What should you actually know about your insurance policy?
Written by Andy Kruger
BuildSOS CEO7 min read
The short answer
Know your coverage limits, your deductible (including any separate wind or hurricane deductible, which can be much higher than your standard one), and your major exclusions. Learn the handful of terms that actually matter, replacement cost versus actual cash value, endorsement, exclusion, so you’re not nodding along on a call with an adjuster while not understanding what you’re agreeing to. The best time to learn this is now, at your kitchen table, not during a stressful call after a loss.
This is general information, not legal or financial advice. Check your state Department of Insurance or consult a professional for guidance specific to your situation.
Why most people struggle with insurance basics
In a 2010 NAIC study, more than 60% of Americans failed basic questions about insurance. This isn’t a knock on homeowners. Insurance documents are genuinely written by lawyers for other lawyers, dense with terms that sound similar but mean very different things financially.
That gap has real consequences. Policyholders unfamiliar with their coverage are more likely to face delayed or denied claims, receive inadequate compensation, and struggle to navigate the claims process when it matters most. Closing the gap before a claim, not during one, is the entire point of reading your policy now.
Insurance terms in plain English
- Deductible. The amount you pay out of pocket before insurance starts paying. Wind and hurricane coverage often carries a separate, higher deductible than your standard one.
- Replacement cost (RCV). The full cost to rebuild new. This is the coverage you want.
- Actual cash value (ACV). Replacement cost minus depreciation. This usually pays out significantly less than RCV, sometimes tens of thousands of dollars less on a total loss.
- Adjuster. The insurance company’s representative who inspects your damage and writes the estimate.
- Public adjuster. An independent adjuster you hire yourself (and pay out of your eventual settlement) to negotiate with the carrier on your behalf.
- Endorsement. An add-on to your base policy. Some are automatic, some cost extra and have to be requested.
- Exclusion. Something your policy specifically doesn’t cover. Read these carefully; flood and earth movement are common exclusions people don’t discover until it’s too late.
- Code upgrade coverage. Extra coverage specifically for code-required upgrades when rebuilding after a loss. Often missing from a base policy unless added separately.
What to check in your policy
- Coverage limits. How much your policy actually pays out, and whether that figure has kept pace with what it would cost to rebuild your home today.
- Deductibles, including separate wind deductibles. In many hurricane-prone states, wind or hurricane damage carries its own deductible. Hurricane deductibles are usually 1% to 5% of your home’s insured value.
- Replacement cost vs. actual cash value. Know which one your policy uses, since the financial difference on a total loss can be substantial.
- Common exclusions. Flood is almost always excluded from a standard policy. Mold and sewer backup are often excluded or limited too.
- Additional living expenses (ALE) coverage. If your home is uninhabitable during repairs, this covers temporary housing. Check the limit and any time cap, since some policies limit ALE more than homeowners expect.
Frequently asked
Where do I find these details in my policy?
Look for the “declarations page” for a summary of limits and deductibles, then the full policy document for exclusions and definitions. If it’s unclear, call your agent and ask directly, or try Policy AIDvisor for a plain-language read.
Is a higher deductible always worse?
Not necessarily; it often means a lower premium. What matters is knowing the number in advance so it’s not a surprise when you need to file a claim.
What’s the single most important term to actually understand?
Replacement cost versus actual cash value. It’s the distinction that most directly affects how much money you actually receive on a claim, and it’s one of the most commonly misunderstood.
Should I talk to my insurance agent about this?
Yes. Once you’ve reviewed your policy and have questions, your agent is the right person to walk through specifics and any state rules that apply to your coverage.
What is an endorsement, and do I need any?
An endorsement is an add-on to your base policy, some automatic, some optional and priced separately. Common ones worth asking about include code upgrade coverage and additional living expenses increases. Ask your agent which endorsements make sense for your specific risk.
Sources
About the author
Andy Kruger
Andy Kruger is CEO of BuildSOS, author of When the Storm Comes, and sits on multiple boards and advisory groups shaping disaster resilience policy and research.
About Andy