Understanding home insurance terminology can help you choose the right policy and avoid surprises when you need to file a claim. This glossary breaks down essential home insurance terms every new homeowner should know into easy to understand language.
Actual Cash Value (ACV): What your insurance pays after subtracting value for how old or worn something is.
Claim: When you ask your insurance company to pay for damage or loss.
Deductible: The amount you pay first before your insurance helps cover a loss.
Depreciation: The way things lose value over time as they age or get used.
Endorsement: An add-on that changes or expands what your insurance policy covers.
Exclusion: Something your insurance policy does not cover.
Liability: Protection if you’re legally responsible for hurting someone or damaging their property.
Loss of Use (Additional Living Expense): Pays for temporary living costs if you can’t stay in your home after damage.
Medical Payments: Covers small medical bills if a guest is hurt at your home, no matter who’s at fault.
Named-Perils Policy: Insurance that only covers the specific problems listed in your policy.
Peril: The cause of damage, like fire, wind, or theft.
Replacement Cost: Pays to fix or replace damaged items with new ones of similar quality.
Special-Form Policy: Insurance that covers most types of damage unless the policy says it doesn’t.
The Bottom Line
Homeowners insurance doesn’t have to be confusing. Understanding a few key terms can help you choose coverage that protects both your home and your budget.
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Julie Gordey
A lifelong educator, Julie Gordey, is a retired school administrator. After years of focusing on education, this University of Texas graduate now travels and enjoys freelance writing for BDX and NewHomeSource.com.