Frequently Asked Questions

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Actual Cash Valuation (ACV) is another way insurers calculate reimbursement for property damage, compared with Replacement Cost Valuation (RCV). Under ACV, the insurer pays the cost to replace or repair damaged property less depreciation. Depreciation reflects the age, wear and tear, and condition of the property at the time of loss.

For example, imagine a ten-year-old roof damaged by hail. If a brand-new roof costs $20,000 but the old roof has lost half its value due to age, an ACV policy may only pay $10,000 (less the deductible). The policyholder would need to cover the difference out-of-pocket if they wanted a full replacement.

ACV policies are generally less expensive because they shift more of the replacement burden to the property owner. They may work for property owners who want lower premiums or who are comfortable covering depreciation themselves. However, for many landlords, homeowners, and investors, ACV can result in financial gaps after a claim, particularly when construction costs are rising faster than property values depreciate.

That said, ACV coverage still provides critical protection. It ensures policyholders receive some compensation rather than bearing the entire loss. ACV reflects the depreciated value of the damaged property at the time of loss. 

It is an important concept for policyholders to understand, as it directly affects how much money they will receive when filing a claim.

A claim is the formal request a policyholder makes to their insurance company after a loss occurs. Submitting a claim triggers the insurer’s duty to investigate, assess damages, and provide payment according to the policy terms.

The process usually involves notifying the insurer promptly, providing documentation (photos, receipts, or estimates), and cooperating with adjusters. Once approved, the insurer issues payment for the loss, subject to deductibles and policy limits.

Filing a claim is the moment insurance fulfills its promise: transferring the financial burden of unexpected losses from the policyholder to the insurer. Understanding the claims process helps property owners act quickly and effectively during stressful times, ensuring they receive the protection they’ve paid for.

The Declarations Page, often called the “dec page,” is the summary section of an insurance policy. It outlines the most important details, including the insured’s name, property address, coverage limits, deductibles, premium, and policy period. It also lists the insurer’s information and the mortgagee, if applicable.

Think of it as the “snapshot” of your insurance contract. While the full policy contains legal language and details, the dec page highlights the key information you need to quickly confirm your coverage.

For property owners and landlords, reviewing the declarations page regularly ensures your coverage amounts and endorsements match your current needs. Policyholders should keep a copy of their dec page available for reference.

A deductible is the amount a policyholder must pay out-of-pocket before the insurance company begins covering a claim. For example, if your deductible is $1,000 and your property suffers $10,000 in covered damage, you would pay the first $1,000, and your insurer would pay the remaining $9,000, or up to policy limits.

Deductibles serve two purposes: they share responsibility between insurer and policyholder, and they help keep premiums affordable. Higher deductibles usually result in lower premiums, while lower deductibles lead to higher premium costs. Choosing the right deductible depends on your risk tolerance and financial ability to handle unexpected expenses.

Some policies include standard dollar-amount deductibles, while others, such as windstorm or hurricane coverage, may use a percentage deductible based on the property’s insured value. For instance, a 2% deductible on a $300,000 home means the policyholder must pay the first $6,000 of a covered loss.

Understanding your deductible is essential when budgeting for risk. It ensures that in the event of a claim, you know exactly what portion of the cost you’ll be responsible for.

DP policies (Dwelling Property) are designed primarily for rental, seasonal, or investment properties rather than owner-occupied homes.

DP-1 is the most basic landlord policy. It insures the dwelling against a short list of named perils (like fire, lightning, wind, and vandalism). Claims are typically settled on an Actual Cash Value (ACV)basis, meaning depreciation is deducted from payouts. It usually excludes coverage for tenant belongings and loss of rents unless added. DP-1 works as a budget option but leaves financial exposure after a major claim.

DP-3 is the broadest form of dwelling policy. It insures the property on an open perils basis, covering all risks unless excluded. Losses are generally paid on a Replacement Cost (RCV) basis, which ensures landlords can rebuild without deductions for depreciation. DP-3 policies often include liability and Loss of Rents Coverage by default, making them much stronger protections for income-producing properties.

Key takeaway: DP-1 is limited and cost-driven, good for owners who want to prioritize cost while ensuring a level of protection. DP-3 is more comprehensive and generally recommended for landlords who want to prioritize asset protection. For investors with mortgages, DP-3 is often required by lenders.

Dwelling Coverage is the cornerstone of most property insurance policies. It protects the primary structure of the insured property, such as a house, apartment building, or rental unit, against covered perils like fire, wind, hail, or certain types of water damage. In simple terms, it is the part of your policy that ensures the walls, roof, floors, built-in appliances, and attached structures like garages are financially protected.

The coverage amount is usually based on the cost to rebuild the property, not the market value. That’s because insurance is designed to restore the physical structure, not account for land or fluctuating real estate prices. For landlords, dwelling coverage extends beyond owner-occupied homes, protecting investment properties that generate rental income.

Having the right dwelling limit is critical. Too little coverage could leave property owners paying out-of-pocket after a major loss, while too much coverage could result in unnecessarily high premiums. Insurers often require a minimum percentage of replacement cost coverage to ensure policies are sufficient.

Dwelling Coverage does not typically include land, detached structures, or personal/tenant belongings. These are addressed under separate sections or endorsements. For landlords, it’s also important to pair dwelling coverage with Loss of Rents coverage to safeguard income streams if the property becomes uninhabitable.

In short, Dwelling Coverage is the backbone of property insurance. It ensures that the property itself can be repaired or rebuilt after a disaster, protecting the financial investment at the heart of homeownership and property management.

An endorsement, sometimes called a rider, is an amendment to your insurance policy that changes or adds coverage. Endorsements can expand coverage (such as adding Replacement Cost Valuation for personal property), restrict coverage, or clarify terms.

Common endorsements include adding coverage for high-value jewelry, extending Loss of Rents protection, or insuring home-based businesses. Each endorsement tailors the policy to the unique needs of the property owner.

Endorsements are powerful tools because they transform a standard insurance policy into a customized protection plan. Reviewing them ensures you’re not left with gaps in coverage.

HO-A and HO-3 are both homeowners insurance policies, but they differ in how much protection they provide.

HO-A is the most basic form of homeowners coverage, often available only in certain states (such as Texas). It typically insures the dwelling and personal property against a short, specific list of “named perils” — events like fire, wind, hail, explosion, and theft. If the cause of loss isn’t listed, it isn’t covered. Because of its limited nature, HO-A is usually cheaper, but it leaves gaps for risks such as water damage from plumbing leaks, falling objects, or accidental discharge of appliances. HO-A may suit older homes that are difficult to insure under broader forms, but many clients find its limitations too restrictive.

HO-3, by contrast, is the most common homeowners policy nationwide. It insures the dwelling on an open perils basis, meaning it covers all causes of loss except those specifically excluded (like flood, earthquake, war, or neglect). Personal property is usually covered on a named perils basis, but endorsements can expand that. HO-3 policies often include replacement cost coverage for the dwelling, liability protection, and loss-of-use coverage if the home becomes uninhabitable.

Key takeaway: HO-A is narrow, offering affordable but limited protection, while HO-3 is broader and better suited for homeowners seeking greater coverage. For clients, the choice is about balancing premium savings against risk tolerance. Most lenders require at least HO-3, and many homeowners prefer the peace of mind that comes with broader protection.

Loss of Rents Coverage is specifically designed for landlords and property investors. It provides reimbursement for lost rental income when a rental property becomes uninhabitable due to a covered peril, such as fire, storm damage, or water intrusion. While dwelling coverage pays to repair the building, Loss of Rents ensures that the income stream landlords rely on is protected during the repair period.

For example, if a rental home sustains fire damage and tenants must move out for three months while repairs are made, Loss of Rents Coverage would compensate the landlord for the rent they would have otherwise received. This protection helps landlords continue to meet mortgage payments, taxes, and other obligations even when tenants are displaced.

It is important to note that this coverage only applies to losses stemming from covered perils, it does not cover vacancies due to market conditions, tenant default, or voluntary renovations. Policy limits are typically tied to the rental value of the property and should be carefully calculated to ensure adequate protection.

By including Loss of Rents Coverage, landlords gain financial stability during unexpected disruptions. It bridges the gap between property repairs and income continuity, protecting both the property investment and the landlord’s financial security.

A mortgagee clause protects the lender’s financial interest in your property. Because mortgage companies loan money to purchase properties, they require insurance to ensure the asset remains protected. If a loss occurs, the mortgagee clause guarantees that the lender will be paid first, up to their financial interest.

This clause also protects lenders if the property owner fails to maintain coverage. If a policy is canceled, insurers notify the mortgagee so the lender can take steps to secure force-placed insurance.

For property owners, the mortgagee clause is a reminder that insurance doesn’t just protect you, it also protects the bank or lender holding a stake in your property.

Other Structures Coverage extends protection to buildings and structures on a property that are not directly attached to the main dwelling. Examples include detached garages, fences, sheds, barns, and gazebos. While these structures are separate, they still represent valuable investments that are exposed to the same perils as the main dwelling.

Other Structures Coverage may be included automatically in homeowners and landlord policies, often set at a percentage (commonly 10%) of the dwelling coverage limit. For instance, if the main dwelling is insured for $300,000, the policy may automatically provide $30,000 for detached structures. However, this amount can be increased if the property has high-value structures like large barns, workshops, or extensive fencing.

Coverage applies to many of the same perils listed under the main dwelling, such as fire, windstorm, hail, or vandalism. However, certain exclusions may apply, for example, coverage may not extend to structures used for business purposes or rental unless specifically endorsed.

Other Structures Coverage ensures that property owners don’t overlook important assets that contribute to the functionality and value of their property. Landlords with detached garages or storage sheds should pay particular attention, as tenant use could raise unique risks.

By including this coverage, property owners safeguard not just the home itself but the broader property environment. It helps ensure that in the event of damage or destruction, the property can be restored to its full use and value without unplanned expenses.

A peril is any risk or cause of loss covered by an insurance policy. Policies define perils in two primary ways: Named Perilsand Open Perils.

Named Perils policies list specific risks, such as fire, theft, or windstorm. If a peril isn’t listed, it isn’t covered. Open Perils policies, on the other hand, provide broader protection by covering all risks except those specifically excluded (such as flood or earthquake).

For example, if a pipe bursts and damages your property, an Open Perils policy generally covers it unless excluded. Under a Named Perils policy, coverage only applies if “burst pipes” is specifically listed.

Understanding the difference between these approaches is key to knowing how broad your protection really is.

Personal Property Coverage protects the contents inside a home or rental property, such as furniture, electronics, clothing, and appliances. It ensures that if belongings are damaged or destroyed by a covered peril, such as fire, theft, or vandalism, the policyholder receives compensation to repair or replace them.

For homeowners, this coverage applies to personal possessions within the residence and, to a limited extent, items taken outside the home (e.g., a laptop stolen from a car). For landlords, this coverage may extend only to items the landlord owns and provides, like refrigerators or stoves, but not to tenants’ personal belongings. Tenants are expected to carry their own renters insurance for their possessions.

Personal Property Coverage can be offered on either an Actual Cash Value (ACV) or Replacement Cost Valuation (RCV) basis. Under ACV, depreciation is deducted, while RCV provides reimbursement for new items of like kind and quality. Policyholders should verify which valuation method applies, as it greatly affects claims payouts.

Coverage limits are often set as a percentage of the dwelling limit, though higher-value items like jewelry, fine art, or collectibles may require special endorsements. Without this protection, replacing belongings after a major loss could be financially devastating.

Ultimately, Personal Property Coverage gives peace of mind that not only the structure but also the things that make a house a home are protected. It ensures continuity and recovery after unexpected losses.

A premium is the price you pay to your insurance company for coverage, usually billed monthly or annually. It represents the cost of transferring financial risk from you to the insurer. Premiums vary based on factors like property value, location, construction type, claims history, and chosen coverage limits.

While premiums can feel like a routine expense, they are the foundation of financial security. They ensure that when disaster strikes, you don’t bear the full financial burden alone. Property owners can often adjust premiums by changing deductibles, bundling policies, or enhancing security features on the property.

Premiums are essentially your ticket to peace of mind. They are the steady investment that guarantees protection against unpredictable losses. 

 Property Insurance is the foundation of financial protection for homeowners, landlords, and real estate investors. At its core, property insurance provides coverage for physical structures, such as houses, rental units, or commercial buildings, and sometimes the belongings inside them, against loss or damage caused by specific events. These events, known as “perils,” may include fire, windstorm, hail, theft, vandalism, or water damage from burst pipes.  

The purpose of property insurance is to ensure that when unexpected events occur, property owners do not bear the full financial burden of repairs or replacement. Without coverage, a single catastrophic event, like a house fire or major storm, could wipe out years of investment and savings. Policies are typically tailored to the type of property: homeowners policies cover residences, landlord or tenant-occupied policies address rental properties, and specialized options like builders risk or vacant property insurance fill unique needs.  

Property insurance may also provide liability protection in many cases. This means the policy can help cover medical expenses or legal costs if someone is injured on the property and the owner is found responsible. Some policies even extend coverage for additional living expenses if the insured property becomes uninhabitable after a covered loss.  

Ultimately, property insurance is not just about compliance with lenders (though most require it). It is about peace of mind. By transferring risk to an insurer, property owners gain confidence that their investments, income, and financial stability are protected against life’s uncertainties. 

Replacement Cost Valuation (RCV) is a method insurers use to determine how much they will pay to repair or replace damaged property. Under RCV coverage, the policy reimburses the policyholder for the full cost of replacing the damaged property with new materials of like kind and quality, without deducting for depreciation. In simpler terms, RCV ensures that the insured can restore their property to its pre-loss condition as if the damage never occurred.

For example, if a roof is destroyed by a windstorm and costs $20,000 to replace, an RCV policy will pay that full amount (minus the deductible), even if the old roof was ten years old and worth far less in depreciated value. This is different from Actual Cash Value (ACV), where depreciation is deducted.

RCV coverage is especially valuable in the property insurance industry because construction costs, labor rates, and material prices are constantly rising. Without RCV, property owners risk being undercompensated and left with significant out-of-pocket expenses. Most standard homeowners and landlord policies now offer RCV for the main dwelling, but coverage for personal property may default to ACV unless an RCV endorsement is purchased.

RCV gives property owners the financial stability to repair and rebuild without suffering losses from depreciation, making it one of the most client-friendly valuation methods in property insurance.

Theft Coverage protects against the loss of personal belongings or certain property items stolen from the insured premises. This coverage applies when items such as electronics, jewelry, furniture, or appliances are unlawfully taken, either during a burglary or through forced entry.

For homeowners, Theft Coverage ensures that personal possessions are protected even if the structure itself is not damaged. For landlords, coverage usually applies only to items they own and provide for tenant use, like appliances or furniture in furnished units. Tenants are responsible for their own belongings through renters insurance.

Theft Coverage may also extend, within limits, to belongings stolen away from home, such as a laptop stolen from a car or luggage lost due to theft while traveling. Higher-value items like jewelry or collectibles often require scheduled endorsements to be fully covered, as standard theft limits may be capped.

One important limitation is that Theft Coverage generally requires evidence of forced entry or unlawful access. Losses from simple misplacement or unexplained disappearance are not covered.

Theft Coverage offers peace of mind that in the unfortunate event of burglary, the policyholder will not have to bear the entire financial burden of replacing stolen items. It is an essential safeguard against one of the most common risks property owners and residents face.

Vandalism and Malicious Mischief Coverage protects property owners against intentional acts of damage caused by others. Unlike perils such as fire or wind, vandalism is the result of deliberate human action, for example, broken windows, spray-painted walls, or damaged fixtures.

This coverage is particularly important for landlords and owners of vacant properties, which are often targeted by vandals. Without it, the property owner would need to pay out-of-pocket to repair intentional damage, which can quickly become costly. Coverage typically applies to the structure itself and, in some cases, to permanently installed fixtures or appliances.

However, exclusions may apply. For instance, some standard policies may not include vandalism coverage if a property has been vacant for more than a set period (often 30 or 60 days) unless a specific endorsement is purchased. This makes it essential for property owners to review policy terms carefully, especially when dealing with vacant or seasonal properties.

Vandalism Coverage ensures that intentional destruction doesn’t derail property value or income. It reassures landlords and property owners that they won’t be left unprotected against deliberate harm. When paired with Theft Coverage, it provides robust protection against the two most common intentional risks property faces.