Unit 6 - Dwelling Insurance

The Broad Form broadens some perils covered under the Basic Form and adds the following perils

*remember using the acronym BIG AFFECT B-burglary damage I-ice, sleet, snow (weight of) G-glass breakage A-accidental discharge of water or steam at the described location from within a plumbing, heating, air-conditioning, or automatic fire protective sprinkler system or household appliance F-freezing objects-freezing of plumbing, heating, air-conditioning, or automatic fire protective sprinkler systems and household appliances (insured must use reasonable care to maintain heat in the building or shut off the water supply and drain all systems and appliances) F-falling objects E-electrical currents-sudden and artificially generated electrical current (does not include damage to a tube, transistor, or similar electrical component) C-collapse T-tearing asunder-sudden and accidental tearing apart, cracking, or burning of steam or hot-water heating, air-conditioning, or automatic fire protective sprinkler system and water heaters

Special limits of liability apply to the following classes of property:

- $200 for money or related property, coins, and precious metals; - $1500 for securities, manuscripts, and other valuable paper property; - $1500 for watercraft, including trailers and equipment; - $1500 four trailers not used with watercraft; - $1500 for jewelry, watches, furs, and precious and semi precious stones; - $2500 for firearms; - $2500 for silverware, goldware, or pewter ware

Dwelling policy eligibility

- 1 to 4 unit dwelling in which each unit may accommodate occupants with boarders - Vacation dwellings - Rental dwellings - Dwellings under construction (endorsement) - Mobile homes meeting certain qualifications, including that they are permanently located (endorsement) Farm dwellings NOT eligible

Dwelling policies can provide the following coverages for the named insured

- Coverage A - dwelling - Coverage B - other structures [detached from the main dwelling (also referred to as appurtenant structures)] - Coverage C - insured's personal property - Coverage D - fair rental value although all four coverages are preprinted in the policy, the insured does not have to purchase each one. coverages A-D represent a menu from which to choose. it is important to know that the dwelling policies are designed to insure residences, not commercial businesses.

The following property is not covered in the residential theft coverage endorsement

- animals, birds, and fish; - credit card and phone transfer card; - property while it is in the mail; aircraft and parts, other than model or hobby aircraft; - property held as a sample or for sale or delivery after sale; - property separately described and specifically insured by other insurance; - property of tenants, roomers, and boarders that are not related to an insured; - business property of an insured or residence employee; - property that is in the custody and control of others, such as the laundromat, tailor, or cleaner (except for loss by burglary or a robbery); - Motor vehicles and their equipment (does not apply to vehicles used to service and location or to assist those with disabilities such as motorized scooters and wheelchairs)

Under coverages A and B, the Special Form (DP-3) excludes

- any loss involving collapse, other than as provided in the other coverage section; - freezing of plumbing, heating, air conditioning, automatic fire protective sprinkler system, or a household appliance, or overflow due to freezing unless reasonable care was taken to maintain heat in the building or to shut off the water supply and drain the systems and appliances; - freezing, thawing, pressure, or weight of water or ice to fences, pavements, patios, swimming pools, foundations, retaining walls, bulkheads, piers, wharves, or docks; - theft in or to a dwelling or structure under construction, or theft of any property that is not part of a covered building or structure; - damage by wind, hail, ice, snow, or sleet, to outdoor radio and television antennas and aerials, including their leadin wires, masts, or towers, and damage by these same perils to lawns, trees, shrubs, or plants; - vandalism, malicious mischief, theft, and attempted theft if the dwelling has been vacant for more than 60 consecutive days at time of loss; - constant repeated seepage or leakage of water or steam over time from a plumbing, heating, air conditioning, or fire protective sprinkler system or from a household appliance; - gradual and expected losses, such as wear and tear, deterioration, inherent vice, latent defect, mechanical breakdown, smog, rust, corrosion, mold, wet or dry rot, and smoke from agricultural smudging or industrial operations; - discharge, dispersal, seepage, migration, release, or escape of pollutants such as smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste; - settling, shrinking, bulging, or expansion, including resulting cracking of pavements, foundations, walls, floors, roofs, or ceilings; and - loss caused by birds, vermin, insects, and domestic animals. ** if a loss that is not otherwise excluded involves water damage from a plumbing, heating, air conditioning, or fire protective sprinkler system or household appliance, the policy covers the loss caused by water and the cost of tearing out and replacing any part of a building necessary to repair the system or appliance itself is not covered. *look at 6.4.3 printed comparison chart

Other endorsements that may be used with the dwelling policy

- automatic increase in insurance - dwelling under construction - Mobile home

Additional exclusions that apply only to coverage L include liability:

- for damage to property owned by an insured; - for damages your property rented to, occupied or used by, or in the care of an insured (unless the loss is caused by fire, smoke, or explosion); - for losses that would be covered under a Worker's Compensation or similar law; - for loss assessments charged against the insured as a member of an association, corporation, or community of property owners; assumed under most contracts or agreements; and - for injury to the insured or to any relative minor who resides in the same household.

Dwelling conditions on how losses will be paid

- loss settlement - our option - deductible - pair or set - loss payment - other insurance - recovered property

General Exclusions - all dwelling policies exclude the following

- ordinance or law losses that require the insured to test for, monitor, clean up, or respond to pollutants or that require more elaborate or expensive reconstruction or demolition than was used in the original structure (replacing a dwelling's regular glass with safety glass is covered) - earth movement (quake, mudslide, sinkholes, & subsidence); does not apply to direct loss by fire or explosion resulting from earth movement - water damage in general, including flooding, water backing up inti a building, and water leaking or seeping from below the ground; also excluded is water or waterborne materials that is discharged from a sump pump or related equipment - losses to due power interruption that occurs away from the insured location - insured's failure to save and preserve property after a loss, or protect it from loss - war - nuclear - intentional losses - destruction, confiscation, or seizure of property by the gov't or public authority

Coverage M does not apply to bodily injury:

- to a residence employee that occurs off the insured location and does not arise out of or in the course of work the employee performs for the insured - due to any nuclear hazard - to any person other than a residence employee who regularly resides on any part of the insured location

Bodily injury or property damage arising out of the following are excluded under both coverage L in coverage M:

- war; - losses that are expected or intended by the insured; - business pursuits or the rendering of or failure to render professional services; - transmission of a communicable disease by and insured; - sexual molestation, corporal punishment, or physical or mental abuse; - use, sale, or possession of a controlled substances other than the legitimate use a prescription drugs; - rental of a premise that would not be eligible for coverage under the policy; - a premise owned by or rent it to the insured or rented by the insured to others that is not considered an insured location; - ownership, maintenance, use, loading, or unloading of most types of Warcraft, aircraft, or vehicles

Residential theft coverage endorsement exclusions

-Animals -Credit cards -Property in mail -Aircraft -Other insurance property -Tenant's property (not related to insured) -Business property -Property in custody of others -Motor vehicles (unless assisting disabled)

Mobile home

Allows home and personal property to be insured - this endorsement requires the mobile home to be on a permanent foundation

Dwelling under construction

Attached to provide coverage when the intended occupant of a dwelling under construction is named insured - the limit of liability that applies at any given time is a percentage of the policy limit based on the value of the partially completed home. The available policy limit increases as construction of the home progresses.

Covered Perils - Broad Form

Broad form coverage is more expensive than basic form coverage. Includes coverage for all the perils included in a basic form policy plus several additional perils that are expressively named. Like a basic form policy, abroad foreign policy covers only named perils. Again, if apparel is not specifically named in the policy, that Carol is excluded. Fortunately, the broad form is designed do you cover the most common forms of property damage. The broad form automatically covers fire, lightening, internal explosion, the extended perils (WCSHAVVER) and vandalism and malicious mischief.

Three dwelling policy forms

DP-1 (basic) DP-2 (broad) DP-3 (special)

Replacement cost coverage

DP-1 pays all losses on an actual cash value basis (replacement cost - depreciation). - personal property DP-2 and DP-3 pay losses to the dwelling and other structures on a replacement cost basis, with no deduction for depreciation. insureds must cover their buildings with insurance equal to 80% or more of the full replacement cost at the time of the loss. as a review, an insured can never receive more than the policy limit. - dwelling

Other coverages: DP-2 (broad) and DP-3 (special)

DP-2 and DP-3 include all of the other coverages in DP-1 plus some other coverages that are not found in DP-1. these other coverages are a part of a DP-2 and a DP-3 policy, and no additional premium is required. - trees, shrubs, and other plants - collapse - glass or safety glazing material - ordinance or law - property removed

Wind and Hail (EC)

Damage to the interior of a building from a windstorm or hail is only covered if wind or hail first makes an opening that allows these elements to enter the building. Awnings, signs, and antennas outside of a building are not covered against wind or hail damage.

Expenses

Expenses incurred in the investigation of a claim, including claims adjuster costs, expert witness fees, etc.; reasonable expenses incurred by the insured at the companies request in the investigation or defense of a claim

Aid (first aid)

First day to others at the time of an accident

Internal explosion (DP-1)

Includes the explosion of a furnace, stove, or hot water heater inside the dwelling

Residential Theft Coverage Endorsement

It is not automatically included in the dwelling policy; however, it can be added with broad theft coverage endorsement or limited coverage endorsement. - The limited theft coverage endorsement is available for dwellings that are not owner-occupied. - The broad theft endorsement is only available to owner-occupied dwellings and can apply to on and off-premises theft. Both endorsements provide coverage for theft, attempted theft, and vandalism or malicious mischift as a result of theft. Special limits apply to certain personal property, and certain property is excluded on both endorsements. Separate limits of liability applied on and off-premise coverage and off-premises coverage is available only if on-premises coverage is written. The insured is required to notify the police when a theft loss occurs.

Covered Perils: Special Form (DP-3)

It is the most inclusive of the three options. The trick with special form policies is that they should be read differently from how you would read a basic or broad form policy. Instead of a document listing what's covered, risks of direct physical loss are covered except for the exclusions specifically enumerated in the policy. A special form policy is the opposite of reading a basic or broad form policy. Risks of direct physical loss are covered perils. The special form provides open peril coverage on the dwelling and other structures, insuring against risks or direct physical loss that are not specifically excluded in the policy. -*Personal property is covered on a named broad peril basis-the same perils listed in DP-2

Loss of earnings

Loss of earnings for the insured (such as when the insured is required to miss work for court appearances)

Lightening (DP-1)

Natural electricity

Fire (DP-1)

Only covers damage from an unfriendly fire. Damage from a friendly fire (fireplace) is not covered.

Personal liability supplementary additional coverages

Personal liability and medical payments other coverage also includes three additional coverages: claim expenses, first aid to others, and damage to property of others. Losses under these coverages are paid in addition to the limit of liability and do not cost any extra to the insured. Remember the acronym BAILED. Bonds Aid (first aid) Interest Loss of earnings Expenses Defense costs Expenses for first air to others are covered when they are incurred by the insured for bodily injury to others that is covered by the policy. If the insured causes damage to the property of others, the policy will provide replacement cost coverage up to $1000 for each occurrence or loss.

Extended coverage (EC) perils

Please they are not automatically included in a dwelling policy and can be added for additional premium (remember WCSHAVVER) - Wind - Civil commotion - Smoke - Hail - Aircraft - Vehicles - Volcanic Eruption' - Explosion - Riot The insured can also obtain coverage for vandalism and malicious mischief (V&MM) by paying an additional premium and indicating this coverage in the declarations. This coverage must be purchased in conjunction with the extended coverage perils. If the insured purchases the EC perils of WCSHAVVER and the perils of V&MM, the insured now has basic peril coverage.

Interest

Pre-judgment interest is the interest on court ordered payments, and post judgment interest interest accruing on the judgment after an award has been made but before payment is made by the insurance company

Bonds

Premiums for certain types of bonds, such as bail bonds, appeal bonds, and release of attachment bonds

Automatic increase in insurance

Provides an annual increase in the coverage a and B amount of 4%, 6%, or 8%

Coverage L - Personal Liability

Provides coverage for damages that the insured becomes legally obligated to pay because of an occurrence to which the coverage applies that causes bodily injury or property damage. The insurer will also defend the insured against such claims at its own expense, even if the suit is groundless or fraudulent. - at fault - bodily injury to others - property damage to others - on and off premissend. es The policy minimum limit is $100,000.

Smoke (EC)

Smoke damage from fireplaces is not covered

Defense costs

The cost of hiring an attorney to defend the insured if sued, even if the insured is not liable, paid in addition to per occurrence or policy aggregate limits

Explosion (EC)

The explosion peril in the extended coverage perils replaces the internal explosion peril that is automatically part of every dwelling policy. The explosion peril encompasses both internal explosions and other types of explosions, such as explosions at a neighboring location.

DP-1 Basic Form

The following perils are automatically covered by DP-1: - fire - lightening - internal explosion

Coverage M - Medical Payments to Others

The insurer will pay all necessary medical expenses incurred within three years of an accident that causes bodily injury. This coverage applies to injuries sustained while the injured party is: - on the insured location with the insured's permission; or - off the insured location if the injury arises out of a condition (on the insured location, caused by the activities of the insured, or caused by an animal in the insured's care) There is a minimum limit of $1,000 per person under this coverage. The insured does not have to be legally liable for coverage to apply. Coverage does not apply to any injury sustained by the insured or the insured's family members - medical and bills of others - no-fault - 3 years - on and off premises

Vehicles (EC)

Vehicles peril does not apply to damage caused by a vehicle owned or operated by the insured or resident of the insured's household. It also does not include vehicle damage to fences, driveways, and walks.

Other structures (DP-1)

allows use of up to 10% of the coverage A limit of liability for covered losses to other structures as described in coverage B

Loss payment

condition states that the loss will be paid within 60 days after reaching an agreement with the insured.

Other Insurance

condition states that, if a loss is also covered by other insurance, the insurance company will pay only its proportion of the loss

Recovered property

condition states that, if the insured or insurer recovers property on which the insurer has made loss payment, the other party must be notified. the insurer may have the property returned, in which case the loss payment will adjusted, or allow the company to have it.

Property removed (DP-1)

covers loss to property that occurs while the property is being removed to protect it from a covered peril. in the basic form, property removed is covered for 5 days. for example, the roof has a big hole in it because of a windstorm and the insured moves personal property away from the premises to a storage building for protection.

Coverage A - dwelling

covers the dwelling, structures attached to the dwelling (such as an attached garage or carport), and materials and supplies for use in the construction or repair of the dwelling, or other structures at the location.

Coverage D - fair rental value

covers the insured in the event a covered loss makes the rental portion of a property unfit for normal use. twenty percent (20%) of the insurance on the dwelling is available for this coverage. if a civil authority prohibits use of the insured property because of a covered peril damaged at a neighboring location, payments are limited to a maximum of two weeks.

Coverage C - personal property

covers the insured's personal property that is at the described location and is usual to the dwelling occupancy. personal property belonging to the insured's guests or servants may be covered at the insured's request. if the property is a rental property, a tenant's property is not covered. the following items of personal property are also not covered: - animals, birds, and fish - aircraft - motor vehicles, other than motorized equipment used to maintain the premises - boats, other than rowboats and canoes - accounts, bills, currency, evidence of debt, money, and securities coverage is also available for personal property not at the premises that is limited to 10% of the coverage C amount purchased. you may use this 10% limit for loss by an insured peril covered under coverage C while anywhere in the world. this coverage does not apply property of guests or servants, tenants, or to rowboats or canoes.

Vandalism and Malicious Mischief (V&MM) (EC)

does not cover: - damage to glass or safety glazing materials constituting a part of a building other than glass building blocks; - losses by theft, larceny, or burglary (but does not apply to building damage caused by burglars); - and vandalism to a building that has been vacant for more than 60 consecutive days (the building being constructed it's not considered vacant)

Property removed (DP-2 and DP-3)

in DP-2 and D-3, property removed from the premises to protect from damage is covered for 30 days. in DP-1, it is covered for only 5 days.

Coverage B - other (detached) structures

insures buildings on the premises that are separated from the dwelling by a clear space or connected only by a fence, utility line, or similar connection. the building may not be used for commercial, manufacturing, or farming purposes.

Coverage E - additional living expense

it is included in DP-2 and DP-3 and pays for additional living expenses the insured incurs after a covered loss, including reasonable motel, dining, laundry, and transportation expenses. the limit is 10% of coverage A and applies when the insured occupies the premises. these additional expenses are covered for the time period needed to repair or replace the damaged property or for the insured to move to another permanent location. if a civil authority prohibits use of the insured property because of a covered peril damaged a neighboring location, payments are limited to a maximum of two weeks. (note that is coverage can be added to the DP-1 by endorsement.)

Glass or safety glazing material (DP-2 and DP-3)

it pays for the breakage of glass or safety glazing material and damage to covered property caused by glass breakage.

Collapse (DP-2 and DP-3)

it pays for the collapse of the dwelling caused by a specified list of perils. to be considered a collapse, the loss must involve the building or part of the building abruptly falling down or caving in, after which the building or part of the building cannot be occupied. collapse that results from hidden decay or hidden insect or vermin damage is not covered if the insured knew about the damage before the building collapsed.

Reasonable repairs (DP-1)

it pays for the reasonable costs to make necessary repairs to protect property from further damage following a covered loss. for example, the cost to temporarily fix the big hole in the roof is considered a reasonable repair. remember, protecting property from further loss is a condition of coverage and is the responsibility of the insured after a loss has occurred.

Fire department service charge (DP-1)

it pays up to $500 for fire department changes incurred when the fire department is called to save or protect covered property from a covered peril. no deductible applies to this coverage.

Trees, shrubs, and other plants (DP-2 and DP-3)

it pays up to 5% of the coverage A limit for damage to trees, shrubs, plants, or lawns caused by a specified list of perils. the policy will not pay more than $500 for damage to any one tree, shrub, or plant.

Worldwide coverage (DP-1)

it provides 10% of the coverage C limit for covered personal property while it is located anywhere in the world.

Improvements, alterations, and additions (DP-1)

it provides coverage for insureds who are tenants for improvements or alterations made to the dwelling at the tenant's expense. for example, the renter pays for new carpet in the rental house. up to 10% of the coverage C limit is available.

Rental value (DP-1)

it provides up to 20% of the coverage A limit of liability for loss of fair rental value. with the basic policy, any amount that is paid out will reduce the limit of liability for coverage A as well.

Debris removal (DP-1)

pays for the expense of removing debris as a result of a loss that is covered by the policy

Deductible

the clause states that only the amount of loss over the deductible will be paid, up to the limit of liability

Our option

the condition gives the insurer the right to repair or replace damaged property with material or property of like kind and quality within 30 days of receiving the insured's statement of loss

Pair or set

the condition states that, in case of a loss to an item that is part of a pair or set, the insurance company is not obligated to pay the value of the entire set.

Loss settlement

the condition states the the covered property losses are valued at actual cash value but are not to exceed the amount necessary to repair or replace. DP-2 and DP-3 settle losses to personal property at actual cash value. losses to the dwelling and other structures, however, are paid on a replacement cost basis, as long as the insured carries insurance equal to 80% or more of the full replacement cost of the building at the time of loss.

Other coverages: DP-1 (basic form)

the dwelling basic form provides certain other coverages that are automatically included for no additional premium. - other structures - debris removal - property removed - reasonable repairs - improvements, alterations, and additions - fire department service charge - worldwide coverage - rental value

Personal liability supplement coverages

the insured may purchase personal liability and medical payments to others coverage as an endorsement to the dwelling policy or as a separate policy. - coverage L-personal liability - coverage M-medical payments to others

Dwelling Policies

these policies should not be confused with homeowners policies. there are two different products. - it does not require the building to be owner occupied - usually covers risks that may not qualify for homeowners insurance like rental property, older homes, and hunting cabins in rural areas. the policy does not automatically cover the peril of theft or personal liability. these can be added by endorsement. these policies are called monoline policies because they insure only property.

Ordinance or law (DP-2 and DP-3)

this coverage allows payment of up to 10% of coverage A limit of liability for the increased cost to repair or rebuild a dwelling or other structure to conform to applicable building and land use codes.

DP-2 Broad Form Dwelling Exclusions

weight of ice, snow, or sleet peril does NOT cover damage to awnings, fences, patios, pavement, swimming pools, foundations, retaining walls, bulkheads, piers wharves, or docks. falling objects peril does NOT include damage to awnings, fences, outdoor equipment, or outdoor radio and television antennas, including their lead-in wires, masts, and towers. - damage to a building interior or its contents is covered ONLY if the falling object first damages the roof or an exterior wall. the accidental discharge or overflow peril does NOT include continuous or repeated leakage or seepage, freezing, or damage to the system or appliance itself. - flood the burglar damage and accidental discharge perils are NOT covered if the building has been vacant for more that 60 consecutive days. ** - the vehicles peril covered damage to fences, driveways, and walks when the vehicle is driven by someone who is not a resident of the insured's household. it also covers damage to other types of property when the vehicle is driven by an insured or a resident of the insured's household. - the smoke peril includes loss cause by fireplace smoke.