Understanding your insurance coverage

Your insurance policy is the most valuable tool you have in rebuilding. Let’s help you break down what all that legalese means so you can use it to its fullest extent.

*This guide applies to standard homeowners policies. If you have California FAIR plan, click here.

*This information has been checked for accuracy and non-bias by licensed insurance experts and representatives from National 501c3’s specialized in insurance advocacy. We are not insurance brokers. Consult with a licensed professional about your insurance policy and specific situation.

“How much money do I have?”

Your insurance policy is broken out into buckets of what’s called “coverage”. Each buckets is to help make you whole in certain areas.

“Coverage” refers to amounts of money your insurer has contractually agreed to send you if something happens to your house.

Think of your coverages like cast members in an ensemble; each one has its own particularities and details, and without any one of them, your recovery story is incomplete.

For a glossary of insurance terms click here and scroll to the bottom.

"Can I Afford To Rebuild?"

"Can I Afford To Rebuild?"

Your actual rebuild budget will take a lot more information, but for a rough sense of how your insurance stacks up to today’s rebuild costs, you can fill in one of these templates while you work through this guide.

“How do I know what’s in my policy?”

Experts recommend you work from a printed copy of your full policy. That’s because you might miss coverage details on a small phone, and those little missed details can amount to large amounts you don’t want to lose track of.

If you can’t access a printer, you are entitled to printed copies of your full policy from your insurer. Ask your adjuster to mail you two copies — one that you can highlight and one you can keep clean for reference.

Note: A full copy of your policy should include the declarations page, full policy contract, all endorsements and riders, exclusions, conditions, and any correspondence or add-ons that affect your coverage or claims.

“can I use ChatGPT?”

You sure can, but know that AI makes mistakes so only use this as a rough outline.

  • Always triple check what AI tells you.

  • Upload the full policy, including all declarations pages, endorsements, exclusions, and conditions.

Here’s a prompt to use when uploading your policy:

Please review this full homeowners insurance policy. I want you to identify and explain, in plain language:

1. What is covered under the dwelling, personal property, loss of use, and liability sections

2. What is excluded or limited, especially any important fine print

3. Any deductibles, special sub-limits, or time-based limitations

4. Ordinance and law, code upgrade, or extended replacement cost language

5. What it says about depreciation vs. replacement cost

6. My rights to rebuild vs. purchase elsewhere, if this is a California policy

7. Any deadlines, time limits, or requirements for proving loss

8. Any risks or traps I should be aware of as a policyholder

Please explain this in a clear, simple way I can understand — like you’re helping someone going through a disaster who needs to know exactly what this means in practice.

The buckets

  • What it is:

    This is the amount your insurance company sets aside to rebuild your actual house if it’s damaged or destroyed.

    Think: Walls, roof, floors, built-in cabinets, plumbing, and anything physically attached to the home.

    “How much will they give me to rebuild the home I lost?”

  • What it is:

    This is the amount your insurance company sets aside to repair or replace fencing and structures on your property that aren’t physically attached to your main house.

    Think: Detached garage, fences, sheds, driveways, carports, guest houses, and pool houses.

    “How much will they give me to rebuild or repair fencing and buildings on my property that aren’t part of the main house?”

  • What it is:

    This is the amount your insurance company sets aside to replace your belongings if they’re damaged, destroyed, or stolen.

    Think: Anything that would fall out if you turned the house upside down.

    “How much will they give me to replace the stuff I own that was inside (or around) my home?”

  • What it is:

    This is the amount your insurance company sets aside to cover your additional living expenses if you can’t live in your home because of damage from a covered disaster.

    The word “additional” is key here — you still have to pay your mortgage and cover what you used to pay in bills, then your insurance pays the gap between that and what it will cost you to live elsewhere.

    Think: Rent, hotel stays, meals, laundry, gas, pet boarding, and other extra costs you wouldn’t have if you were still living at home.

    “How much will they give me to live somewhere else while my home is being repaired or rebuilt?”

    Note: You can use your “ALE” to buy or build a house elsewhere. For more on that read up on your Policyholder Rights.

  • Extended Replacement Cost coverage is meant to give you extra money beyond your policy limit if rebuilding your home ends up costing more than expected.

    This can help cover things like price increases in materials or labor after a disaster.

    Note: It’s often calculated as a percentage of your Coverage A — for example, your policy might say it will pay up to 20% or 50% more than your original Coverage A limit.

  • This means your insurer will pay what it would cost to fix, rebuild, or replace your damage, minus a fair amount for wear and tear, based on its condition right before it was damaged, up to your policy limits.

    Note: This coverages means they deduct depreciation, so it may not cover the full cost to replace your home.

  • This coverage is meant to pay what it costs to repair or rebuild your home, without subtracting for wear and tear (also called depreciation).

    *Note: Many insurance policies will only pay the depreciated value (ACV) at first — and will only give you the full replacement amount after you’ve started or finished the repairs or rebuilding.

  • Guaranteed Replacement Cost coverage means your insurance will pay whatever it takes to fully rebuild your home, no matter how much it costs — even if the cost is higher than the coverage limit listed in your policy.

    As long as the damage is caused by something your policy covers, they’ll pay the full rebuild cost with no cap.

  • Ordinance or Law coverage helps pay for the extra cost of rebuilding your home to meet current building codes, if it was damaged or destroyed.

    For example, if your house was built in 1976, this coverage pays for upgrades like electrical, plumbing, or fire safety systems that are now required by law, but weren’t back then.

What to note when reviewing:

What is your Coverage A amount?

Look for the Coverage A limit on the declarations page

This is your starting rebuild/relocate budget.

Do you have Debris Removal Coverage?

Check if it’s:

• A set dollar amount (e.g., $10,000)

• Or a percentage of Coverage A (e.g., 5%)

Note: You can opt in to the free government debris removal program and use this coverage to hire a private debris removal company to remove what the Army Corps of Engineers leaves behind. For a guide to debris removal, click here.

What is your Coverage C amount?

Look for the Coverage C limit (often 50–70% of Coverage A)

Check:

• Whether it’s ACV or RCV

• If there are sub-limits (e.g., $2,500 for electronics, $1,500 for jewelry)

What is your Coverage D amount?

Because this is a Federally declared disaster, this coverage extends for up to 36 months, though hopefully it won’t take that long to rebuild your house.

This amount is to cover your additional rent, utilities, moving costs, additional gas/mileage, installing things you need to live (like an EV charger), etc.

Note: You are legally allowed to use this full amount to buy or build a new house. (CA Insurance Code §2051.5)

For more on your rights as a policyholder, click here.

Do you have ordinance and law coverage?

Look for a section titled “Ordinance or Law” or “Increased Cost of Construction”

• Check the percentage or dollar limit — typically 10%, 25%, or 50% of Coverage A

Do you have Actual Cash Value, Replacement Cost or Guaranteed Replacement Cost coverage?

Which one?

What is your Coverage B amount?

Look for the Coverage B limit on the declarations page

This is your budget to replace fencing, sheds, trees, etc.

Note: This is separate and in addition to your budget to rebuild the house itself.

Do you have Extended Replacement?

If so, what percentage?

Check your endorsements and riders

Check the pages labeled “Endorsements” or “Special Provisions”

Look for:

• Code upgrade increases

• Extended ALE

• Enhanced personal property coverage

Why it matters: These add-ons can change everything — but they’re often buried in the back

Did you know

you can use your insurance money to buy or rebuild elsewhere if you need to

California is one of very few States that give you the right to use your full coverage amount to buy or rebuild anywhere you want. Since it’s so unusual, your out-of-State adjuster may need to be informed of this.

For a full guide to your policyholder rights and CA Insurance Code §2051.5, click here.

Need a glossary?

We’ve got one right here, at the bottom of the page.