Chapter 8 - Homeowners Insurance

Homeowners Policy Eligibility Requirements

1)The named insured must be an owner/occupant of the dwelling or condominium or a renter who maintains a residential occupancy. 2)The home cannot contain more than 4 family living units and no more than two roomers or boarders per family. 3)Unless the insured is a renter, he/she cannot purchase personal property only coverage. 4)The dwelling must be used exclusively as a residence, except for certain incidental occupancies such as offices, professional, or private schools or studios. 5)Farms cannot be covered under a homeowners policy. 6)Mobile homes are eligible if the mobile home endorsement is attached. 7)Dwellings under construction or seasonal residences are eligible. 8)Homes purchased on an installment contract or are occupied under a trustee or life estate arrangement are eligible.

Section 1 Endorsement - Earthquake Endorsements

Add coverage for losses due to earthquake which is normally excluded from all HO policies.

Section II of HO Policy - Liability

All homeowners policies provide identical liability coverages regardless of the variations in property coverage. It's really just a matter of the amount of liability coverage you want to carry.

Classes of property specifically excluded from coverage under an HO policy Coverage C.

Animals, birds, fish. Motorized vehicles or aircraft. Property of boarders. Property in an apartment held for rental by the insured. Paper or electronic records. Property rented to others off residence premises. Hovercraft and parts. Water or steam.

Types of HO forms

As of HO 2000, there are 6 different HO policies. HO-2, HO-3, HO-4, HO-5, HO-6, and HO-8.

HO-2

Broad Form, provides broad coverage for the dwelling and personal property. Covered perils are similar to DP-1, with the extended coverage perils and V&MM coverage. Breakage of glass and theft are covered and it broadens certain perils and adds others not found in DP-1.

Additional Coverages found in only select HO Forms

Collapse caused by a covered peril is found in HO-2, 3,4,5, and 6. Coverage is included in the policy limit. Landlords furnishings. Provides $2500 of coverage for landlords furnishings in an apartment held for rental by the insured. This coverage is included in HO-2,3, and 5. Building additions and alterations made by the insured. Covers fixtures, installations, and improvements. Coverage is limited to 10% of coverage C. Only available in HO-4. Grave markers. Provides up to $5,000 coverage for damage to headstones and mausoleums caused by a covered peril under Coverage C. Included in HO-2,3,4,5, and 6. Ordinance or Law Coverage. Pays up to 10% of Coverage A limit for increased cost to repair or rebuild in order to conform to ordinances and land use codes. This coverage is provided as an additional amount. Provided under HO-2,3,4,5,and 6.

HO-5

Comprehensive Form, provides open peril coverage for both the dwelling and other stuctures and personal property.

HO Section I - Property

Contains four separate property coverages. Coverage A - Dwelling, Coverage B - Other Structures, Coverage C - Personal Property, Coverage D - Loss of Use.

HO-4

Contents Broad Form, insures tenants (people who do not own the building in which they reside). Provides broad coverage to personal property similar to HO-2 and HO-3. Provides NO coverage for the dwelling. Neither coverage A or B is included.This form provides liability and medical payments coverage. Known as the Tenants Form.

Debris Removal General

Covers all debris removal (except fallen trees) and is covered within the policy limit and not as an additional amount of insurance. If the combined property damage and debris removal exceed the policy limit, an additional 5% of the limit will be available for debris removal. Applies to all type of debris removal except fallen trees.

Reasonable Repairs

Covers any costs of repairs necessary to further protect a property after a loss due to or damage from a covered peril.

Coverage E - Personal Liability

Covers bodily injury, meaning harm, sickness, or disease, including required care, loss of services, and death. It also covers property damage which means physical injury or destruction to someone's tangible property, including loss of use. It also covers bodily injury or property damage arising from insured locations that include the premises described in the declarations, new acquired residences, location where insured is temporarily residing, locations an insured is renting for nonbusiness use, vacant land owned or rented by the insured, the insured's land on which a residence is being built, cemetery plots or burial vaults. The insurance company will provide defense, at its own cost, to defend the insured against groundless charges. The insurers duty to defend ends when the policy limit for the coverage is reached. $100,000.00 is the minimum limit and higher amounts can be purchased. In addition to actual damages, the coverage also covers prejudgement interest awarded on any juddgement amount that the insurer must pay.

Glass or Safety Glazing Material

Covers breakage of glass that is part of a building, including windows and storm doors.

Trees, Shrubs, and Other Plants

Covers loss or damage to these items, on the residence premises, caused by fire, lightning, explosion, riot, aircraft, vehicles not owned or operated by the resident, theft, V&MM. Coverage is limited to 5% of the Coverage A limit or a max of $500 for any one tree or shrub, or plant. In HO-4 and HO-6, the limit is 10% of the Coverage C limit or a max of $500 for any one tree, shrub, or plant.

Coverage B - Other Structures

Covers other buildings on the described premises that are separated from the building by a clear space or are connected only by a fence or utility line. Neither the dwelling or other structures can be used for business purposes, except for permitted incidental occupancies (beauty parlor, professional office, etc.). Other structures rented to anyone other than the tenants of dwelling is excluded, unless the other structure is rented as a private garage.

Coverage C - Personal Property

Covers personal property owned by the insured while it is anywhere in the world. It can also cover property owned by others while it is located at the residence premises occupied by the insured. It also covers the property of a guest or residence employee while in any residence occupied by the insured. HO Coverage C is broader than that provided by Dwelling forms, which allow only 10% of the Coverage C limit for worldwide coverage. Under an HO, full Coverage C applies to personal property while it is anywhere in the world. Worldwide personal property coverage only applies to temporary situations, for example, you are on vacation. If property is normally kept somewhere else, then it is only covered up to 10% of Coverage C limit, or $1000, whichever is greater. This restriction does not apply to property that is being moved from one principal residence to another. In a moving situation, full coverage applies for up to 30 days from the start of the move. In the case where property is moved from the residence premises to a temporary location while a residence is under repair, full coverage applies while at the temporary residence.

Property Removed

Covers property against direct loss from any peril while being removed from a premises endagered by a covered peril, for up to thirty days while removed.

Coverage A - Dwelling

Covers the dwelling and the structures attached to the dwelling as well as materials and supplies for repair and construction if they are located on or next to the residence premises.

Coverage F - Medical Payments to others (Guest Medical Coverage)

Does not pay medical bills of the insured or regular residents of the insured premises. Coverage F will be provided even if the insured is not legally liable for the injuries sustained by guests as long as the injuries occur on the insured premises or are a result of the insured's activities. The basic limit for Coverage F is $1000 per person per accident. Higher limits can be purchased.

What is not covered under weight of ice, snow, sleet

Doesn't cover damage to anything that protrudes from the house, foundations, retaining walls, bulkheads, pavements.

Conditions of HO policies

Duties after loss, mortgage condition, pair or set, appraisal, other insurance. Losses due to the following are paid at actual cash value, but not more than he cost to repair or replace: Personal property, awnings, carpeting, appliances, outdoor antennas, outdoor equipment, structures that are not buildings.

Section II Endorsements - Business Pursuits

Endorsement provides liability coverage for business conducted away from the residence premises.

Section 1 Endorsement - Home Day Care Coverage Endorsement

Extends homeowners coverage to this type of business. Premium for this coverage is based on the number of children the insured cares for.

Limits of Liability -Deductibles

For HO2, 3, and 5 the primary limit is applied to coverage A, dwelling. For HO4, and HO6 the primary limited is applied to Coverage C, personal property because there is no coverage A or B. For all HO policies, limits to other coverages are expressed as a % of the primary limit. For HO2, HO3, HO5, and HO8: Coverage A - Primary limit For Coverage B - One or two family dwelling: 10% of coverage A. For a three or four family dwelling: 5% of coverage A. For Coverage C - One or two family dwelling: 50% of Coverage A limit. Three family dwelling, 30% of Coverage A limit. Four family dwelling, 25% of Coverage A limit. For Coverage D - HO-8 10% of Coverage A limit. HO2, HO3, HO5: 30% of Coverage A limit.

Broad Named Perils

HO-2 (the broad form) adds some additional perils and expands the definition of others. Additional perils include: falling objects, the weight of ice, snow, sleet, accidental discharge or overflow of water or steam from an appliance - does not include sump pump overflow. Sudden or accidental rupture of mechanicals. Freezing of plumbing or related systems. Sudden or accidental damage from the artificially generated electrical current.

Liability Coverage

Has two major coverages. Coverage E - personal liability and Coverage F Medical Payments to others.

HO Additional Coverages in all HO Policies

In addition to four major property coverages all HO policies include these additional coverages: Debris Removal - General, Debris Removal - Trees, Reasonable repairs, Trees, Shrubs, and Other Plants, Fire Department Service Charge, Property Removed, Credit Card, EFT Card, Access Device, Forgery and Counterfeit Money, Loss Assessment Glass or Safety Glazing Material.

Exclusions that apply to Coverage E and F

Injury or damage that is expected or intended by the insured. (not an accident). Anything that happens as a result of business pursuits. Anything that happens on a rented part of the property. Anything arising from the use or operation of aircraft, watercraft (with exceptions), and motor vehicles. Anything that comes from war. Transmission of communicable diseases. Anything as result of molestation, corporal punishment or physical or mental abuse. Anything related to controlled substances, excluding legitimate presription drugs.

Multi-Line Policy

Is a policy that includes both property and casualty insurance in one policy. Like my homeowners which protects both my home and me if I get sued because someone is injured on my property.

Mono-Line Policy

Is a policy that only covers one thing, like your property or casualty, but seperatly.

Freezing of plumbing

Is not covered if the premises is unoccupied unless the insured as taken measures to maintain the temperature in the home to a certain level or if the homeowner has shut off the water supply and drained the system and appliances of water.

Special Limits of Liability for Theft Losses Only under Coverage C

Jewelry, watches, furs, and precious and semiprecious stones are covered to $1500 per occurrence. Silverware, goldware, pewterware are covered up to $2500. Firearms covered up to $2500.

Loss Exclusions on all HO forms

Losses due to law enforcement of construction, repair, or demolition. Earth movement, including earthquake and mine susidence, water damage due to flooding or from sump pump, loss of power due to down power lines, insureds failure to preserve property after a loss, war, nuclear hazard, intentional loss, destruction or seizure of property by government.

How losses are paid

Losses to the building or other structures are paid at replacement cost as long as the insured carries insurance equal to at least 80% of the buildings replacement value. Calculated as follows: amount of insurance carried/ .80 * building replacement cost = x% which is then multiplied by the amount of the loss to determine the reimbursement. For example, I carry $1,000,000 in insurance/ .80 * $1.5M (cost of replacing my house) = .83 X 1,000,000 = 830,000 loss payout.

HO-8

Modified Coverage Form, is designed for older homes whose replacement value far exceeds their market value. No longer available in many jurisdictions. Provides basic coverage on dwelling and personal property similar to DP-1 with extended coverage perils and V&MM coverage but also includes certain RESTRICTIONS of valuation on losses.

Section II Endorsements - The Personal Injury Endorsement

Modifies the definition of bodily injury to include personal injury which is slander, fales arrest, invasion of privacy, or malicious prosecution.

Homeowners 2000 Policy Eligibility and Insureds

Not every person or house qualify for homeowners insurance. The rules are stricter than they are for dwelling policies.

Falling object coverage

Only applies if the falling object first pierces the exterior of the building.

Section 1 Endorsement - Permitted Incidental Occupancies

Overrides exclusions provided under the HO policy for business activities conducted on the residence premises.

Additional Coverages

Payment for items included here are made in Addition to the stated limits of liability for major coverages. Any payments made under these items will not reduce the limit of insurance for damages under other coverage sections of the policy. Claim Expenses: Reimburses the insured for defense costs, prem for bonds, postjudgement interest, reasonable expenses incurred by the insured at the insurers request, including loss of earnings up to $250 per day. First aid provided to others at the time of the accident. Damage to property of others. Pays up to $1000 per occurrence for property damaged or destroyed by the insured without regard for legal liability. It covers the insureds "moral Obligation". Property of others under the insureds care is covered. When a loss is payable under Section 1 of the homeowners policy, the additional coverage applies on an excess basis. Loss Assessment. Pays up to $1000 on the insureds share of any loss caused by someone acting on behalf of the insured in a corporation or association of property owners

Loss Assessment

Pays up to $1000 for an insured's share of loss assessment charged against the insured during the policy period by a corporation or association of property owners as a result of a direct loss to the property owned by all members collectively and caused by a covered peril. For example, damage to a condo assoc pool house due to fire.

Identity theft or counterfeit money

Pays up to $500 for unauthorized use of cc, forgery or alteration of an insured's checks, or if the insured accepted counterfeit money in good faith. No deductible applies to this coverage. Business use is excluded.

Fire Department Service Charge

Pays up to $500 when fire department is call to save property from a covered peril. No deductible applies to this coverage and this coverage is not available if prop is located within a limit of a city furnishing the fire department service.

Section 1 Endorsement - The Scheduled Personal Property Endorsement

Provides a separate schedule of insurance for one or more of the following nine categories: 1)Jewelry 2)Furs and fur trimmed garments 3)Cameras, and related equipment 4)Musical instruments, 5)Silverware, 6)Golf Equipment, 7)Fine arts, 8)Postage stamps, 9)Coins Once scheduled separately, this property is no subject to the limitations that apply to unscheduled personal property. The coverage is provided under an open peril basis with no deductible. Losses are paid in either cash value, replacement cost, market value, etc.

Coverage D - Loss of Use

Provides coverage to you if your residence is uninhabitable due to a covered loss and you need to pay rent to live somewhere else. This coverage is normally limited to a certain number of months or a certain number of dollars. It also provides coverage to you if a part of the residence that you normally rent is not rentable due to a covered loss. In this case, it will pay you for your lost rent less any expenses that you are not incurring because the room/unit is not rented.

Section 1 Endorsement - Personal Property Replacement Cost Endorsement

Provides that the policy will reimburse losses on the replacement cost basis.

Conditions

Section II - Coverage E is considered to be excess insurance over any other insurance, except for like an umbrella policy which is written to be excess over the limits of liability that apply to the HO policy. Section 1 and II - Cancellation Condition. An insurance company can cancel a policy for any reason with 10 days written notice in the first 60 days of the policy term. After 60 days, the insurer can only cancel for the following reasons: 1)Material misrepresentation by the insured 30 days notice required. 2)A substantial change in risk insured 30 days notice required. 3)Nonpayment of premium 10 days notice required. The insurance company retains the right of nonrenwal, with 30 days written notice to the insured required.

Special Limits of Liability under Coverage C

Some types of personal property are subject to limits of coverage because the insurance companies are trying to encourage you to get specific coverage (scheduled coverage) for these items. Money or related property, coins, and precious metals like gold bulion, or limited to $200. Securities, manuscripts, other valuable paper property, watercraft including trailers and equipment, trailers not used for water craft, small electronics (phone, computers, cd player, must be electrically powered.) are limited to $1500. Property on residence premises used for business is limited to $2500. Property away from residence premises used for business, limited to $500.

HO-3

Special Form, provides open peril coverage for loss to the dwelling and other structures insuring against all risks that are not specifically excluded. It provides broad coverage to personal property, identical to that of HO-2. Personal property is covered under a named peril basis for the same perils covered under HO-2. Under coverages A and B, HO-3 excludes: any loss involving collapse except as provided in other coverages section. Freezing of plumbing because heat was not maintained to adequate temperature. Weight of ice and snow, freezing or thawing. Theft to dwelling under construction. V&MM if dwelling is left vacant for more than 60 days. Losses due to normal wear and tear.

Whose covered under a homeowners policy

The named insureds and any residents of the same household, provided that they are relatives or are under 21 and in the care of the insured or a resident relative.

Scope of Homeowners Coverage

There are two sections to HO policy. Section I Provides Property Insurance and Section II proivides Liability and Medical Payment Insurance.

HO Forms Base Perils

These are perils covered by all HO policies. They are: Fire, lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, V&MM, theft, volcanic eruption. Under windstorm or hail, interior damage is only covered if the wind or hail first makes an opening in the building. Water craft, outboard motors, and related equipment are only covered for damage by these perils if they are in fully enclosed buildings. Vehicle damage caused to a building is only covered if caused by a non-resident. Smoke from fireplaces, agricultural smudging, or industrial operations is not covered. Puffback from a furnace is covered. V&MM is only covered if the residence has not been vacant for more than 60 days. Theft only covers items stolen by others while the items are on the premises. It does not cover items stolen from a portion of the premises that is rented out. Does not cover mysterious disappearance.

Endorsements

Things attached to a policy to customize it to the needs of the insured. They can alter coverage provisions by adding coverages, changing valuation or settlement provisions, or remove exclusions.

Debris Removal - Trees

This coverage is always provided as an additional amount of insurance, outside the policy limits. $1000 per occurrence and $500 per tree. Coverage is provided if the trees are felled by a covered peril such as windstorm, weight of snow and ice, snow, sleet, hail. Coverage is provided if a neighbors tree is felled by any peril insured under Coverage C. In order for this coverage to apply, the tree has to have either damaged a covered structure, is blocking a driveway on the premises that prevents a motor vehicle from leaving or entering the property, or the tree must be blocking access to a handicap ramp or other fixture that prevents a handicap person from entering or leaving the property.

Limited Fungi, Wet or Dry Rot, or Bacteria Coverages (mold)

This endorsement adds coverage to property/and or liability coverage for losses arising out of fungi, wet or dry rot, or bacteria coverage. Only used with HO3 and HO5 policies. Under section 1, this added under additional coverages. It states that amount shown is the most that the insurer will pay for loss payable under section 1 caused by mold, cost to remove mold from covered property, Cost to tear out and replace any part of the building or other covered property as needed to gain access to mold. This coverage does not increase the policy limit that applies to covered property. Under section II - Liability the limit of liability condition is modified to state that the insurer's total liability under Cvoerge E, for all damages arising directly or inderectly out of the actual, alleged, threatened contact with modl with not be more than the sublimit for this coverage shown in the schedule.

HO-6

Unit-Owners Form, provides broad coverage on the personal property of condo owners, similar to that of HO-2, HO-3, and HO-5. Provides LIMITED dwelling coverage. Includes limited Coverage A (dwelling) for alterations, appliances, fixtures, and improvements that are part of the building. Items of real property pertaining solely to the residencer premises. Property that is the insured's responsibility under a condo assoc agreement. Structures other than the residence premises owned solely by the insured at the location of residence premises. Standard Coverage A limit is $1000 per occurrence. Condo owners. Insures against same perils as HO-2 and HO-4. In addition, in HO-6 there is coverage for cost to tear and replace any part of the building necessary to repair the system or appliance from which the water or steam escaped.

HO-2 Expanded Perils

Vehicle damage is expanded to include cause by people living on the premises and provides for losses to fences, driveway or walkway. Smoke peril is expanded to include smoke from a fireplace.

Section II Endorsements - Watercraft Endorsements

Will provide liability coverage for Watercraft up to 26 feet in length powered by motors exceeding 25 horsepower. Watercraft powered by inboard or inboard-outboard engines or motors. Sailboats longer than 26 feet.