Insurance Principles and Policy Provisions
The contract you are applying
Insurance rests on indemnity, insurable interest, utmost good faith, and the idea that a policy is a contract of adhesion - the insurer drafts it, so ambiguities are construed against the drafter and in favor of coverage. Every claim analysis begins with the complete policy: declarations (who, what, when, limits, deductible), insuring agreement, definitions, conditions, exclusions, and endorsements, which control over conflicting printed text. Conditions include the insured's post-loss duties - notice, cooperation, proof of loss, mitigation, examination under oath - and a material breach can prejudice the claim.
Valuation and limits that drive the number
Replacement cost pays to repair or replace without depreciation; actual cash value pays replacement cost less depreciation. On an RCV policy the adjuster usually pays ACV first and holds recoverable depreciation until repairs are complete and documented. Deductibles apply per occurrence, not per damaged item. Limits may be per occurrence, per item, or aggregate, and a coinsurance clause penalizes underinsurance: payment = (limit ÷ required limit) × loss, capped at the limit.
Traps: treating a named-peril form as "all risk"; ignoring an endorsement that broadens or narrows coverage; reading the definitions last instead of first; applying the deductible twice; confusing "occurrence" with "claim."
Worked example: an 80% coinsurance clause, a $600,000 limit, and $1,000,000 replacement value. Required limit = 80% × $1,000,000 = $800,000, so the ratio is 600/800 = 0.75. A $100,000 covered loss pays 0.75 × $100,000 = $75,000, less the deductible. Had the limit been $800,000 or more, the full $100,000 would be payable.