provided through extended replacement cost coverage, which increases the payout by 10% to 50% above the policy’s dwelling limit.

Extended replacement cost coverage allows homeowners to increase their dwelling coverage limit beyond the standard amount, typically by 125%, 150%, or even 200%. This ensures that if rebuilding costs exceed the insured amount due to inflation or post-disaster price surges, the homeowner won’t have to pay out-of-pocket.

A homeowners insurance declaration page (often called a “dec page”) is a summary of your insurance policy, outlining key details such as coverage types, limits, deductibles, and premium costs. It serves as proof of insurance and is typically required by mortgage lenders.

A homeowners insurance deductible is the amount a policyholder must pay out-of-pocket before their insurance company covers the remaining costs of a claim. Deductibles typically range from $250 to $2,500, though some policies use a percentage-based deductible (e.g., 1% or 2% of the home’s insured value) instead of a fixed dollar amount.

Dwelling coverage is the part of a homeowners insurance policy that protects the physical structure of your home, including the walls, roof, and attached structures, against covered perils like fire, vandalism, and severe weather.

Earthquake insurance is a specialized policy that covers damage to your home and belongings caused by earthquakes, since standard homeowners insurance does not include earthquake-related damage.

An endorsement in homeowners insurance is an add-on or modification to a standard policy that provides extra coverage for specific risks or increases coverage limits. It allows homeowners to customize their insurance to better fit their needs.

Escrow in homeowners insurance refers to an account set up by a mortgage lender to manage payments for property taxes and insurance premiums. Instead of homeowners paying these expenses directly, the lender collects a portion of the costs monthly as part of the mortgage payment and then pays the bills when they are due.

Flood insurance is a separate policy that covers damage caused by flooding, which is not included in standard homeowners insurance. It helps protect homes, businesses, and personal belongings from flood-related losses.

These are different types of homeowners insurance policies, each designed for specific living situations:

• HO-3 (Special Form) – The most common homeowners insurance policy. It covers the home’s structure on an open-peril basis (everything except exclusions) and personal property on a named-peril basis (specific risks listed in the policy).
• HO-4 (Renters Insurance) – Designed for renters, covering personal property and liability but not the building itself. It protects belongings from named perils like fire, theft, and vandalism.
• HO-5 (Comprehensive Form) – A premium homeowners policy that covers both the home and personal property on an open-peril basis, offering broader protection than HO-3.
• HO-6 (Condo Insurance) – Tailored for condo owners, covering personal property and the interior structure of the unit (from the walls inward), while the condo association’s policy covers the exterior.

Inflation Guard is a homeowners insurance feature that automatically increases your coverage limits to keep up with inflation and rising construction costs. This ensures that your policy remains sufficient to cover rebuilding expenses, even as material and labor costs increase over time.

In homeowners insurance, “insured” refers to the policyholder—the person or entity covered under the insurance policy. The insured is entitled to financial protection against covered losses, such as property damage or liability claims.

An insurance claim is a formal request made by a policyholder to an insurance company for financial reimbursement or coverage based on the terms of their policy. It is submitted when the insured experiences a loss or damage covered under their insurance contract, such as an accident, illness, or property damage

Jewelry is personal. It recalls emotions, moments, and milestones in your life, which is why it can be devastating if the jewelry that represents special moments in your life is damaged, lost, or stolen. A jewelry insurance policy is the best way to make sure your favorite items are protected.

Loss assessment coverage is an optional endorsement for homeowners and condo insurance that helps cover costs when a homeowners association (HOA) or condo association assesses fees.

Loss of Use coverage is a part of homeowners insurance that helps pay for temporary living expenses if your home becomes uninhabitable due to a covered event, such as a fire or storm.

Medical payments coverage in homeowners insurance helps pay for minor medical expenses if a guest is injured on your property, regardless of fault. It’s designed to cover small injuries and prevent lawsuits.

Open perils coverage, also known as all-risk insurance, protects your home and belongings against any cause of damage, unless specifically excluded in the policy. This differs from named perils coverage, which only covers risks explicitly listed in the policy.

In homeowners insurance, a peril refers to a specific event or risk that can cause damage to your home or belongings. Insurance policies typically cover certain perils while excluding others.

Common Covered Perils:

• Fire & Smoke
• Windstorms & Hail
• Theft & Vandalism
• Lightning Strikes
• Explosions
• Falling Objects
• Water Damage (from burst pipes, not flooding)
• Weight of Ice, Snow, or Sleet
• Damage from Vehicles or Aircraft

Personal liability coverage in homeowners insurance protects you financially if someone is injured on your property or if you accidentally cause damage to someone else’s property. It covers legal fees, medical expenses, lost wages, and settlements if you’re found responsible.

Personal property coverage is a key part of homeowners insurance that protects your belongings—such as furniture, electronics, clothing, and appliances—against covered perils like fire, theft, and vandalism.

A homeowners insurance premium is the amount you pay to maintain your insurance coverage. It can be paid monthly, quarterly, or annually, depending on your policy terms.

Replacement Cost and Actual Cash Value (ACV) are two different ways insurers calculate payouts for damaged or lost property.

• Replacement Cost: Covers the cost to replace damaged items with new ones of similar kind and quality, without deducting for depreciation. This ensures you can buy a new equivalent item at today’s prices.
• Actual Cash Value (ACV): Pays out the item’s current market value, factoring in depreciation. This means older items will receive a lower payout than their original purchase price.

Subrogation in homeowners insurance is the process where an insurance company seeks reimbursement from a third party responsible for a loss after paying a claim to the policyholder. This allows insurers to recover costs when another party is legally liable for the damage.

Umbrella insurance provides extra liability coverage beyond the limits of your homeowners or auto insurance. It helps protect your assets if you’re sued for damages that exceed your primary policy’s coverage.