Lesson 6: Homeowners Insurance - Property Coverage

Question 1

Typical homeowners policy provides

Answer 1

property coverage to pay you for losses and liability coverage to protect you from lawsuits

Question 2

Homeowners ins - how much?

Answer 2

at least 80% of its replacement cost

Question 3

Personal liability coverage

Answer 3

many HO policies provide a min of $100k in personal liability coverage, so would pay up to that amt in total to injured persons per occurrence

Question 4

Homeowners Coverage D

Answer 4

loss of use

Question 4

Homeowners coverage sections

Answer 4

Section I provides property coverages (A, B, C, and D), while Section II provides liability coverages (E and F).

Question 4

Homeowners Coverage A

Answer 4

Dwelling

Question 4

Homeowners Coverage B

Answer 4

Other structures such as shed

Question 5

Homeowners Coverage C

Answer 5

personal property

Question 6

Homeowners Coverage F

Answer 6

medical payments to others

Question 6

Homeowners policy - scheduled personal property endorsements

Answer 6

ex. gold earrings, $2500; presidential Rolex, $13,500

Question 6

Qualifying Conditions for Homeowners policy

Answer 6

• homeowner occupied
• vacation home
• home under construction
• residential property
• structures containing up to 4 units are eligible

Question 7

Homeowners Coverage E

Answer 7

personal liability

Question 7

Homeowners policy - Forms

Answer 7

forms are:
- Basic (Modified) Ho-8 (older homes like 75 years)
- Broad HO2
- Special HO3
- Tenant Broad Form HO4 - Contents of Renters
- Comprehensive HO5 - High valued Houses (affluent homes 750k+)
-Condo broad form HO6 - condo unit owners

Question 8

Homeowners policy - dec page

Answer 8

covers the who, what, when, where, and how much

Question 8

Homeowners policy - section 2 liability definitions

Answer 8

includes: 1) bodily injury and property damage; 2) residence premises; 3) insured location

Question 9

Homeowners policy - Section 1

Answer 9

deals with the property coverages - coverages a, b, c address direct loss of the dwelling, other structures and personal property; coverage D deals with loss of use

Question 10

Homeowners policy - property endorsements

Answer 10

earthquake; replacement cost for contents

Question 10

The four-part Section I coverages included in all homeowners forms are:

Answer 10

Coverage A - Dwelling

Coverage B - Other Structures

Coverage C - Personal Property

Coverage D - Loss of Use

Question 11

Homeowners policy - where do coverages apply

Answer 11

1) residence premises; 2) secondary home; 3) premises used in connection w/ the residence (she shed or garage); 4) non-owned premises where insured temporarily resides (hotel room); 5) vacant land other than farm land (quail hunting excursion); 6) home construction activity; 7) cemetery location; 8) premises occasionally rented by insured (personal, non-business)

Question 12

Section II Liability definitions include:

Answer 12

Bodily Injury and Property Damage
Residence Premises
Insured Location

The following shows where coverages apply:

Residence Premises
Secondary Home
Premises used in connection with the residence
Example: a “she-shed” or garage
Non-owned Premises where the insured temporarily resides Example: a hotel room
Vacant Land other than farmland
Example: a quail hunting excursion
Home construction activity
Cemetery Location
Premises occasionally rented by insured NOTE: personal/non-business

Question 12

Section 2 liability coverage

Answer 12

Coverage E - personal liability, min $100k per occurrence for BI/PD. Defense costs are unlimited and above the policy limits.
Coverage F - medical payments to others; 3 years to report

Question 12

Coverage is worldwide

Answer 12

worldwide coverage for personal property (exception: if the insured has personal property at a residence other than the primary, the primary HO policy pays 10% of coverage C or 1000$, whichever is higher)

Question 12

Condo broad form HO6

Answer 12

Covers unit owner’s personal property, personal liability, walls, floors, and ceilings and specific upgrades of their unit in the condo; association will purchase master policy that covers the condo building (commercial)

Question 12

Section 2 additional coverages

Answer 12

Can add addt’l coverages through endorsement/rider. 1) Claim expenses (defense loss of earnings, reasonable expenses); first aid expenses; damage to property of others; loss assessment coverage (pool house injury, every homeowner in HOA is assessed)

Question 13

Section II Coverage E covers

Answer 13

Personal Liability with a minimum of $100,000 per occurrence for Bodily Injury/Property Damage. Defense is unlimited and above the policy limits.

Question 14

Coverage F

Answer 14

medical payments to others

Question 15

Homeowners - HO-1: A basic form

Answer 15

geared toward older homes with limited coverage and protects the residence from a specific list of eleven (11) named perils: fire and lightning; windstorms and hail; riots and civil commotion; explosions; aircraft and other vehicles; smoke; vandalism and malicious mischief; theft; glass that is part of the home; volcanic eruptions, and personal liability.

Question 16

Homeowners Broad - HO-2

Answer 16

Broad form policies (HO-2) cover damage to the dwelling and possessions from specific perils listed in the policy, such as: explosion, fire, hail, civil commotion, theft, lightning, windstorm, riot, vandalism, falling objects, smoke, damage from a vehicle, damage from an aircraft

Question 17

Homeowners - Special Form HO-3

Answer 17

All Risk (HO-3) is the most common type of homeowners policy. The dwelling is covered against all risks or perils except those specifically excluded in the policy. The home’s contents are generally covered against named perils.

Question 18

Homeowners Renters HO-4

Answer 18

Renters (HO-4) policies provide coverage of a renter’s personal property if it is stolen, damaged, or destroyed in a home or apartment. Personal property is covered against named perils, and losses are settled on an actual cash value basis unless the renter purchases replacement cost coverage. Renters policies do not cover the house or apartment building or any detached structures.

Question 19

Homeowners Comprehensive Forms (HO-5)

Answer 19

Comprehensive Forms (HO-5) includes all risk for high-value homes. All risk includes coverage for the dwelling, other structures and personal property contents.

Question 20

Homeowners Condominium (HO-6)

Answer 20

Condominium (HO-6) policies provide coverage similar to a renter’s policy. The limit chosen is based on the value of the owner’s personal property or contents. An HO-6 policy also provides coverage for that part of the dwelling that belongs to the condominium owner. This includes alterations, appliances, fixtures and improvements that are part of the building or are contained within the building. Both the dwelling and the contents are covered against named perils.

Question 21

Personal Articles Floater

Answer 21

covers all risks from physical loss or damage to specified classes of property that are high-valued items or more, like silverware, fine arts, camera, and golf equipment.

• The PAF may be written as a separate policy or attached to an existing policy.
• The policyowner must provide a detailed appraisal of insured items.

Question 22

Condo Broad Form H0-6

Answer 22

Contents of the insured as a condo unit-owner
Condo Association will purchase a master policy that covers the condo building (Commercial)
The owner is responsible for the contents of their units and any upgrades that they make.

Question 23

Concealment or Fraud –

Answer 23

policy is void if an insured has intentionally concealed or misrepresented any material fact or situation relating to the policy, whether before or after a loss.

Question 24

Liberalization clause –

Answer 24

any revision adopted which would broaden coverage will immediately apply to the policy within 60 days prior to or during the time period.

Question 25

Waiver of change of policy of provisions –

Answer 25

a waiver or modification of any provision of the policy must be in writing by the insurer to be considered valid.

Question 26

Cancellation –

Answer 26

policy can be canceled at any time by the insured, notifying the insurer in writing; the date cancellation will take effect. The insurer may cancel the policy only for reasons stated in the condition and must inform the insurer in writing of the date cancellation will take effect.

Question 27

Common liability exclusions

Answer 27

1) war action
2) intentional acts (intentional injury exclusion prohibits an insured, which caused an intentional injury to himself or herself or to another person, from recovering insurance benefits for that injury)
3) Rendering or failure to render professional services (Bodily injury or property damage arising out of the rendering or failing to render professional service. For example, if CPR goes wrong and the recipient is injured)
4) Business liability (Business liability insurance protects a company and/or business owner in the event of a formal lawsuit or any third-party claim. For example, an in-home daycare would not be covered.)
5) Ownership and use of automobile, aircraft, watercraft (owned or rented)
6) Transmission of Communicable Disease
7) Sexual Molestation, Physical Abuse, mental abuse

Question 28

Flood insurance

Answer 28

covers direct physical loss caused by “flood.” A flood is an overflow of water throughout cities and land that would be ordinarily dry.

Question 29

Definition of flood

Answer 29

A flood is water damage caused by flood, surface water, waves, tidal water, tsunami, storm surge, overflow of water, or spray from any of these whether driven by wind or not. Water or sewage from outside of residence premises plumbing system entering through sewers or drains; or water which enters into and overflows from within a sump pump, sump pump well, or any other system designed to remove subsurface water which is drained from the foundation area.

Question 29

National flood insurance program

Answer 29

fed govt plays major role in flood ins; can only purchase it through NFIP

Question 30

Community role (floods)

Answer 30

The FIA notifies the communities when they are eligible. The community has to adapt and abide by the outlined flood rules/guidelines. There is a 30 day waiting period before coverage can begin. For example, they would have to build dams and levees. If the community abides but the guidelines, they are then eligible to purchase flood insurance.

Question 31

Flood programs

Answer 31

There is a regular program and an emergency program. After meeting requirements, the community would then qualify for the emergency program. They then develop a flood map for that community and the community can
then participate in the regular program.

Question 32

Flood deductibles

Answer 32

flood insurance deductible applies separately for the building and the contents

Question 33

Personal Watercraft Insurance

Answer 33

Personal watercraft require a separate policy package because most standard homeowners policies exclude boats.

Question 34

Three Watercraft policies provide the necessary coverage:

Answer 34

1 Outboard Motor and Boat Insurance is an all-risk, Inland Marine floater that covers physical damage to boats. Claims are usually paid on an actual cash value basis.
2 Boatowners/Watercraft Package Policies, also known as Boatowner policies, combine property coverage on an open peril basis, liability, and medical coverage. In. They usually insure boats under 30 feet with a maximum dollar value of $25,000. Again, losses are usually paid on an actual cash value basis.
3 A Personal Yacht Policy is a specialized form of Ocean Marine Insurance and is usually written for pleasure boats that exceed maximum size and other requirements for a Boatowners/Watercraft policy.

Question 35

Personal Umbrella Coverage

Answer 35

provides individuals and families with low-cost, high- limit protection over the basic liability protections in several personal policies:

Comprehensive Personal Liability in Section II of the Homeowners Policy
Automobile liability
Other personal (not business) liability insurance

Question 36

Personal Umbrella Coverage - Minimum

Answer 36

$1 million