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Homeowners Insurance

Insurance Lingo, Simplified: What Every Homeowner & Renter Should Know

There are quite a few insurance terms commonly used in the industry. Many of these terms are essential to understanding your home insurancecondo insurance, or renters insurance policies. The insurance pros at The Windward Insurance Agency bring you real-world, practical definitions of these terms so you can make informed decisions about your insurance needs and get the protection you and your loved ones need.


Actual Cash Value (ACV)

This is one way to value your home and belongings. Actual cash value is calculated by taking the current cost to replace an item, minus an amount based on the item’s age and condition. Policyholders are usually asked to choose between actual cash value or replacement cost (which doesn’t subtract anything for age or condition of the property) when obtaining home insurance.


Additional Living Expenses (ALE)

This is a type of protection included in home insurance, condo insurance, and renters insurance policies. It provides reimbursement for extra costs incurred when you’re required to live away from home after it’s significantly damaged due to a hazard your policy covers. ALE is also referred to as loss-of-use coverage.



An adjuster is someone employed or contracted by your insurance company to evaluate and settle claims with policyholders on behalf of the company.



This is used to convey how much financial risk an insurance company can take on, and still pay policyholder claims should disaster strike. Capacity is an indication of whether an insurer can provide insurance in a particular situation or region.



A “claim” in the insurance world is when a policyholder requests compensation from their insurer for a loss covered by their policy.



Coverage indicates the types of protection offered by your home insurance policy. For example, the Coverage A section of your policy details the extent to which your insurance will protect the physical structure of your home, including the building itself, foundation, walls, roof, and built-in features like plumbing, wiring, and central air. Many permanent fixtures (walls, cabinets, countertops, and flooring) are also included, as are an attached garage, deck, and patio. This coverage varies slightly for condominium owners.


Covered Loss

Covered losses are the types of damage, destruction, or loss of property your policy protects you against. Common covered losses in a standard home insurance policy include damage/destruction/loss due to fire, windstorm, lightning, hail, and theft. 


Dec Page

The declarations page – often referred to just as the dec page – is the section of your insurance policy summarizing the protections the policy provides, as well as the limits and costs for each.



This is the amount of money a policyholder must pay before insurance benefits kick in. Each deductible is triggered by a specific set of circumstances – e.g., the hurricane deductible applies when damage is caused by a hurricane.



Depreciation describes the loss in value of an asset over time, due to factors associated with aging, wear and tear, or becoming outdated/unusable. 


Endorsement / Rider

An endorsement a.k.a rider is add-on protection to your policy.



Specific situations/risks/damages not covered by your policy are called exclusions. Your policy does not protect you in these events.


Flood Insurance

Flooding – the damage caused by rising water in the home – is not included in the standard home insurance policy and must be purchased separately, where available.


HO-3, HO-4, HO-6

In general, when you see “HO” in insurance terms, it refers to home insurance policies. The numerals correspond to specific types of policies. HO-3 is the most common – and most comprehensive – standard homeowners policy. HO-4 is designed for renters to protect what they own inside the home they’re renting. And HO-6 is a condo owner’s policy protecting their unit and belongings.


Liability Coverage

Liability coverage, a usual part of the standard home, condo, or renter’s policy, may be used to pay your legal defense and associated costs if you’re sued for the personal injury or property damage of someone else while on your property.


Medical Payments Coverage

This protection typically goes hand-in-hand with liability coverage – although this coverage is used to pay medical expenses of others injured on your property, regardless of whose fault the injury is. It’s meant to help reduce the risk of being sued in such a situation.


Ordinance or Law Coverage

This may be used to pay extra costs (up to your selected policy limits) required to bring your property up to code during repair/replacement work your insurance company is already obligated to pay for.


Other Structures

This refers to those buildings or structures not attached to your home. Detached garages, sheds, fences, and swimming pools all qualify as “other structures” (Coverage B in the standard home insurance policy). 



A specific risk (e.g., fire, windstorm, theft) covered by an insurance policy. Not all perils will be covered by your policy – be sure to go over which risks are not included with your agent.


Personal Property

In insurance terms, “personal property” are those physical belongings you own in your home.



This is the amount of money you pay each year for your insurance policy. Premiums may be paid monthly, semi-annually, or in one lump sum each year.


Replacement Cost Value

Like actual cost value, this is another way to value your home and belongings. Replacement cost allows your insurer to reimburse you for the current cost to repair/replace your property, without regard for its age or condition.


Stated Value

Stated value is yet another way to value your property. It simply means something is valued at a predetermined amount at the time a home insurance policy is finalized.  


Takeout / Assumption

Takeout and assumption are insurance terms describing a process in Florida, whereby private insurers are encouraged by the state to take over home insurance policies from the state’s insurer of last resort, Citizens Property Insurance Corporation. This is done to help spread the financial risk and improve the health of Florida’s insurance market.


Total Loss

This insurance term is just what it sounds like: when damage to a policyholder’s property is considered beyond repair and cheaper to rebuild than restore.


Umbrella Coverage

When you add additional liability protection to your home, condo, or renters insurance policy, it’s called umbrella coverage. This is used to protect your assets if you are sued and found liable for accidental injury to others or damage to their property.



This describes the process by which insurance companies assess the risk of insuring a home or individual. 


Wind Mitigation Inspection

A wind mitigation inspection is performed by a certified inspector who will assess how well your home – and especially your roof – can withstand strong winds. Having this type of inspection can strengthen your home and may qualify you for a discount on your home insurance premium. 


Home Insurance Terms Shouldn’t Be Confusing – We Can Help!

At The Windward Insurance Agency, we’ve been helping policyholders navigate the sometimes complex waters of home insurancecondo insurancerenters insurance – and more – since 2006! We can help you understand the insurance terms listed here or others you may have questions about. To find out more, get a quote on our website or call us at (866) 231-2433