CoverPath Coverage Guides

Actual cash value (ACV) coverage pays the depreciated value of a damaged or lost item at the time of the claim. Replacement cost coverage pays the amount needed to replace the item with a new one of similar kind and quality, without deducting for depreciation. For example, if a five-year-old roof is destroyed, ACV coverage would pay its depreciated value while replacement cost coverage would pay to install a new roof. Replacement cost policies generally carry higher premiums but may result in more complete coverage after a loss.

A per-occurrence limit is the maximum an insurer will pay for a single covered event or claim. An aggregate limit is the maximum total the insurer will pay across all claims during the entire policy period — usually one year. For example, a policy with a $1 million per-occurrence limit and a $2 million aggregate would pay up to $1 million on any one claim but no more than $2 million in total claims throughout the year.

Standard homeowners insurance policies typically provide limited or no coverage for business-related activities conducted from the home. Business equipment may have reduced coverage under personal property limits, and liability coverage usually excludes business-related claims. Home-based business owners often need a business owners policy (BOP), a home business endorsement, or a separate commercial policy to adequately cover business exposures.

A named perils policy only covers losses caused by the specific risks listed in the policy — such as fire, theft, or windstorm. If a cause of loss is not listed, it is not covered. An open perils policy (sometimes called "all-risk") covers losses from any cause except those specifically excluded. Open perils policies generally provide broader protection because the burden is on the insurer to exclude certain risks rather than on the policyholder to identify which risks are included.

Endorsements are written attachments to a policy that modify its standard terms. They can expand coverage, restrict coverage, add new coverage types, or clarify existing provisions. An endorsement takes precedence over the base policy language it modifies. Common examples include adding scheduled personal property coverage for valuables, adding water backup coverage to a homeowners policy, or excluding certain locations from a commercial policy.

In commercial property insurance, a coinsurance clause requires the policyholder to insure property up to a specified percentage of its total value — commonly 80% or 90%. If the insured amount falls below that threshold at the time of a loss, the insurer may only pay a proportional share of the claim. For example, if a building worth $1 million should be insured at 80% ($800,000) but is only insured for $600,000, and a $100,000 loss occurs, the insurer may only pay a fraction of that loss based on the coinsurance shortfall.