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Consumers and Advice terms
Homeowners Insurance for ordinary people.
Additional insuredA person or organization added to a policy so it receives the policy's liability protection, typically an owner who does not live in the home.Additional interestA person or business with a financial stake in the insured property, such as a lienholder, listed on the policy to get notices but not coverage.Agreed valueA value the insurer and policyholder settle on in advance, which the policy then pays in a total loss without a later dispute over what the item was worth.All-in coverageA condo master policy type insuring the building plus each unit's interior finishes and owner upgrades, leaving mainly belongings and liability to the owner.Animal liability exclusionPolicy wording that removes liability coverage for injuries caused by a named dog, a listed breed or an animal with a bite history.Attractive nuisanceA legal doctrine that can hold a landowner responsible when a child is hurt by a tempting hazard on the property, such as a pool or trampoline.Bare walls coverageA condo master policy type that insures only the structure and common areas, leaving everything from the interior surfaces inward to the unit owner.BinderA short-term written confirmation that coverage is in force while the full policy is being issued, often used as proof of insurance at a home closing.Blanket coverageA single limit that applies across several buildings, locations or kinds of property instead of a separate limit for each one.Bodily injuryPhysical harm to a person, including sickness, disease and resulting death, that triggers liability and medical payments coverage under a homeowners policy.Builder's riskTemporary property insurance on a structure being built or substantially renovated, covering materials and work in place until the project is finished.Business pursuits exclusionA liability exclusion for injury or damage arising from your trade, profession or other paid activity, with narrow exceptions for small or volunteer work.Captive agentAn agent who sells for a single insurance company or group, usually under an exclusive contract, so every quote comes from that company's products.CoinsuranceA policy clause that reduces a claim payment when the insurance carried falls below a required percentage of the property's value, usually 80% for homes.Declarations pageThe summary page at the front of a policy listing the insured, the property, policy dates, limits, deductibles, premium, mortgage lender and attached forms.Direct writerAn insurer that sells straight to consumers by website, phone, app or its own employees rather than through independent agents who represent several companies.DP-1 (basic dwelling form)The basic dwelling form: it covers a short list of named perils to the building, typically at actual cash value, with no liability coverage built in.DP-2 (broad dwelling form)A broader named-perils dwelling form that adds falling objects, water discharge and freezing, and typically pays building losses at replacement cost.DP-3 (special dwelling form)The special dwelling form: open-perils coverage on the building and other structures, the closest match to an HO-3, common for rentals and second homes.Dwelling coverage (Coverage A)The part of a homeowners policy that pays to repair or rebuild the house itself, including attached structures such as a garage, porch or deck.Dwelling fire policyA property-only policy for a house, usually one that is rented, vacant or seasonal, sold without the liability package of a homeowners policy.EndorsementA written change attached to a policy that adds, removes or alters coverage, limits or conditions, and controls over the base form wherever the two conflict.Equipment breakdown coverageAn optional add-on that pays to fix home systems and appliances that fail suddenly from a mechanical or electrical fault, which standard policies exclude.Evidence of insuranceA short document from your insurer or agent confirming that a policy is in force, with its limits and the lender to notify. It is not the policy itself.ExclusionA policy provision that removes coverage for a stated cause, type of loss, property or circumstance that the coverage would otherwise reach.Extended replacement costExtra dwelling coverage, often 25% or 50% above the Coverage A limit, that helps pay to rebuild when the actual cost after a loss exceeds the limit.Fair rental valuePayment for the rent you lose when a covered loss makes a part of your home that you rent to someone else, or hold for rent, unfit to live in.FloaterCoverage that insures listed movable items, such as jewelry, art or cameras, at stated values wherever they go, free of a standard policy's low limits.Guaranteed replacement costDwelling coverage under which the insurer agrees to pay the full cost to rebuild, even above the policy limit, if the owner meets the policy's conditions.HO-1 (basic form)The oldest and narrowest ISO homeowners policy, insuring a short list of named perils; it has been largely discontinued.HO-2 (broad form)A named-perils homeowners policy covering 16 listed causes of loss for the house and belongings: broader than the basic form, narrower than the special form.HO-3 (special form)The most common homeowners policy: open-perils coverage for the house and other structures, and named-perils coverage for belongings.HO-4 (contents broad form)The renters policy: it covers a tenant's belongings, loss of use and liability, but not the building, which the landlord insures.HO-5 (comprehensive form)A premium homeowners policy insuring the house, other structures and belongings against any cause of loss not excluded, often for newer or higher-value homes.HO-6 (unit-owners form)The condo owner's policy: it covers belongings, the parts of the unit the association's policy leaves to you, loss assessments, liability and loss of use.HO-7 (mobile home form)A homeowners-style policy for owner-occupied mobile and manufactured homes, adapting property and liability coverage to how those homes are built and sited.HO-8 (modified coverage form)A named-perils policy for older homes whose rebuild cost far exceeds market value, paying to repair with common materials rather than replace like for like.Home business endorsementAn add-on that gives a small office, studio, school or similar operation run from the house liability and business property coverage the base policy lacks.Home-sharing endorsementAn add-on that extends a homeowners policy to cover renting all or part of the home to short-stay guests through platforms such as Airbnb or Vrbo.Homeowners association (HOA)An organization that enforces rules and maintains shared property in a subdivision, condominium or planned community, funded by dues from the owners.Host liquor liabilityYour legal exposure when a guest who drank at your private gathering later injures someone, usually covered under a homeowners policy's personal liability.Independent agentAn agent or agency appointed by several insurance companies that compares their coverage and prices for a customer and is paid by commission.Insurable interestThe financial stake in a property that you must hold, so that its damage or loss would cost you money, before an insurer can cover it or pay you for a claim.Insurance brokerA licensed intermediary who places coverage on the buyer's behalf with whichever insurers will take the risk, often including surplus lines markets.Insurance to valueThe ratio of the coverage on a home to what it would cost to rebuild it today; 100% means the limit matches the rebuild cost.Landlord policyInsurance for a home you own and rent to tenants, covering the building, lost rent and the owner's liability, but not the tenant's belongings.Loss assessment coverageCoverage for your share of a bill that a condo or homeowners association charges owners after a covered loss that its own insurance does not fully pay.Loss of use (Coverage D)Coverage that pays extra living costs or lost rent when a covered loss makes your home unfit to live in, such as hotel bills or a tenant's missed rent.Manufactured homeA house built in a factory on a permanent chassis to the federal HUD code, in effect since June 15, 1976, and insured on forms written for that construction.Master policyThe property and liability policy a condominium or homeowners association buys for the shared structure and common areas, paid for through dues.Medical payments to others (Coverage F)No-fault coverage that pays the medical bills of a guest hurt on your property, whether or not you were at fault, up to a small per-person limit.Moral hazardThe risk that holding insurance leads someone to cause or inflate a loss, or to take less care, because the insurer rather than the owner bears the cost.Named insuredThe person or people listed on the declarations page as the policy's owner, who hold the contract rights and receive notices and claim payments.Named perilsCoverage that applies only to the causes of loss listed in the policy, so a claim is paid only if the damage came from one of them.Open perilsCoverage that applies to any direct physical loss unless the policy specifically excludes the cause, so the insurer must point to an exclusion to deny a claim.Ordinance or law coverageCoverage for the extra cost of repairing or rebuilding a damaged home to current building codes and zoning rules, which the dwelling limit does not pay.Other structures (Coverage B)Protection for buildings on your lot that stand apart from the house, such as a detached garage, shed, gazebo or fence.PerilA specific cause of loss, such as fire, wind, theft or water, that a policy covers or excludes; it is the cause of the damage rather than the damage itself.Personal injuryLiability coverage for non-physical wrongs such as defamation, false arrest, invasion of privacy and wrongful eviction, usually added by endorsement.Personal liability (Coverage E)Coverage that defends you and pays damages if you are legally responsible for injuring someone or damaging their property, at home or away from it.Personal property (Coverage C)Coverage for the movable things you own, such as furniture, clothing, electronics and tools, whether they are at home or elsewhere in the world.Policy limitThe most an insurer will pay for a covered loss under one coverage, set separately for the house, other structures, belongings, living costs and liability.Policy periodThe span between a policy's effective date and expiration date, usually 12 months, during which a loss must occur to be covered.Premises liabilityThe legal duty of an owner or occupier to keep property reasonably safe, and the exposure when a visitor is hurt by a wet step, loose railing or icy walk.Property damage liabilityCoverage that pays when you are legally responsible for physically damaging someone else's tangible belongings or building, or for taking away their use.RenewalThe insurer's continuation of your policy for another term, usually with a new premium and sometimes with changed deductibles, limits or conditions.Replacement costWhat it would cost to repair or rebuild with materials of like kind and quality at today's prices, with no deduction for age or wear.RiderA form added to a policy to change its coverage; in homeowners insurance, an everyday word for an endorsement such as scheduled jewelry or water backup.Scheduled personal propertyIndividually listed valuables, such as jewelry, art and collectibles, insured for a stated amount each, with broader protection than standard contents coverage.Service line coverageAn add-on that pays to repair or replace the buried water, sewer, gas or electric lines running from your house to the street or the utility's connection.Special limits of liabilityLow dollar caps on categories such as cash, jewelry, firearms, silverware and business property that apply no matter how high your belongings limit is.Stated valueThe amount you declare for an item on a policy, which caps the payout but may be reduced if its actual worth or repair cost at the time of loss is lower.SublimitA cap on payment for one type of loss or coverage that is lower than the main policy limit, such as a set dollar amount for mold or sewer backup.Umbrella policyExtra liability coverage, typically sold in $1 million steps, that applies above your home and auto liability limits and may cover some claims they exclude.UnderinsuranceCarrying a coverage limit below what a loss would cost to repair or rebuild, which leaves the owner to pay the gap.UnderwritingHow an insurer evaluates a home and its owner, decides whether to offer coverage and on what terms, and sets the price.UnoccupiedDescribes a furnished home that nobody is living in for a time, which can limit coverage under some policies, unlike a vacant home that is empty of contents.Vacancy clausePolicy language that removes or limits coverage for certain losses, such as vandalism and glass breakage, once a home has sat empty beyond a set number of days.Vacant dwelling policyA specialty property policy for a house nobody lives in, written because owner-occupied forms restrict coverage once a home sits empty.Walls-in coverageCondo unit-owner coverage for everything from the interior wall surfaces inward, which is the part of the unit the association's master policy does not insure.Water backup coverageAn optional add-on that pays for damage when water or sewage comes up through drains or sewers, or when a sump pump fails or overflows.All other perils deductibleThe basic amount you pay first on covered losses not subject to a separate wind, hail, hurricane or earthquake figure, listed on your declarations page.DeductibleThe amount of a covered property loss you pay yourself before the insurer pays the rest, shown on your declarations page as a dollar figure or a percentage.Escrow accountA lender-held account that collects a share of your annual property tax and insurance bills with each mortgage payment and pays them when due.Force-placed insuranceCoverage a mortgage servicer buys on your home and bills to you when it believes your own policy has lapsed or falls short of loan requirements.Grace periodExtra days after a premium due date during which coverage may stay in force while you pay, where the policy or state law provides for it.Inflation guardAn endorsement that raises your coverage limits a set percentage each year so they keep pace with rising rebuilding costs between renewals.Installment feeA small charge added to each payment when you pay your premium in monthly or other installments instead of in one lump sum.Loss payeeA party named on a policy to receive claim money for a particular item or property up to its financial stake, such as a lender or lessor.Market valueThe price a willing buyer would pay a willing seller on the open market, which includes the land and location and is not the basis for dwelling coverage.MortgageeThe lender that holds the mortgage on the home, listed on the declarations page so it gets cancellation notices and shares in payments for dwelling damage.Mortgagee clauseThe policy condition that gives the lender its own right to be paid for dwelling losses and protects that right even when the owner's claim is denied.Percentage deductibleThe share of your insured dwelling limit, rather than a fixed dollar figure, that you pay first on a loss, commonly 1% to 5% for wind, hail or hurricane damage.Policy feeA flat charge some insurers add to a new or renewed policy for administrative costs, separate from the premium calculated for your coverage.PremiumThe price of a policy for its term, set by rebuilding cost, location, claims history, roof, deductible and other rating factors.Pro rata cancellationA cancellation method that refunds the unused part of the premium in exact proportion to the days remaining, with no penalty deducted.Short-rate cancellationA cancellation method that returns less than the full unused premium when you end a policy early, so the insurer keeps a penalty on top of what it earned.SurchargeAn extra amount added to a premium because of a specific risk factor, claim history or state-required assessment, usually shown apart from the base rate.AM Best ratingThe letter grade, from A++ to D, that the insurance rating agency AM Best assigns to an insurer's ability to meet its ongoing policy obligations.Attorney-in-factThe company that manages a reciprocal exchange for its policyholders under a power of attorney, running underwriting, sales and claims in return for a fee.Demotech ratingA financial strength grade from an independent firm that rates mostly small and regional property insurers, often those AM Best and S&P do not cover.Financial strength ratingAn independent agency's grade of an insurer's ability to meet its obligations and pay claims, issued by firms such as AM Best, S&P, Moody's, Fitch and Demotech.InsurtechA company that uses software, data and automation to sell, price or service insurance, as a licensed insurer or as an agency or MGA backed by carriers.Mutual insurance companyAn insurer owned by its policyholders rather than outside shareholders, which can return surplus to them as dividends or keep it to strengthen the company.NAIC complaint indexA ratio comparing an insurer's share of confirmed consumer complaints with its share of premium, where 1.00 means complaints in line with its size.Reciprocal exchangeAn unincorporated group of policyholders, called subscribers, who insure one another through an exchange run by a separate manager under a power of attorney.Stock insurance companyAn insurer owned by shareholders who supply its capital and receive its profits, as opposed to one owned by the people it insures.