How to Read a Homeowners Insurance Declarations Page
A homeowners insurance policy typically has four parts: the declaration page, the insuring agreement, an exclusions section and the general conditions section. Since the declaration page gives the policyholder a tidy, easy-to-reference summation of the entire policy and its various components, there's a good reason why the insurance declarations page is the very first page of a homeowners policy.
Before we take a deep dive into the ins and outs of the declaration page, first-time home buyers may want to familiarize themselves with the policy documents that are included in the four sections of a typical home insurance policy:
The Declaration Page
Also called the "dec page" or the "information page," the declaration page specifies the policy number, the policy's effective dates, the insured property's address, the mortgage holder, the coverages, coverage limits, the deductible, any discounts and the premium, which is the total monetary amount you pay for your homeowners insurance.
The Insuring Agreement
This section specifies the types of perils, or losses, covered by the policy. According to the National Association of Insurance Commissioners (NAIC), the policy should either be a "named-perils policy," which will list the types of losses covered, or an "all-risk policy" (also called an "open policy"), which lists the types of coverages excluded by the policy. If the policyholder purchases additional coverage—also known as an "endorsement" or a "rider"—the declaration page should list that new endorsement.
The Exclusions Section
This section specifies which coverages or perils the insurance policy does not cover, sometimes modifying the insuring agreement's coverages. Specific exclusions are typically certain natural disasters (flood and earthquake) as well as certain types of personal property (vehicles and animals).
The General Conditions Section
This section details the policyholder's responsibilities in the event of a loss. This section also includes definitions for the terms used on the declarations page and in the insuring agreement.
Details of an Insurance Declaration Page
A homeowners insurance declaration page is usually two pages long. When you receive a hard copy of your insurance policy from your insurance company, you should carefully examine the declaration page to make sure that all the information is correct and that everything you and your insurance agent talked about is accurately represented or you may be under- or over-insured.
No two declaration pages are exactly the same. These are the most common sections of a typical homeowners insurance declaration page:
Names of the Insured Parties
The homeowner's insurance dec page specifies the names of the people who are covered by the policy: the policyholder, the policyholder's family members and any other insured party living in the insured house. If you take on a boarder, for example, you may want to update your policy.
The dec page will list the home address of the insured house. If this home address is not correct, it might cause some problems when you have to file a claim.
Homeowners Insurance Policy Number
The homeowners insurance declarations page provides your identification number, which is also your billing account number. You will need this number to pay your premium and to file a claim.
A homeowners insurance policy usually lasts for a one-year period and must be renewed to stay active. Your homeowners insurance declaration page will specify your current policy period, including the date the policy takes effect and the date the policy ends.
All insurance customers should keep a close eye on their home insurance expiration dates, as there are penalties for letting a home insurance policy lapse.
A List of the Insurance Products You Purchased
The home insurance declaration page will list all the insurance products you have purchased and their coverage limits. Any homeowner's insurance product that is not included in a standard home insurance policy is called "add-on" insurance. The standard homeowners policy includes four insurance products that represent four different areas of risk:
- Dwelling coverage, which insures the exterior and interior of your home's structure
- Personal property, which covers the loss of your personal belongings. Your insurance carrier will want you to complete a home inventory as soon as possible.
- Additional living expenses, which covers your additional living expenses if your home becomes uninhabitable
- Personal liability, which covers the bodily injury (dog bites) or property damage (a dog chews up your friend's designer purse) of a houseguest
Homeowners Insurance Coverage Limits
This section of the homeowners insurance declaration page will specify each product's coverage limits, or the maximum amount of money your insurance company will pay for a loss. These amounts should be reviewed annually, and adjustments should be made when new purchases and upgrades are added to the house.
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Actual Cash Value vs Replacement Cost
This section also stipulates whether your house and personal property will be replaced on a "replacement cost" basis or an "actual cash value" (ACV) basis. Replacement cost is more expensive.
If you need to replace your television, for example, the replacement-cost method will pay for the same model or a television of similar quality. On the basis of the ACV method, you will be reimbursed only for your television's depreciated value. So, if you bought your television for $1,500 but it's worth just $500 at the time of your claim, your insurance company will provide just $500 in compensation.
An endorsement indicates that current coverage has been increased or new coverage has been added. A homeowners insurance declaration page will record these increases and purchases and how much coverage their policy limits allow, so you should make sure they are accurately represented on the dec page. Here are some common additional endorsements:
"Other structures" include a detached garage, a shed, a fence or, say, a gazebo. Insurance companies offer other-structures insurance as an add-on product.
Insurance companies offer this insurance coverage as an add-on product.
Insurance providers offer this additional coverage as an add-on product.
You can purchase homeowners insurance for a guest house, a vacation home or another property you own.
Medical payments liability coverage pays for the medical bills of your injured houseguest. (Your family's medical expenses are reimbursed by your health insurance.)
Your insurance declaration page will list the deductibles for each of your insurance coverage products. A deductible is the monetary amount the named insured must pay out of pocket before the insured's insurance provider will start paying. According to the Insurance Information Institute, it will be either a dollar amount, a percentage of the claim amount, or a specified period of time must elapse before benefits are paid.
The bigger the deductible, the lower the premium. There is a deductible each time you file a claim. Consider reasons why you may not want to make a claim.
The insurance declaration page will list all of your discounts, such as a discount for bundling your homeowners insurance and car insurance. All insurance carriers offer discounts, which are a great way to save money. If you think you are eligible for a home insurance discount that you are not receiving, call your insurance agent or compare quotes for a new policy.
The declaration page will specify the premium, or the cost of your policy for the agree-upon term. This price should take into account your discounts.
The declarations page will list the name and address of your mortgage lender or lienholder for the insured property. Mortgage companies and lienholders demand proof of insurance before they will back a mortgage or loan. Make sure this address is correct on the dec page, since your proof of insurance will be mailed to the address of the mortgage company or lienholder.
When you renew your policy with your insurance agency or one of the other insurers, you should double-check the new declaration page to make sure your coverage, any additional coverages and their policy coverage limits are correct. Most mortgage and loan companies accept your current declarations page as proof of insurance.
If your homeowners coverage lapses, your mortgage company or lienholder may force you to buy a home coverage policy of its own choosing, which may be overpriced.
Agent and Insurance Company Contact
The declaration page will list the insurance company's name and address as well as your agent contact information.
Review Your Declaration Page, Find Ways To Save
The declaration page specifies everything you need to know about your home coverage: the name and address of the insured, the insurer, the lender and your agent, the policy number, the policy's effective dates, your coverages and coverage limits, the premium and any discounts.
Keep your dec page handy when shopping for a better price on homeowners insurance. You may be paying up to 40% more than you need to pay for a solid policy. SmartFinancial can find you the right homeowners insurance for the best value. Enter your zip code below for a free quote or call 855-214-2291.
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