Answers for Arizona investors
Investor Insurance Glossary
The insurance terms that come up when you own rentals, flips, and short term rentals, each defined in one sentence, with why it matters to an investor.
Actual cash value
Actual cash value is a way of settling claims that pays the replacement cost of damaged property minus depreciation for age and wear.
Why it matters to investors: On an older roof or building, depreciation can leave a large gap between the claim payment and the repair bill.
Additional insured
Additional insured is a person or business added to someone else's policy so they share some of its liability protection, such as a property owner added to a contractor's policy.
Why it matters to investors: Asking contractors to add you as an additional insured, where their carrier allows it, helps keep a worker's mistake from landing on your own policy.
Binder
Binder is a short, temporary document from a carrier or agent confirming that coverage is in place while the full policy is issued.
Why it matters to investors: Lenders often ask for a binder before closing, so it needs the right named insured, mortgagee, and effective date.
Builder's risk
Builder's risk is a policy that covers a building while it is being built or renovated, including the work in progress and, on many policies, materials on site.
Why it matters to investors: Many landlord and homeowners policies limit coverage during a major rehab, so builder's risk covers that stage until the home is ready to rent.
Carrier
Carrier is the insurance company that issues a policy and pays covered claims.
Why it matters to investors: Carriers change what they'll insure and how they price it, so the right carrier for a property today may not be the right one at the next renewal.
Certificate of insurance
Certificate of insurance is a one page summary from an agent or carrier showing that a policy exists, with its limits and dates.
Why it matters to investors: Ask every contractor for one before work starts and check the dates; a certificate shows coverage but doesn't change the policy itself.
Declarations page
Declarations page is the summary page of a policy that lists the named insured, the property, coverages, limits, deductibles, premium, and policy dates.
Why it matters to investors: It's the fastest way to compare policies and the page lenders and agents ask for first.
Deductible
Deductible is the amount you pay toward a covered loss before the insurance pays the rest.
Why it matters to investors: A higher deductible can lower the premium, but it should be an amount you could cover on several properties at once if one storm hits them all.
Dwelling forms (DP-1, DP-2, DP-3)
Dwelling forms (DP-1, DP-2, and DP-3) are the standard policy forms many carriers use to insure a home the owner doesn't live in, such as a rental.
Why it matters to investors: The form decides which causes of loss are covered and how claims are paid, so two landlord policies with the same limit can protect you very differently.
Endorsement
Endorsement is a written change to a policy that adds, removes, or changes coverage.
Why it matters to investors: Short term rental use, ordinance or law coverage, and higher limits are often added by endorsement, so the base policy form isn't the whole story.
Exclusion
Exclusion is a part of a policy that spells out what it doesn't cover, such as flood, wear and tear, or certain business uses.
Why it matters to investors: Exclusions often decide claims, so reading them is the quickest way to find a gap before it matters.
Flood insurance
Flood insurance is a separate policy that covers flood damage, which standard homeowners and landlord policies usually exclude.
Why it matters to investors: Monsoon storms can bring flash flooding, according to the National Weather Service, and most new flood policies take effect 30 days after purchase unless they're bought with a loan closing, according to FEMA's FloodSmart program.
General liability
General liability is insurance for a business or LLC that can cover injuries and property damage to others caused by its operations.
Why it matters to investors: If an LLC owns your rentals, check that the LLC itself is covered, either by a general liability policy or by the liability on each property policy.
Independent agency
Independent agency is an insurance agency that can place policies with more than one carrier, instead of representing a single company.
Why it matters to investors: One agent can compare several carriers for each property, which matters when carriers differ on rentals, vacancy, and short term rentals.
Loss of rents
Loss of rents, also called fair rental value, is coverage that can replace the rent you lose while a covered loss makes your rental unlivable.
Why it matters to investors: Without it, a fire can stop the rent while the mortgage payments keep coming, so check the limit and how long it pays.
Loss payee
Loss payee is a person or business, often a lender, named on a policy to receive claim payments for covered property along with the named insured.
Why it matters to investors: On rehab loans the lender may ask to be a loss payee, and claim checks may then include its name.
Mortgagee clause
Mortgagee clause is the part of a policy that lists your lender and protects its interest in the property, often with the loan number.
Why it matters to investors: Lenders check it before closing, and a wrong name or a missing loan number can hold up a closing or a claim payment.
Named insured
Named insured is the person or entity listed on the declarations page as the policy's owner, with the rights and duties that come with it.
Why it matters to investors: If an LLC owns your rental, the named insured should usually be the LLC, because a mismatch with the owner on title can complicate a claim.
Named storm
Named storm is a storm given a name by a weather agency, such as a hurricane or tropical storm, and some policies set a separate deductible for damage from one.
Why it matters to investors: If your policy has a named storm deductible, read how it defines the term and which damage it applies to.
Ordinance or law coverage
Ordinance or law coverage helps pay the extra cost of rebuilding to current building codes after a covered loss, including tearing down undamaged parts when codes require it.
Why it matters to investors: An older rental may need code upgrades during a rebuild, and many policies pay little toward that cost unless the coverage is added.
Other structures
Other structures is coverage for buildings on the property that aren't attached to the home, such as a detached garage, a casita, or a fence.
Why it matters to investors: If your property has a block wall, a casita, or a detached garage, check that this limit fits what is actually there.
Premium
Premium is the price you pay for an insurance policy, usually for a one year term.
Why it matters to investors: Premiums can change at every renewal, so comparing them across your properties once a year helps you catch increases before they're automatic.
Renewal
Renewal is when a policy term ends and the policy continues for a new term, often with a new premium and sometimes with new terms.
Why it matters to investors: With several properties, renewals scatter across the year, and tracking them on one calendar turns surprise bills into decisions.
Replacement cost
Replacement cost is a way of settling claims that pays to repair or replace damaged property with new materials of like kind and quality, without subtracting depreciation.
Why it matters to investors: It's usually what keeps a claim payment close to the real cost of rebuilding a rental.
Umbrella policy
Umbrella policy is extra liability insurance that sits above your home, auto, and property policies and can pay after their liability limits are used up.
Why it matters to investors: As a portfolio grows, so does the size of a possible lawsuit, and an umbrella should list every property and LLC it is meant to protect.
Underwriting
Underwriting is the carrier's process of reviewing a property and its owner to decide whether to insure it and at what price.
Why it matters to investors: Roof age, vacancy, claims history, and how the home is used all go through underwriting, which is why every quote depends on carrier approval.
Vacancy clause
Vacancy clause is a policy condition that limits or removes some coverages once a home has been vacant for a set number of consecutive days.
Why it matters to investors: A long turnover or rehab can trigger it without you noticing, so know the number in your policy and plan around it.
Wind and hail deductible
Wind and hail deductible is a separate deductible for wind or hail damage, often set as a percentage of the dwelling limit instead of a flat dollar amount.
Why it matters to investors: A percentage deductible on a high dwelling limit can mean a large out of pocket cost after a storm, so check it on every declarations page.
These are general definitions. Every policy is different, so the declarations page and the policy itself are what count. Quotes and coverage are subject to underwriting and carrier approval. Everhold Insurance is a licensed insurance agency in the State of Arizona. License # 3004512575.
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