Trying to read what your insurance policy is really saying can be tricky. There are terms that need to be understood to fully determine if you have the coverage and service you need.


  • An insurance policy is a contract between an individual or business and an insurance company. It determines the claims that the insurer must legally pay.
  • After an initial payment, or premium, is made an insurer contractually agrees to pay for losses covered in the policies terms.


  • The terms of your insurance policy outline costs that will be paid in the event of a loss or claim. When you file a claim, you are formally requesting money for damages or expenses due to an event covered in your agreement.
  • Once a claim is filed an adjuster will be assigned to your claim. They are there to survey damages and provide estimates for repair costs.
  • If a claim is validated and approved, then monies are distributed.


  • When you file an insurance claim, you will be responsible for your deductible. The deductible is the amount of money you will pay before the insurer pays their part based on the terms of your policy. It can be found on the front or declarations page of your insurance policy.
  • There are typically two types of deductibles, dollar-amount and percentage based. Dollar-amount deductibles are the most common, and they are a set amount chosen when you purchase a policy. No matter the amount of your claim, the deductible remains that set amount. Percentage-based deductibles are becoming more common, especially in high-risk areas. This type is based on a percentage of the estimated replacement cost of the covered home or business.


  • A premium rate is the amount you pay for an insurance policy (typically monthly) to keep it active.
  • The higher your deductible the lower your premiums and vice-versa. Premiums can often be reduced by upwards to 20% with a higher deductible however, raising your deductible higher is not always the best choice. If you are financially able and prepared to pay higher deductible funds, then raising your deductible rates could be the right choice for you. You will see a difference in your premium rates but, be aware that if you need to file multiple claims in a year your financial obligations may be higher overall. Multiple claims may also increase premium rates due to your higher liability for a claim. These are things to take into consideration.

Recoverable vs Non-Recoverable

  • It is very important for policy owners to check whether they have a recoverable or non-recoverable insurance policy. Not planning ahead in accordance with your plan may leave you with costs you are not prepared for or comfortable covering.
  • With a non-recoverable plan, you will pay more out-of-pocket than just your deductible costs. Your costs will include your policy’s deductible PLUS any depreciation amount for full replacement.
  • With a recoverable plan you will pay your deductible, then receive the actual cash value (ACV) on your claim PLUS the depreciation amount. It’s important to note that some recoverable plans may become non-recoverable if certain conditions like repairs or replacements are not made.

Your insurance policy is not something that should be overlooked. It’s important to know what’s in your policy and if the terms are adequate for your needs. Knowing some of the basic insurance terms used will be just one step toward being informed and properly covered in the case of a loss.


Related Blog Posts:

Let’s Talk Deductibles.  What Are They?  What Kind of Deductible Do I Have?  Should I Make Changes?

What is a Deductible? How Does it Work?

How Do I Know if my Insurance Really Has Me Covered?

Determine Which Insurance Policy is Right for You

Getting to Know Your Insurance Policy


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