Homeowners insurance coverage: settlement terms and exclusions

Questions covered in this guide

How do replacement cost and actual cash value differ?

Replacement cost and actual cash value describe different settlement approaches. Actual cash value takes depreciation into account; replacement cost concerns repairing or replacing with like kind and quality, subject to policy conditions. NAIC’s settlement explanation describes that distinction. Check the wording for the building, roof and belongings separately rather than assuming one label applies to every part of the policy.

Which exclusions and special deductibles should you check?

Start with the proposed policy documents and ask which causes of loss are excluded, limited or handled through separate coverage. Flood, earthquake, wind and water-related terms deserve explicit questions rather than assumptions based on a broad policy name. NAIC’s homeowners guide provides an overview. Your location and contract determine which exclusions, endorsements and deductibles actually apply.

What information should be recorded for each proposal?

Keep a side-by-side record of:

Dwelling limit and the basis used to estimate rebuilding cost.
Building, roof and belongings settlement terms.
Standard deductible and each special deductible with its trigger.
Personal-property limits and any item-specific restrictions.
Liability and loss-of-use provisions.
Exclusions, endorsements and unanswered questions.

Keep the proposal date with the record. A renewal or revised offer may change a term that was present in an earlier version.

Worked example: turn a percentage deductible into dollars

Invented policy terms: a 2% wind/hail deductible calculated on a $400,000 dwelling limit equals $8,000. It is not 2% of a $15,000 repair bill. If the insurer instead specifies another basis, use that basis. Confirm the trigger, applicable limit and any special terms before comparing this amount with a flat deductible. This example only converts a stated percentage; it does not calculate a claim payment.

Why can two policies with the same premium differ?

One may use different roof settlement language, special deductibles or exclusions. A matching premium or dwelling limit cannot resolve those differences. Use the coverage comparison with Home insurance selected to record the actual terms. The settlement comparison guide goes further into proposal differences. Do not use the flat-deductible calculator as a substitute for interpreting a percentage or special-peril deductible.

How should you compare a home-and-auto bundle?

Compare the combined annual cost with equivalent separate policies, including supplied fees, while keeping the coverage differences visible. A discount percentage alone does not establish the lower total or equivalent protection. Use the bundle comparison with actual proposals and ask the providers what changes if one policy is later removed. This guide prepares questions; it does not rank insurers or recommend policy limits.

Putting it into practice

A matching dwelling limit does not establish matching roof or belongings settlement. Percentage deductibles also require a named basis and peril before they can be compared with a dollar deductible.

Sources and supported claims

NAIC distinguishes replacement cost from actual cash value, which takes depreciation into account.
Source ↗ · national · Checked 2026-10-13

NAIC describes homeowners protection and the need to review exclusions and deductibles.
Source ↗ · national · Checked 2026-10-13

More help with this decision

Sources & scope

NAIC: Homeowners insurance consumer guide ↗
General coverage, exclusions, deductibles; policy wording controls · Checked 2026-10-12