Claim terms in plain English

A

Actual cash value (ACV)

What damaged property was worth just before the loss: the cost to replace it today minus depreciation for age and wear. A policy that pays actual cash value pays less than the price of a new replacement.

Additional living expenses (ALE)

Coverage for the extra cost of living somewhere else, such as hotel bills and meals above your normal spending, while a covered loss makes your home unlivable. It is limited by a dollar amount, a time period or both, depending on the policy.

Appraisal clause

A policy provision for settling a disagreement over the dollar amount of a loss without going to court. You and the insurer each hire an appraiser, and a neutral umpire decides what the two cannot agree on. It does not decide whether something is covered.

Assignment of benefits

An agreement that transfers your rights under your policy and your claim to someone else, most often a contractor. Signing one can mean giving up control of the claim, so read it closely first.

B

Bad faith

A legal term for an insurer handling a claim unreasonably, for example denying or delaying payment without a reasonable basis. What counts as bad faith, and what you can do about it, depends on state law.

D

Declarations page

The summary page at the front of your policy. It lists who and what is insured, the policy dates, the premium, your coverage limits and your deductibles.

Deductible

The part of a covered loss you pay yourself. The insurer subtracts it from the claim payment, and it can be a flat dollar amount or a percentage of the amount your home is insured for.

Depreciation

The drop in value of property over time because of age and wear. Insurers subtract it from replacement cost to arrive at actual cash value.

E

Endorsement

A written change attached to your policy that adds, removes or alters coverage. Also called a rider. Where an endorsement and the main policy differ, the endorsement controls.

Estimate

A written, itemized list of the repairs needed and what each will cost in labor and materials. The insurer's adjuster, your contractor and a public adjuster may each write one, and the totals often differ.

Exclusion

Policy wording that removes coverage for a particular cause of loss, type of property or situation. If an exclusion applies, the insurer does not pay for that part of the loss.

F

First-party claim

A claim you make under your own insurance policy, such as a homeowners claim for damage to your own house. Public adjusters work on first-party property claims.

I

Independent adjuster

An adjuster who is not an employee of one insurance company but is hired by insurers on contract to handle claims. An independent adjuster represents the insurer, and you do not pay them.

M

Mortgagee clause

The part of a property policy that protects your mortgage lender's financial interest in the home. It is the reason claim checks for damage to the structure are often made out to both you and the lender.

N

Named peril

A cause of loss that the policy specifically lists, such as fire or theft. A named-peril policy covers only the causes on its list.

O

Open peril

Coverage for any cause of loss except the ones the policy specifically excludes. Also called all-risk coverage. It is broader than named-peril coverage.

Ordinance or law coverage

Coverage for the added cost of bringing a damaged home up to current building codes when it is repaired or rebuilt. A standard homeowners policy does not pay this cost unless the coverage is included.

P

Policy limit

The most the insurer will pay for a covered loss under a given coverage. Your dwelling, your belongings and your living expenses each have their own limit.

Proof of loss

A formal, signed statement you give the insurer describing what was damaged and how much you are claiming. Some insurers require it to be notarized and set a deadline for sending it in.

Public adjuster

A claims professional hired and paid by the policyholder, not the insurer, to document a property loss and negotiate the claim. Most states require a license.

R

Recoverable depreciation

The gap between replacement cost and actual cash value that a replacement cost policy holds back at first. The insurer pays it once you show the repair or replacement was done, usually within a time limit.

Replacement cost value (RCV)

The cost to repair or replace damaged property with new property of like kind and quality at today's prices, with nothing taken off for depreciation. It is paid only up to your policy limit.

Reservation of rights

A letter from your insurer saying it is still investigating the claim and keeps the right to deny all or part of it later. It is not a denial, but it shows which coverage questions the insurer is looking at.

S

Scope of loss

The detailed list of everything that has to be repaired or replaced, including materials, quantities, labor and building code work. You and the insurer need to agree on the scope before you can agree on the price.

Staff adjuster

An adjuster who is an employee of the insurance company handling your claim. Also called a company adjuster. They represent the insurer, and you do not pay them.

Subrogation

Your insurer's right, after it pays your claim, to recover that money from the person or company that caused the damage.

Supplemental claim

A request for more money on a claim the insurer has already paid in part or in full, usually because more damage was found or repairs cost more than the first estimate.

U

Umpire

The neutral third person in an appraisal. The two appraisers choose the umpire, who settles the differences when they cannot agree on the amount of the loss.

Definitions are written by this site in everyday language. Your policy's own definitions control what a word means in your claim.