LookupA searchable reference table
Homeowners Claim Terms Decoder
A sourced glossary of claim terms: actual cash value, replacement cost, depreciation, holdback, deductible, ALE, appraisal and more, each paraphrased from a state insurance department or the NAIC, with where you will see it.
On this page
| Term | What it means | Where you see it | Source |
|---|---|---|---|
| Actual cash value (ACV) | What the damaged item is worth now: the cost to replace it today, minus depreciation. It pays less than replacement cost. | Estimate totals and the policy's coverage section | Texas Department of Insurance, Home insurance glossary |
| Replacement cost (RC) | The cost to replace the damaged property with similar kind and quality without subtracting depreciation, up to the policy limit. | Estimate totals and the policy's coverage section | Texas Department of Insurance, Home insurance glossary |
| Depreciation | The loss in value from age, wear and tear and other factors. It is the gap between replacement cost and actual cash value. | A deduction line on the estimate | California Department of Insurance, Residential Property Claims Guide (April 2023) |
| Depreciation holdback | On a replacement cost policy, the insurer usually pays the actual cash value first and the withheld depreciation after repairs are complete. | The first payment letter and the payment schedule | Texas Department of Insurance, Home insurance guide |
| Deductible | The part of a covered loss you pay before the company pays anything. | Declarations page and the estimate summary | Texas Department of Insurance, Home insurance glossary |
| Declarations page | The page of the policy that lists the insurer, the policy period, the premium and the coverage amounts. | The front of your policy | Texas Department of Insurance, Home insurance glossary |
| Peril | A risk the policy covers or excludes, such as fire, windstorm, flood or theft. | Policy coverage sections | Texas Department of Insurance, Home insurance glossary |
| Named-peril and all-risk policies | A named-peril policy covers only the risks it lists. An all-risk policy covers everything except what it excludes. | Policy form | Texas Department of Insurance, Home insurance glossary |
| Exclusion | A provision that denies coverage for certain perils, people, property or locations. | Policy exclusions section and denial letters | Texas Department of Insurance, Home insurance glossary |
| Endorsement (rider) | A written attachment that widens or narrows what the policy pays. Sewer or drain backup is often added this way. | Pages attached to the policy | Texas Department of Insurance, Home insurance glossary |
| Additional living expenses (ALE) | Pays for temporary housing, food and other necessities when a covered loss makes the home unlivable, usually up to a limit set as a share of dwelling coverage. | Declarations page and a separate payment | Texas Department of Insurance, Home insurance glossary |
| Adjuster (staff or independent) | The insurer's employee or hired contractor who evaluates the loss and settles the claim. Their inspection is free to you. | Name on the estimate and claim letters | Texas Department of Insurance, Home insurance glossary |
| Public adjuster | A licensed adjuster you hire to negotiate your claim for a share of the settlement. North Dakota's guide says they typically charge 10 to 20 percent. | Contracts offered after a loss | North Dakota Insurance Department, How to submit a claim |
| Appraisal | A process many policies provide for disagreements about the amount of a loss: each side hires an appraiser and the appraisers pick an umpire. It settles the amount, not whether the loss is covered. | Policy conditions section | Texas Department of Insurance, Home insurance glossary |
| Mitigation | Reasonable steps to limit further damage, such as covering a roof opening. Insurers typically reimburse reasonable costs on a covered loss. | Claim guidance and the policy's duties after a loss | NAIC, Navigating the claims process: recover and rebuild |
| Ensuing damage | Further damage that follows the first. California's guide warns a policy may not cover it if you did not take reasonable steps to secure the property. | Policy duties after a loss | California Department of Insurance, Residential Property Claims Guide (April 2023) |
| Advance payment | The first check is often an advance, not the final payment. Structure, contents and living expenses may each come as a separate check. | The first payment letter | California Department of Insurance, Residential Property Claims Guide (April 2023) |
| Proof of loss | A document describing the loss that the company can ask you to submit. North Dakota's guide gives 60 days from the company's request. | A form the insurer sends | North Dakota Insurance Department, How to submit a claim |
| Building code upgrades | The cost of bringing repairs up to current building codes. California's guide lists it among things that may be covered, with no detail, so ask your agent. | Policy extensions and the estimate | California Department of Insurance, Residential Property Claims Guide (April 2023) |
| First-party claim | A claim you file under your own policy. | Insurer correspondence | Texas Department of Insurance, Home insurance glossary |
How to use the table
Read an adjuster's estimate with the table open beside it. When a line or a letter uses a word you do not recognize, find it in the first column, read what it means, and use the third column to see where in your paperwork it appears. Your browser's find command works on the table, and it prints. On a phone each row becomes a card.
Every meaning is a short paraphrase of a public source named in the last column. These are the regulators' own words reduced to plain language, not a legal definition, and a policy that defines a term differently controls over this page.
The terms that cause the most confusion
Most people trip over the cluster around payment. Actual cash value is the replacement cost minus depreciation. Replacement cost is the amount to replace without taking depreciation off, up to the policy limit. Depreciation is the loss in value from age and wear. A replacement cost policy usually pays in installments: the actual cash value first, then the withheld depreciation, called the holdback, after repairs are done. So a first payment that looks small may not be the final number. The depreciation guide walks through a regulator's own example.
A second cluster is about who is on whose side. A staff adjuster works for the insurer, and so does an independent adjuster the insurer hires. A public adjuster works for you, for a share of the settlement, and must be licensed. An appraisal is not an adjuster at all: it is a dispute process in the policy, and it decides the amount of a loss, not whether the loss is covered.
A third cluster is the paperwork: the declarations page lists your coverage amounts, an endorsement changes what the policy pays, and an exclusion takes something out. Sewer backup, for example, is often added by endorsement, which is why it appears on the coverage checker.
Worked example: reading a first payment letter
Imagine a letter says it is paying a figure labeled actual cash value, with a line below marked recoverable depreciation and a deductible subtracted at the top. Using the table: the actual cash value is the payment now, the recoverable depreciation is the holdback that may be released once repairs are finished, and the deductible is your share. California's guide adds that the first check is often an advance and not a final payment. With that, the letter stops looking like a final offer and starts looking like the first step in a schedule, and you know which questions to ask: when is the holdback released, and what proof of completed repairs does the insurer need.
What is not in the table
Some terms that appear on contractor-style estimates are not defined in the public glossaries this page was built from. Overhead and profit, supplement, and loss of use are examples. They are left out instead of guessed at. If a term on your estimate is missing here, ask the adjuster to define it in writing, and write it in your claim log.
If you are checking an estimate line by line, the LineItemly note below is where this site points readers who want help with that.
Related
For the steps themselves, see the claim documentation checklist. For disagreements, see the dispute and supplement letter.
Sources
- Texas Department of Insurance, Home insurance glossary tdi.texas.gov
- California Department of Insurance, Residential Property Claims Guide (April 2023) insurance.ca.gov
- Texas Department of Insurance, Home insurance guide tdi.texas.gov
- North Dakota Insurance Department, How to submit a claim insurance.nd.gov
- NAIC, Navigating the claims process: recover and rebuild content.naic.org