Understanding Your Insurance Policy

Understanding your policy ensures you are adequately covered and helps you make informed decisions in the event of a claim, safeguarding your financial security and peace of mind.

Four categories of coverage

Getting Started

Generally, insurance policies are broken down into four categories describing what insurance covers and the maximum amount the insurer will pay out in case of loss or damage. These categories are listed on your policies “declarations page.” Usually, these categories are:


Coverage A



Coverage B

Other Structures


Coverage C

Contents/Personal Property (Possessions)


Coverage D

Loss of Use/Additional Living Expenses

Understanding your coverage

Deconstructing the Declarations Page

The “declarations page” states the dollar amounts/limits for these categories, but these are not always presented clearly. There are extensions, limits, and exclusions for certain items. For instance, policies often include papers, computers, and jewelry as “sub-limits.”

If you don’t have a complete or current copy of your policy, request one in writing and ensure that you and your insurance adjuster are working from the same iteration of the document. Unfortunately, math determines how much you’re entitled to regarding dwelling repair and replacement, debris removal, and building code compliance. You shouldn’t rely exclusively on your insurer’s calculations; do your due diligence and double-check the numbers.

This is the majority of what your policy protects. Your actual coverage in Coverage A may be higher than stated here because your policy may contain “endorsements” or policy extras that increase its value. These endorsements should be explained in the policy phrasing, but you’ll have to go through and add up these extras and add that number to your total policy.

Included are structures separated from the main dwelling, such as garages, outbuildings, decks, fences, retaining walls, etc. This coverage limit may increase with the extras described in the Dwelling Coverage A section described above. If you think your home may be underinsured, read your policy to see if any items can be moved into this category.

This limit is often not adjusted but is usually adequate to cover personal property losses. Your policy may require you to list and value an inventory of lost or damaged property, but sometimes, your claims adjuster will waive this rule. This is where Actual Cash Value vs Replacement Cost Value comes into play. Your insurer will depreciate the value of your personal property (often unreasonably) and pay the “Actual Cash Value” until you replace these items. This is why it is essential to be diligent about saving your receipts to get complete reimbursement. You can file for time extensions if necessary. Do not feel pressured by policy deadlines. Make sure you submit everything in writing through the proper channel before your deadline, and an extension should be readily granted.

This covers replacement costs of living, such as hotels, groceries, pet boarding, transportation, parking costs, laundry expenses, and moving or storage costs until you can move back into your home. This limit does not apply to mortgage payments. This coverage is either a dollar amount, a reasonable time limit, or both. Some Loss-of-use payments will be advanced, and some will be “as incurred.” Once again, it is important to stay diligent about saving all your receipts to be submitted to receive your full reimbursement.

Additional resources

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