Glossary

Insurance terms in plain English.

ACV (Actual Cash Value) — Replacement cost minus depreciation. What the insurer thinks your damaged property is "worth" today, not what it costs to replace. This is the initial payout on most RCV policies.

ALE (Additional Living Expenses) — Coverage D on your policy. Pays for hotel, meals, and other costs above your normal expenses if your home is uninhabitable during repairs. Also called "loss of use."

Appraisal — A dispute resolution process built into most policies. Each side hires an appraiser, they pick an umpire, and a majority decision is binding. Resolves amount disputes (not coverage disputes).

Bad faith — When an insurer unreasonably denies, delays, or underpays a claim. In Colorado, this can trigger double damages plus attorney fees under CRS 10-3-1115/1116.

CLUE report — Comprehensive Loss Underwriting Exchange. A database of your claims history that insurers check when pricing or issuing policies. Even calling to ask a question can sometimes be recorded as a claim inquiry.

Coverage A — Dwelling coverage. Pays to repair or replace the structure of your home.

Coverage B — Other structures. Detached garage, fences, sheds. Usually 10% of Coverage A.

Coverage C — Personal property. Your belongings. Has sublimits for certain categories.

Coverage D — Loss of use / ALE. See ALE above.

Declarations page (dec page) — The summary page of your policy showing your coverages, limits, deductible, premium, and endorsements. This is NOT the full policy.

Deductible — The amount you pay out of pocket before insurance kicks in. A $2,500 deductible on a $50,000 claim means the insurer pays $47,500 (minus depreciation if ACV).

Depreciation — The reduction in value of an item due to age and wear. A 10-year-old water heater is worth less than a new one. Insurers use depreciation to reduce payouts on ACV calculations.

DORA — Department of Regulatory Agencies. The Colorado state department that oversees the Division of Insurance, which regulates insurance companies.

Efficient proximate cause — A legal doctrine used in Colorado. If a covered event (burst pipe) sets off a chain leading to otherwise excluded damage (mold), the entire loss may be covered because the covered event was the primary cause.

Endorsement — An add-on to your base policy that modifies coverage. Sewer backup coverage, equipment breakdown, and ordinance/law are common endorsements.

Examination under oath (EUO) — A formal, recorded interview where the insurer asks you questions under oath about your claim. More serious than a recorded statement. Consider having an attorney present.

HO-3 — The most common homeowner insurance policy form. "Open peril" for the dwelling (covers everything except what's excluded) and "named peril" for personal property.

Independent adjuster — An adjuster contracted by the insurer to handle your claim. Despite the name, they work for and are paid by the insurer.

Mitigation — Steps taken to prevent further damage after a loss. Extracting water, setting up drying equipment, boarding up broken windows. Your policy requires you to mitigate.

O&P (Overhead & Profit) — The 10% overhead + 10% profit that general contractors typically charge on top of material and labor costs. Insurers often try to exclude this from estimates.

Open peril — A policy that covers all causes of loss except those specifically excluded. HO-3 dwelling coverage is open peril. This is better for you because the burden is on the insurer to prove an exclusion applies.

Proof of loss — A formal, sworn statement of your claimed damages. Some insurers require this before processing a claim. It's a legal document.

Public adjuster (PA) — A licensed adjuster who works for the policyholder (you), not the insurer. They document damage, write estimates, and negotiate on your behalf for a percentage of the settlement.

RCV (Replacement Cost Value) — The cost to replace or repair damaged property with equivalent materials at today's prices, without deduction for depreciation. Most modern policies are RCV, but they pay ACV first and release depreciation holdback after repairs.

Recoverable depreciation — The difference between RCV and ACV that the insurer withholds initially but releases after you complete repairs and submit invoices. You usually have a deadline to claim this (check your policy).

Reservation of rights letter — A letter from the insurer saying they'll investigate your claim but reserving the right to deny it later. This means they're looking for a reason not to pay. Take it seriously.

Scope — The list of specific repair work and materials included in an estimate. "Scope dispute" means the insurer and your contractor disagree on what work is needed.

Staff adjuster — An adjuster who is a full-time employee of the insurance company. They work for and represent the insurer's interests.

Subrogation — After paying your claim, the insurer may pursue the party responsible for the damage (a negligent contractor, manufacturer, etc.) to recover what they paid.

Supplement — A formal request to revise the insurer's estimate based on additional damage found or scope items that were missed. This is how you dispute specific line items.

Xactimate — The industry-standard software used by adjusters and contractors to write repair estimates. Both sides usually use it, but different settings and pricing databases can produce very different numbers for the same work.

General information, not legal advice. For advice specific to your situation, consult a licensed professional.