Chapter 22
Identify the basic types of homeowners policies that are used today
The types of homeowners policies that are used today are: · HO-2 Broad Form · HO-3 Special Form · HO-4 Contents Broad Form · HO-5 Comprehensive Form · HO-6 Unit-Owners Form · HO-8 Modified Coverage Form
. Coverage C under a Homeowners 3 policy covers personal property on a named-perils basis. List the various perils that are covered.
The various perils that are covered under Homeowners 3 Policy are: · Fire or lighting · Windstorm of hail · Explosion · Riot or civil commotion · Aircraft · Vehicles · Smoke · Vandalism or malicious mischief · Theft · Falling objects · Weight of ice, snow or sleet · Unexpected discharge or overflow of water or steam · Sudden destroying, cracking, boiling of a steam, hot water, air conditioning or automatic fire protective sprinkler system or appliance for heating water · Unexpected damage from an artificially generated electrical current · Volcanic eruption
The Section I property coverages provide different types of coverages to an insured. For each of the following coverages, briefly describe the type of coverage provided, and give an example of a loss that would be covered. Additional coverages
Additional coverages are: · Debris removal · Reasonable repairs · Trees, scrubs, and other plants · Fire Department Service charge · Property removal · Credit Card, EFT Card or Access Device, Forgery and Counterfeit money · Loss assessment · Collapse · Glass or Safety Glazing material · Landlord's furnishings · Ordinance or Law · Grave Markers
Carolyn owns a home with a replacement cost of $400,000 that is insured under a Homeowners 3 policy for $280,000. The roof was badly damaged in a severe windstorm, and it will cost $20,000 to repair the roof. The actual cash value of the loss is $10,000. Ignoring any deductible, how much will Carolyn collect from the insurer?
Carolyn will receive $17,500 from the insurer. 280,000 / (0.8 x 400,000) 280,000 / 320,000 0.875 x 20,000 17,500
The Section I property coverages provide different types of coverages to an insured. For each of the following coverages, briefly describe the type of coverage provided, and give an example of a loss that would be covered. .Coverage A: Dwelling
Coverage A covers the dwelling on the residence premises and any structure attached to the dwelling including: Materials intended for construction are included and specifically excludes land.
The Section I property coverages provide different types of coverages to an insured. For each of the following coverages, briefly describe the type of coverage provided, and give an example of a loss that would be covered. Coverage: Other Structures
Coverage B insures other structures on the residence premises · Includes a detached garage, tool shed, etc. · Structures that are rented out or used for a business are excluded · The amount of coverage is based on the amount of insurance in Coverage A
The Section I property coverages provide different types of coverages to an insured. For each of the following coverages, briefly describe the type of coverage provided, and give an example of a loss that would be covered. Coverage C: Personal Property
Coverage C insures personal property owned or used by an insured · Personal property is covered anywhere in the world, both on and off the premises · The amount of coverage is 50% of Coverage A, but can be increased if desired · Coverage for personal property at another residence, such as a vacation home, is limited to 10% of Coverage C or $1000, whichever is greater · Certain types of personal property have maximum dollar limits on the amount paid for any loss
The Section I property coverages provide different types of coverages to an insured. For each of the following coverages, briefly describe the type of coverage provided, and give an example of a loss that would be covered. Coverage D: Loss of Use
Coverage D provides protection when the residence premises cannot be used because of a covered loss · Coverage is 30% of Coverage A · Additional living expense is the increase in living expenses actually incurred by the insured to maintain the family's standard of living · The policy pays the fair rental value for that part of the residence that is rented to others, but is not fit to live in · Coverage applies if the home is not damaged, but a civil authority prohibits the insured from using the premises
a. Coverage A and Coverage B under a Homeowners 3 policy insure the dwelling and other structures against "direct physical loss." Explain the meaning of this phrase.
Ho-3 policy provides insurance against direct physical losses to dwelling and other related structures. Under this policy, all physical losses to the property can be claims except the following losses that are specially excluded: · Collapse · Freezing · Fences, pavement, patio, and similar structures · Dwelling under construction · Vandalism and malicious mischief · Mold, fungus, or dry rot · Wear and tear or deterioration · Mechanical breakdown · Smog, rust or corrosion · Discharge, seepage, etc. · Birds, rodents or insects · Besting or infestation or discharge or release of waste Animals owned or kept by an insured
Why are these special limits used?
Special limits for the insurance claim are used because of moral hazard and loss adjustment problems and are desire by the insurer to limit his/her liability.
Martin and Carrie Jones insured their home and personal property under an unendorsed Homeowners 3 policy. The home has a current replacement cost of $300,000. The policy contains the following limits: Coverage A: $240,000 Coverage B: $24,000 Coverage C: $120,000 Coverage D: $72,000 The home was badly damaged in a fire, and the Jones family was forced to live in a motel for 60 days while their home was being rebuilt. Undamaged personal property was stored in a rental unit during the period of reconstruction. What dollar amount, if any, is payable under their Homeowners 3 policy for the following (ignore any deductible)? Meals eaten in the motel restaurant for 60 days at an average cost of $60 daily (food costs at home average $20 daily).
Meals would be covered under Coverage D loss of use. The total amount payable would be $3,600 (60 x 60).
. Michelle purchased a Homeowners 3 policy with no special endorsements to cover her home and personal property. A fire occurred and destroyed a big-screen television. Michelle paid $4,000 for the new TV, and it was 25 percent depreciated when the fire occurred. The replacement cost of a similar television is $3,800. Ignoring any deductible, how much will Michelle collect for the loss?
Michelle will receive $3,800 from the insurer; as the replacement for the TV is $3,800.
Martin and Carrie Jones insured their home and personal property under an unendorsed Homeowners 3 policy. The home has a current replacement cost of $300,000. The policy contains the following limits: Coverage A: $240,000 Coverage B: $24,000 Coverage C: $120,000 Coverage D: $72,000 The home was badly damaged in a fire, and the Jones family was forced to live in a motel for 60 days while their home was being rebuilt. Undamaged personal property was stored in a rental unit during the period of reconstruction. What dollar amount, if any, is payable under their Homeowners 3 policy for the following (ignore any deductible)? . Monthly mortgage payment of $1,500 on their home.
Mortgage notes are not covered under homeowner's policy, which means that they will not receive compensation.
Martin and Carrie Jones insured their home and personal property under an unendorsed Homeowners 3 policy. The home has a current replacement cost of $300,000. The policy contains the following limits: Coverage A: $240,000 Coverage B: $24,000 Coverage C: $120,000 Coverage D: $72,000 The home was badly damaged in a fire, and the Jones family was forced to live in a motel for 60 days while their home was being rebuilt. Undamaged personal property was stored in a rental unit during the period of reconstruction. What dollar amount, if any, is payable under their Homeowners 3 policy for the following (ignore any deductible)? Rent for storing undamaged furniture in a rental unit while the home is being rebuilt, $200 monthly.
Rent for storage unit would be covered under Coverage D loss of use. The total amount payable would be $400 (200 x 2).
Briefly describe the duties imposed on the insured under a homeowners policy after a property loss occurs.
The duties imposed on the insured under a homeowners policy after a property loss occurs are: · The insured must give the prompt notices to the insurer or the agent of the insurer · The insurer must take care of the property from the further damage and make the repairs if required necessarily. · The insured must prepare a report on the inventory of damaged personal property with the details of quantity, item details, cash value · Exhibit the damaged property · The insured must file a proof of los within 60 days from date of the insurer's request.
Martin and Carrie Jones insured their home and personal property under an unendorsed Homeowners 3 policy. The home has a current replacement cost of $300,000. The policy contains the following limits: Coverage A: $240,000 Coverage B: $24,000 Coverage C: $120,000 Coverage D: $72,000 The home was badly damaged in a fire, and the Jones family was forced to live in a motel for 60 days while their home was being rebuilt. Undamaged personal property was stored in a rental unit during the period of reconstruction. What dollar amount, if any, is payable under their Homeowners 3 policy for the following (ignore any deductible)? Three bedrooms were totally destroyed in the fire. The replacement cost of restoring the bedrooms is $80,000. The actual cash value of the loss is $50,000.
The loss would be covered under Part A Dwelling. Since the amount of loss payable is the actual cash value of loss not replacement. Which means that the loss payable is $50,000.
List the major exclusions that are found in Section I of the Homeowners 3 policy.
The major exclusions that are found in Section I of the Homeowners 3 Policy are: · Concurrent causation losses · Any loss due to an ordinance or law, except as described in the Additional Coverages · Losses due to earth movement · Certain water losses · Losses due to neglect, power failure, or faulty design · Losses which are intentional · Losses due to war, government action, failure to act, or nuclear hazard · Losses due to certain weather conditions
Identify the persons who are insured under a home-owners policy.
The person who are insured under a home-owners policy are: · The named insured and residents of the household who are relatives of the named insured · Other persons under the age of 21 years who are under the care of the named insured or the residents of the household who are relatives of the named insured · A full-time student under the age of 24 who was a resident of the household and a relative of the named insured but is now away from home or a full-time student under the age of 21 who is under the care of the named insured or the residents of the household who are relatives of the named insured and is away from home. · Any other person legally responsible for the covered animals or watercraft A person employed by the named insured or any of the other insureds as defined above in respect of a motor vehicle covered by the policy
Martin and Carrie Jones insured their home and personal property under an unendorsed Homeowners 3 policy. The home has a current replacement cost of $300,000. The policy contains the following limits: Coverage A: $240,000 Coverage B: $24,000 Coverage C: $120,000 Coverage D: $72,000 The home was badly damaged in a fire, and the Jones family was forced to live in a motel for 60 days while their home was being rebuilt. Undamaged personal property was stored in a rental unit during the period of reconstruction. What dollar amount, if any, is payable under their Homeowners 3 policy for the following (ignore any deductible)? Rental of motel room at $100 daily for 60 days.
The rental of a motel room is covered under Coverage D loss of use. The total amount payable would $6,000 (100 x 60). The max payable would be $72,000 (240,000 x .30).
