How to read and understand your home insurance policy

How to read your home insurance policy

To read your home insurance policy, work through it by section. A policy starts with the declarations page and then has multiple pages of detailed information. As you read through the exclusions and coverage details, take note of anything you don’t understand so that you can review those questions with your agent or a company representative later.

What is a home insurance declarations page?

The declarations page is the front page of your homeowners insurance policy and summarizes the policy's coverage, limits, costs and deductibles.

On the declarations page you'll find:

The address of the home
The names of the insured
The agent or insurance company
What's covered, the limits of coverage, and your deductible(s)
The start and end dates of the coverage

What to look for in your homeowners insurance policy documents

As you read through your policy, look for changes to your policy (on renewal), your coverage and any special limits, how your home and its contents are covered, your premium and deductible, and the conditions and exclusions.

Policy changes. On renewal, you will see a page that lists policy changes for the coming year. It outlines everything that’s changed in any section of the policy since last year. This is the main thing to read when you get your renewal; you probably don’t need to re-read the entire policy every year if you check out this page.
Coverage amounts and how things are valued. Your dwelling coverage should be for the home’s replacement cost, not the market value. For personal property, look for replacement cost vs. actual cash value. Actual cash value is standard on a home insurance policy, but it provides very limited coverage, per Wells. “Actual cash value (ACV) is the standard method of valuing personal property (household contents.) But, ACV coverage only pays about 20%-25% on the replacement cost dollar. So, if it would cost you $100,000 to replace the contents of your home, on ACV coverage you would collect $20,000 - $25,000 instead,” she said.
The premium breakdown. While the declarations page shows you the total premium, you’ll find a page further into the policy that breaks down all charges. It will list what you’re paying for each section of your coverage, any fees that are added to the policy and any discounts you’re receiving.
The policy conditions. This section outlines the rules by which the policy contract abides. It will list the allowable reasons for nonrenewal or cancellation of the policy by the insurance company.
Coverage details and exclusions. The exclusions are the big thing to read here, as it will tell you everything specifically not covered by your policy, broken down by coverage section. You’ll also find here details about the conditions of each coverage, including your duties after a loss. Wells noted that floods and earthquakes are both excluded and require separate coverage. “Earthquake and flood are the two most common perils for which people don’t have coverage. Those two causes of loss are not covered in standard homeowner forms. If you live near a major earthquake fault line, you especially need to ask for earthquake coverage. If you live where it floods, you need to ask for separate flood insurance,” she said.

How do I find my homeowners insurance policy?

To find your homeowners policy, check all the mail you've received from the carrier; you should receive a physical copy in the mail when you start a new policy and at every renewal. If you don't have a physical copy, log into your account on the company website or in the app and find the section for policy documents, where you can download a copy. You can also call your agent or the carrier directly to request a copy of your policy.

Tips for understanding your homeowners policy

To better understand your home insurance policy, get to know the terms used and ask questions before you need to file a claim.

Know the terms. For many people, the hardest thing to understand about a home insurance policy is the terminology. While insurance companies have to make the policy easy to read, there are still many industry terms. Keep a glossary of insurance terms handy or search for the definitions as you read.
Ask questions. If you have an insurance agent, plan an annual meeting to review your policy and get any questions answered. If you prefer direct buy, get someone from your insurance company on the phone to clarify anything you don’t understand. You have the right to understand how your coverage works.
Don’t wait for a claim. Many people don’t worry about what’s in their home insurance policy until they file a claim. But once a loss has occurred, it’s too late to make necessary changes, and you may be underinsured. Take the time to read and understand your policy when it’s first issued.