3-A1/2 HOMEOWNERS Flashcards
Property Insurance Categories:
Personal Lines
Commercial Lines
Homeowners Insurance
Dwelling Insurance
Personal Lines:
for possessions intended for personal use (e.g. a home, family
mini-van, or land).
Commercial Lines:
for possessions intended for business or corporate use (e.g. a restaurant or church).
Residential dwellings fall under Personal Lines and are insured by either Homeowners or _______.
Dwelling policies
Homeowners Insurance:
for property inhabited by the insured (e.g. primary residence).
Dwelling Insurance:
for property not inhabited by the insured (e.g. rental property, vacation home, etc).
Homeowners (HO) Insurance bundles property and liability coverages into one _____ policy.
“package”
Property coverage:
Liability coverage:
Property coverage:
covers physical losses to the home and associated structures
Liability coverage:
covers losses experienced by a third party, for which the policyholder is liable
Homeowner Eligibility
- It’s Personal
- Own & Occupy
It’s Personal:
HO policies are for individuals, not corporations, businesses,government entities, etc.
Own & Occupy:
HO policies are for individuals who both own and occupy their
residences
If you run a business out of your home, you may not be eligible for a _____ policy.
homeowners
A business is any full time, part time, or occasional ____ or occupation.
trade
Buildings that qualify for HO Insurance:
● Residential dwellings with up to 4 families (if at least one of the units is
occupied by the owner)
● Dwellings used exclusively for residential purposes Exception: using a room for
a home office or having a private daycare or school may be allowed.
● Mobile homes, with the proper endorsement
● Buildings under construction
“Insurance Services Offices” (ISO) forms:
● Forms for homeowners policies
● Each provides a different type of coverage
ISO forms currently used:
● HO-2: Broad form ● HO-3: Special form ● HO-4: Contents Broad form ● HO-5: Comprehensive form ● HO-6: Condominium form ● HO-8: Modified Coverage form
The Named-Peril Approach
● Covers losses caused only by perils named in policy.
● If loss is caused by unlisted peril, it is not covered.
The Named-Peril Approach
Example
The Standard Fire Policy was a named-peril policy covering fire and lightning. Losses caused by any other peril would be excluded.
In addition to the perils of fire and lightning, the Extended Coverage Endorsement covered:
● Windstorm ● Hail ● Explosion ● Riot or civil commotion ● Vehicles ● Aircraft ● Volcanic Eruption ● Smoke
The Broad Form Endorsement added coverage for:
● Vandalism or malicious mischief
● Theft
● Falling objects
● Weight of ice, snow, or sleet
● Damage from a steam or hot water system
● Accidental discharge or overflow of water or steam
● Freezing of plumbing, heating, air conditioning systems, or domestic
appliances
● Sudden and accidental damage from artificially generated electrical current
● Volcano
Broad Form Endorsement Example
Two Broad Form perils, vehicles and smoke, are fairly specific: property damage caused by a vehicle is covered, but damage to a fence, driveway, or walkway is not covered if it was caused by a vehicle driven by a resident of the “residence premises.” And smoke damage from a fire is covered, but not smoke damage from an industry nearby.
Herman leaves a window open while he is away at work, allowing rain from a sudden thunderstorm to enter the living room and damage a sofa. Is this loss covered?
No. Rain damage to personal property inside a building is only covered if the storm first makes an opening.
During a sudden thunderstorm, a small tree in Herman’s yard is blown down. One of the branches breaks a window, allowing rain to enter the living room and damage a sofa. Is this loss covered?
Yes. Since the windstorm caused the opening that resulted in rain damage, this loss would not be excluded.
Herman leaves a window open while he is away at work, allowing rain from a sudden thunderstorm to enter the living room and damage the hardwood flooring. Is this loss covered?
Yes. Since the floors are not personal property, but are part of the building itself, the damage would be covered in most policies.
Herman leaves a window open while he is away at work, allowing wind from a sudden thunderstorm to enter the living room and shatter a lamp by blowing it off a table. Is this loss covered?
Yes. The lamp is personal property directly damaged by a covered, named peril. The exclusion for personal property inside a building applies to damage caused by rain, sand, sleet, snow, or dust—not wind.
So, if a picture falls off a wall and damages the table below it, there is __ ___. But if a suitcase falls out of an airplane flying overhead, punctures the roof, and crushes a dining room table, then the table would be covered.
no coverage
“Unoccupied” does not mean _____
“vacant”
Unoccupied:
no one is living at the insured property, but the insured’s belongings are
there
Vacant:
the insured property is empty; neither the insured nor his belongings are there
HO-2 “Broad Form”
● Named peril policy
● Insures against all 17 Broad Form perils
● Covers the insured’s house and personal property
HO-4 “Contents Broad Form”
● Known as “renters insurance” (think “4-Rent”)
● Insures against all 17 Broad Form perils
● Only covers personal property
● Does not insure house and other structures
HO-6 “Unit Owner’s Form”
● Known as the Condo Form
● Covers the owner’s belongings
● Covers all finished surfaces of the individual condominium unit
HO-8 “Modified Coverage Form”
● Named-peril coverage ○ fire ○ lightning ○ windstorm ○ hail ○ explosion ○ riot or civil commotion ○ aircraft ○ vehicles ○ smoke ○ vandalism or malicious mischief ○ theft ○ volcanic eruption ● Covers fewer perils ● Covers property at ACV (deducts depreciation for age, condition, and wear) ● Considers the fair market value of the home ● Advantage: it’s cheaper
HO-8 Example
If you bought a fixer-upper in a run-down neighborhood, its value might be only $25,000, but material and labor costs would make its replacement cost well over $100,000.
The Open-Peril Approach
● Covers damages caused by all perils, except those specifically excluded
● If loss is caused by unlisted peril, it is covered
● Increases the need for exclusions
● HO-3 & HO-5 use the Special Form Endorsement
HO-3 “Special Form”
● Open-peril coverage for dwelling and other structures
● Named-peril coverage for personal property (covered against all Broad Form
perils)
