Important Home Insurance Terms Homeowner Should Know

Posted on: 23 December 2020

When you are in the market for home insurance, you may hear a lot of terms and acronyms being thrown around. These terms are often confusing unless you've done your research or are familiar with insurance. To ensure you are getting the coverage you need and know what you are purchasing, you should be familiar with some of these major home insurance terms.

ACV (Actual Cash Value)

ACV refers to the market value of your losses minus any depreciation. For example, if an item originally cost $1,000 when you bought it three years ago, the ACV would be that value minus three years' depreciation.


An appraisal is an estimate of the insured property's value by an authorized appraiser. It also refers to damage estimates by an insurance adjuster.


The deductible is the amount of money you have to spend before the insurance takes over. For example, if you have a $500 deductible on a covered item, then you must spend at least that amount before the insurance company pays anything else.


Exclusions are things not covered by your insurance or only have limited coverage. Exclusions can be part of the property, certain personal items, or even people (like tenants).

Liability Coverage

Liability coverage protects you if someone gets injured on your property. Examples are coverage for slip and falls, dog bites, or negligence. Your policy may also have liability limits for these items. In those cases, you would have to pay out-of-pocket for damages over a certain amount.


A lien is a claim to your property by someone else. For example, if you pay a mortgage, then the bank likely has a lien on your property until you pay off the loan. The lienholder is often listed as the additional party insured on your policy.


Perils are the actual causes of damage such as storms, fires, explosions, and vandalism. Your policy will likely limit your coverage to only certain perils and exclude other perils. Flood damage is often a peril that requires separate coverage.


Risk refers to your chances of having a covered event. The amount of risk your property has is a factor in your insurance rates and offerings. Certain factors increase or decrease your risk. For example, owning a property in a high fire area has a higher risk than a similar property in a safer area.

When you look over a new home insurance policy, do not be afraid to ask your agent about any unfamiliar terms. Knowing what you're buying can help you prepare for future events and reduce your losses if something were to happen. For more information about home insurance, or any other questions about insurance, talk to your agent.