Understanding Your Homeowners Insurance Policy: Key Terms Explained

Declarations Page

The "dec page" is a one-to-two page summary at the front of your policy that lists your coverage amounts, deductibles, premium, and policy period. Keep this page somewhere accessible — you'll need it when you call to file a claim.

Deductible

The deductible is the amount you pay out of pocket before your insurance coverage kicks in. A $2,000 deductible means you pay the first $2,000 of any claim. Higher deductibles mean lower premiums — but more exposure in a loss event.

Note: Some policies have a separate, higher deductible for specific perils like wind/hail or hurricanes, expressed as a percentage of your home's insured value (e.g., 2%).

Replacement Cost Value (RCV) vs. Actual Cash Value (ACV)

This is one of the most important distinctions in any property policy:

• RCV pays what it costs to replace the damaged item with a new equivalent — no depreciation deducted.
• ACV pays what the damaged item was worth at the time of the loss — depreciation is subtracted.

Example: A 10-year-old roof that costs $20,000 to replace might only have an ACV of $8,000. If you have an ACV policy, you absorb the $12,000 difference.

Recoverable Depreciation

Many RCV policies pay ACV initially and then release the "held-back" depreciation once repairs are completed. This is called recoverable depreciation — and failing to complete repairs and submit a supplemental claim means leaving money on the table.

Coverage A, B, C, D

• Coverage A — Dwelling: the structure of your home
• Coverage B — Other structures: fences, detached garages, sheds
• Coverage C — Personal property: contents inside your home
• Coverage D — Loss of use: additional living expenses if you can't live in your home during repairs

Exclusions

Exclusions are perils or situations your policy does NOT cover. Common exclusions include:

• Flood damage (requires a separate NFIP or private flood policy)
• Earthquake damage (separate rider or policy required)
• Wear and tear / maintenance issues
• Mold (sometimes covered, sometimes excluded — read carefully)

Subrogation

After paying your claim, your insurer may pursue recovery against a third party who was responsible for your loss (e.g., a plumbing contractor who caused a leak). This is subrogation — it doesn't affect your claim, but it's why you should cooperate with your insurer's investigation.