Homeowner’s Insurance

Homeowners Policy [HO Policy] Bundles Property and liability coverages Property coverage: covers physical losses to the home and associated structures Liability coverage: covers losses experience by a 3rd party, for which the policyholder is liable Coverage also includes coverage for additional living expenses, personal property, and medical payments

Homeowner Eligibility For individuals only not corporations, businesses, government entities, churches, etc HO policies are for individuals who both own and occupy their residences Rentals to a 3rd party (and you don’t live there) are NOT eligible Renters can hold an HO-4 policy.

Examples of Eligibility Murr and Joanne are eligible because they bought a home and they will live in that home. Eligible Sal has a home he owns but he does not live in the home Not Eligible for HO policy Quentin lives in his apartment Eligible (HO-4)

Eligible Buildings 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 Except: 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

Types of HO Policies Written on Insurance Service Offices forms (ISO) HO-2 BROAD HO-3 SPECIAL HO-4 CONTENTS BROAD HO-5 COMPREHENSIVE HO-6 CONDOMINIUM HO-8 MODIFIED Written on Insurance Service Offices forms (ISO)

Types of HO Policies HO-2 BROAD ska “cheap” form – more coverage than HO-8 HO-3 SPECIAL – most common – middle HO-4 CONTENTS BROAD (renters/tenants policy) – contents-only HO-5 COMPREHENSIVE – best coverage – high end – high premium HO-6 CONDOMINIUM – for condo owners HO-8 MODIFIED – more limited coverage

Named-Peril Coverage Covers losses caused only by perils named in policy If loss is caused by unlisted peril, it is not covered When a policy lists the perils that it insures against, it is said to be using the “named perils” approach. Damaged caused by a peril not specifically named, it will not be covered. For example: Standard fire policy originally covered fire and lightning. Since its listed the covered perils specifically, it was a named-peril policy,

Extended Coverage Additional coverage for additional premiums Windstorm Hail Explosion Riot or Civil commotion Vehicles Aircraft Volcanic Eruption Smoke Additional coverage for additional premiums 2nd most common endorsement – vandalism and malicious mischief (VMM)

Broad Form Coverage Insurers may list them by different names or group them differently, the Broad Form will pretty much always cover the following perils: Vandalism or malicious mischief Theft Breakage of glass in a building, storm door, or window Falling objects Weight of ice, snow, or sleet Collapse 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 Coverage Keep in mind that, just because a policy lists covered perils, it is not necessarily meant to cover every loss associated with them. A policy's definitions, exclusions, or both, will always limit how it applies to each peril. For 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.

Perils Fire is defined as "rapid oxidation accompanied by flame, spark, or glow." In order for a fire to be a covered cause of loss, it must also be "hostile" - that is, it must have gotten out of control and spread from where it was intended to burn, or it must have been started by accident in the first place. By contrast, a friendly fire is one that is started on purpose and stays where it was intended to burn, such as in a fireplace or furnace. Lightning is "an abrupt, discontinuous, natural electric discharge in the atmosphere." This does not include “power surges" or any damages from an electrical current that was generated artificially

Perils Explosion occurs when the pent up force of confined air or gas suddenly bursts into the open, and the violent release of pressure or energy causes an audible bursting or breaking. This peril does not include explosions outside the home or losses due to burst water pipes, electrical arcing, rupture of pressure-relief valves, or explosion of steam fittings owned, leased, or operated by the insured. Windstorm is not defined in the policy. Hurricanes, tropical storms and tornados are windstorms, to be sure, but this peril is not limited to such storms. For our purposes, a windstorm can mean any wind with enough force to damage property.

Perils Hail, by definition, is precipitation in the form of spherical or irregular pellets of ice. Riot & Civil Commotion refers to any violent public disorder, generally involving three or more people acting with a common intent to disturb the peace. Two people acting covertly under cover of night is not a riot (perhaps vandalism, but not a riot).

Perils Aircraft can also include spacecraft and self- propelled missiles. This peril is somewhat curious, since an aircraft, spacecraft, or missile crashing into a home could also be covered under falling objects. However, unlike falling objects, the peril of aircraft does not require any physical contact. That is, coverage can still apply, even if damage was caused by the violent impact of a nearby crash or a sonic boom. This peril would also cover property damage inflicted by motorized model or hobby aircraft. The peril of Vehicles can mean anything that carries people or property, that is, any form of conveyance. This peril includes more than just a car striking a house. Since no physical contact is required, it can include damages such as a rock thrown by a vehicle that breaks a window, or a vehicle rolling into a lake while holding personal property, to name just a few. The most limited Homeowners form (the HO-2, which we'll cover in a moment) does exclude vehicle damage to a fence, driveway, or walk caused by a resident of the insured home.

Perils Theft includes losses caused by attempted theft and loss of property from a known place when it is likely that the property has been stolen. Four types of theft do NOT count under this peril: first, theft committed by an "insured"; second, theft involving a dwelling under construction, or materials and supplies for use during the construction process; third, theft from a part of the "residence premises" that the insured is renting out to someone who is not an insured under the policy; or fourth, off-premises theft of trailers, watercraft, and items at a secondary property that the insured owns or rents (these items are more specifically insured on other policies). The peril of Smoke refers to sudden and accidental damage from smoke. It does not include damage caused by agricultural smudging or industrial operations (since these are, presumably, neither accidental nor sudden).

Perils Falling Objects includes anything from tree limbs and aircraft to self-propelled missiles, spacecraft, satellites and meteors - basically anything that may fall on your covered property. As with the perils of wind and hail, there is no coverage for property inside a building, unless the falling object first damages the roof or outside walls containing the property. So, if a picture falls off a wall and damages the table below it, there is no coverage. 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. Weight of Ice, Snow, or Sleet is fairly self-explanatory. It means any damage to structures, and the property inside them, due to excessive weight. This peril does not require a collapse of the structure, it simply requires damage to occur.

Perils Collapse refers to when a covered structure (or part of a structure) abruptly falls or caves in. Collapse is covered when it is caused by any of the Broad Form perils, or by hidden decay, hidden insect or vermin damage, weight of contents, or the use of defective materials if the loss occurs during construction. This peril does not include damage to awnings, fences, patios, pools, underground pipes, septic systems, foundations, retaining walls, or docks. Accidental Discharge or Overflow of Water can apply to water or steam from within a plumbing, heating, air conditioning, or automatic fire sprinkler system, or from within a household appliance. It does not include the system or appliance from which the water or steam escaped. So, water damage from a broken pipe would be covered, but damage to the pipe itself is not. This peril also excludes sumps, vacant properties, and any losses that have to do with constant seepage or freezing (which is its own separate peril). Finally, it does not include accidental discharge or overflow that occurs off the premises.

Perils Sudden and Accidental Tearing Apart can mean rupture, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire sprinkler system, or an appliance for heating water. Unlike Accidental Discharge, this peril includes coverage for the system or appliance itself. Freezing can include the freezing of plumbing, heating or air conditioning systems, automatic fire sprinkler systems or household appliances. For coverage to apply, however, the home cannot be vacant, unoccupied, or under construction, unless the insured has taken “reasonable” care to maintain heat in the building, or has shut off the water supply and drained the system of water.

Perils Volcanic Eruption includes damage caused by the eruption of a volcano, including volcanic explosion, airborne shockwaves, volcanic ash, and lava flow. It does not cover earthquakes, land shock waves, or ground tremors. Eruptions that occur within a 72 hour period of each other are considered to be one eruption. Artificially Generated Current includes sudden and accidental damage from any electrical current, except currents that are naturally generated, such as lightning or static electricity. It does not include any loss to circuitry, tubes, transistors, or electronic components that are a part of appliances, fixtures, computers, home entertainment units or other kinds of electronics.

Exclusions Watercraft, their trailers, furnishing, equipment and outboard engines or motors: These items are only covered for wind and hail when inside a fully enclosed building If left exposed to the elements, they lose coverage for wind and hail Personal Property inside a building (and the building interior in the Broad Form): Damage caused by rain, sand, sleet, snow, or dust is only covered if wind or hail first made the opening that allowed the rain, sand, sleet, snow, or dust to enter.