1. Property Module I

2. Objective of this Module
The objective of this module is to provide you with a good understanding of the Homeowners Property and Liability coverage's, as well as the various “Property” policy forms available in Texas.
Knowledge of these products will help you, in conjunction with clients, to develop an insurance program that meets their needs and wants.
9/22/2018

3. The Property Policy Contract
Any individual or family faces many exposures to risks. Three major risks are:
Their house could be destroyed or damaged (if they own a home).
Contents of their house could be destroyed or damaged.
They could be held liable (and be sued) for an accident occurring on their premises, for an accident resulting from their activities away from home.
9/22/2018

4. The Property Policy Contract
The Homeowners policies are designed to protect a person or family against these risks. Whether clients own or rent a home, condominium, or mobile home, Homeowners insurance is valuable protection they should not be without.
Farmers writes property insurance in all states that we operate. Your personal lines manual describes the available policies as well as corresponding customer selection guidelines, coverage extensions, coverage limits, etc. This will all be discussed in more detail later in your training.
9/22/2018

5. The Policy Contract
Our discussion of the contract basics will begin with a review of the Homeowners Policy - Form B, which we refer to as the HOB.
Not all items in the contract will be explained or expanded upon in that we are covering a lot of information in a short period of time.
Because of this, we encourage you to review the contract in your own time and list any questions that you might have for further class discussion.
9/22/2018

6. Construction of the Contract
Each policy contract contains the following sections (Remember: DICE):
Declarations
Insuring Agreement
Conditions
Exclusions
9/22/2018

7. Construction of the Contract
Let’s take a closer look at two of these sections of the contact:
DECLARATIONS: Also known as the dec page or face sheet. It is attached to the policy and includes such information as insured’s name and address, description of the property and locations, coverage limits, premium, mortgage (if any), numbers for attached endorsements, etc.
AGREEMENT: This explains just what the company promises to do in return for the premium paid and compliance with the policy’s provisions.
9/22/2018

8. Definitions
Before getting further into the policy contract it is important to become familiar with the basic definitions.
“You” and “your” refer to the named insured in the Declarations and the spouse (if a resident of the same household).
“We”, “us” and “our” refer to the company issuing this policy
(i.e., the Fire Insurance Exchange or Farmers Insurance Exchange).
Policy Contract page 3
9/22/2018

9. Definitions
INSURED - is/are the person or persons named on the Declarations. This can be an individual; however, it is frequently a husband and wife. Relatives and other persons under the age of 21 are only covered if they are residents of the insured’s household.
OCCURRENCE - is defined as an accident, or repeated exposures to conditions, which cause bodily injury or property damage during the policy period.
RESIDENT PREMISES - means the one- or two- family dwelling and separate (other) structures where the insured resides.
9/22/2018
Policy Contract page 3

10. Major Sections of the Policy
The Homeowners policy is divided into two large coverage sections:
SECTION I - PROPERTY COVERAGE
Coverage A - Dwelling
Coverage B - Personal Property
SECTION II - LIABILITY COVERAGE
Coverage C - Personal Liability
Coverage D - Medical Payments to Others
9/22/2018

11. Section I - Property Coverage's
COVERAGE A - DWELLING - What’s Covered
The dwelling, including any attached structures ( such as an attached garage).
Policy Contract Page 4, Section 1 #1
9/22/2018

12. Section I - Property Coverage
Pause here to take a minute to review the policy contract for the following questions:
In most states, materials and supplies used in the construction of the dwelling or other structures are specified as be covered. Is this true for Texas?
In most states, wall-to-wall carpeting attached to the dwelling is specified as being considered part of the dwelling. Is this true for Texas?
9/22/2018

13. Important!
Proper Insurance to value is one of the most important considerations in insuring property; the insured needs to be properly protected. It is, therefore, important to write Coverage A in an amount close to the replacement cost of the dwelling as possible. (This may bear little relation to its market value.)
9/22/2018

14. Determining Replacement Cost
The Computerized Dwelling Replacement
Cost Estimation Program is designed to
properly establish and maintain adequate
insurance to value.
The program calculates the minimum estimated replacement cost, based on local labor and material cost, square footage, construction type, heating and air conditioning, etc.
Clients should be advised to keep you posted on any additions, renovations, or major purchases; it is required by the policy. These can boost the amount of coverage needed.
9/22/2018

15. Determining Replacement Cost
Pause here to examine the Replacement Cost Worksheet and to discuss Co-Insurance.
9/22/2018

16. Coverage A - Separate Structure
This provides coverage for structures that are detached from the dwelling, such as detached garages, swimming pools, fences, tool sheds, guest houses and other outbuildings on the premises.
The Separate (Other) Structures limits is typically 10% of the Dwelling Coverage (Coverage A). This is an additional amount of insurance; it does not reduce the Coverage A limit of coverage.
Pause here to review this section in the policy contract located on pages 4, #Coverage A #2
9/22/2018

17. Coverage B - Personal Property
Personal property owned or used by the insured is covered anywhere in the world. Required coverage is limited to:
50% of Coverage A for Actual Cash Value
60% of Coverage A for Replacement Cost
Coverage is limited to 10% of Coverage B or $1000, whichever is greater for:
Personal property owned or used by the insured is anywhere else in the world, other than the residence premises.
As specified , for personal property of a residence employee.
The contract states that this is additional insurance; it does not reduce the Coverage B limit of coverage.
9/22/2018
Policy Contract page 4 Coverage B

18. Coverage B - Personal Property
Special Limits for Certain Types of Property
$100 on money or numismatic (coins or currency) property or loss by theft or unauthorized use of bank funds transfer cards registered to the insured.
$500 on gold or silver bullion, manuscripts, notes, securities, stamps, evidences o debt, etc.
$500 for loss by theft of gems, watches, jewelry or furs.
Remember, some of these may be amended by an endorsement to raise these limits.
Policy Contract page 4 Coverage B
9/22/2018

19. Coverage B - Personal Property
Property Not Covered
Animals or birds. Pets are excluded because they are difficult to value.
Motor Vehicles. Generally, motor vehicles are excluded.
What does and does not constitute a motor vehicle is explained in the “Definitions” section.
Aircraft and their parts.
Property usually rented to others off the residence premises.
Consult the property contract for any other categories of property not covered.
9/22/2018
Policy Contract page 4-5 Coverage B

20. Important Points to Remember
When coverage is either limited or excluded under the Homeowners policy, this does not necessarily mean that the coverage is not available. Coverage may be provided via endorsements or separate policies. These can help you structure on insurance program to meet the needs and wants of clients.
Written documentation and photographs or videotapes of these possessions are excellent ways to help determine appropriate coverage. They are also important should there be a loss.
You can order Farmers’ “Household Contents Inventory Record” booklet to provide to clients.
9/22/2018

21. Coverage D - Loss of Use Payment option is 20% of Coverage A
In addition to covering the dwelling, other structures and personal property, the policy also provides “Loss of Use” coverage. When needed, this coverage is very valuable.
**NOTE -An HOA only provides 10% of Coverage A
Additional Living Expense. If a covered loss forces the insured to leave the insured premises, the necessary (additional) expenses needed to maintain a normal standard of living are paid. The insured must actually incur the expense.
Loss of Rents (Fair Rental Value in some states). If a covered loss makes part of the insured premises rented to others unsuitable to live in, the loss of rents is reimbursed to the insured.
Policy Contract page 5
9/22/2018

22. Coverage D - Loss of Use
Use your policy contract to answer the following:
1. If a loss caused by a Peril insured Against under Section I makes the residence premises wholly or partially untenantable, do we cover:
additional living expenses so that your household may maintain its normal standard of living?
Fair rental value for loss of rent monies which were paid for the part of the residence premises that do not continue?
Yes, it is covered.
Yes, it is covered.
Policy contract page 5
9/22/2018

23. Extensions of Coverage
These are supplemental benefits that expand insurance protection. Many may seem incidental; however, if not covered, they could add up to a substantial amount.
Policy Contract page5-6
9/22/2018

24. Extension of Coverage Debris Removal
If damage to the covered property plus the expense for removing debris exceeds the Dwelling coverage amount on the property, the policy provides an additional 5% of the Coverage A limits toward the cost of debris removal.
Is this stipulated in your state’s policy? Review page 5-6, Extension of Coverage 1-A for the answer.
9/22/2018

25. Extension of Coverage Emergency Repairs
This pays for reasonable (necessary) repairs made solely to protect the insured property from further damage. This would include repairs such as boarding up broken windows or covering a hole in the roof. The damage must be caused by an insured peril.
Review page 5-6, #3 of the policy contract.
9/22/2018

26. Extension of Coverage Trees, Shrubs, Plants and Lawns
They are covered against named perils. Note that windstorm and hail are not specified as covered perils.
This coverage provides up to 5% of the Dwelling coverage; the limit of payment for any one tree, plant or shrub is $
Is this coverage considered additional insurance ( in addition to the policy limit)? See page 5-6, #4 of the policy contract.
9/22/2018

27. Extension of Coverage Fire Department Service Charges
Up to a specific amount will be paid as an additional amount of insurance for service charges made by a Fire Department in answer to a call. No deductible applies.
This coverage is not provided in Texas.
9/22/2018

28. Extension of Coverage Emergency Removal of Property
This provides that covered property is insured for direct loss from any cause:
While being removed from the premises when endangered by loss from a covered peril; and
While removed for a specified amount of time.
What is the amount of time specified in your policy? See page 5, #5 Extensions of Coverage.
9/22/2018

29. Extension of Coverage
Credit Card, Fund Transfer (Debit Card), Forgery and Counterfeit Money
The insured is covered up to $100 for loss caused by the following. (This does not increase the coverage B limit of insurance.)
Theft or unauthorized use of credit cards or debit cards.
Forgery or alteration of a check or other negotiable instrument.
Acceptance in good faith of counterfeit U.S. or Canadian paper money.
9/22/2018
Policy Contract page4

30. Extension of Coverage
Credit Card, Fund Transfer (Debit Card), Forgery and Counterfeit Money
The defense coverage is also valuable. It typically specifies that we:
Will defend the insured in any claim or suit brought against the insured concerning the Credit or Debit card coverage's.
Have the option to defend the insured or the insured's bank against a suit for the enforcement of payment under the Forgery Coverage.
Policy Contract page 10
9/22/2018

31. Extension of Coverage
Credit Card, Fund Transfer (Debit Card), Forgery and Counterfeit Money
There are exclusions under certain situations, including loss arising from the following:
Business Pursuits
Dishonesty of the insured
Policy Contract page 4
9/22/2018

32. Extension of Coverage Collapse of Buildings
Collapse is typically not the proximate cause of a loss, rather it is the result of some other cause. This could include:
Weight rain that collects on a flat roof.
Weight of contents, people or equipment while on a roof.
Collapse of Building applies to Coverage B in Texas.
Does Texas contain this coverage? Under which section is it addressed?
See Page 6 & 7
9/22/2018

33. Extension of Coverage Loss Assessment
Many homeowners belong to an association of property owners. This coverage provides up to $50,000 in $1,000 increments when:
The assessment results from direct loss to collectively owned property covered by a peril insured against under Coverage A (Dwelling).
The insured, as owner or tenant of the residence premises, is charged an assessment by a corporation or association of property owners; and
The assessment is not charged against the insured or the association by a governmental body.
Is this coverage provided in the Texas policy contract?
Coverage can be added by endorsement
9/22/2018

34. Extension of Coverage Consequential Loss
This coverage, which is provided in the Texas Homeowners Policy - Form B, deals with the loss of personal of property from sudden temperature change. The loss must result from physical damage to the home caused by a covered peril.
9/22/2018

35. Extension of Coverage Building Ordinance or Law Coverage
We do not cover loss caused by or resulting from the enforcement of any ordinance or law regulating the construction, repair or demolition of a building or structure
9/22/2018

36. Extension of Coverage Important!
Take time to review all of the “Extensions of Coverage” in the policy contract. If you have any questions, please bring them to the next class.
9/22/2018

37. Section I - Perils Insured Against
The Texas Homeowners Policy - Form B (HOB) covers the dwelling and separate (other) structures on an “accidental direct physical loss” basis; personal property is covered on a “named peril” basis. Let’s review these terms.
9/22/2018

38. Section I - Perils Insured Against
Named-peril basis - If a loss is caused by a peril that is named, the loss is covered. If it’s not named in the policy, it’s not covered.
Accidental direct physical loss (ADPL) - Covers losses by all perils except those that are excluded. ADPL is said to be “defined by exclusions.”
9/22/2018

39. Applying to Coverage A
The perils that the policy insures against are not listed in the policy itself. The policy states that we insure against “all risks of physical loss” to the property described in Coverage A unless the loss is specifically excluded.
9/22/2018

40. Applying to Coverage B
The policy states that we insure for accidental direct physical loss to property described in the Personal Property section, subject to Section I exclusions and limitations, caused by one (or more) of the named perils.
9/22/2018

41. Applying to Coverage B The partial list includes: Fire and Lightning
Windstorm, Hurricane and Hail
Riot and Civil Commotion
Sudden and Accidental Damage from Smoke.
Aircraft
Vehicles
Vandalism
Theft
Freezing of a household appliance.
Accidental discharge, leakage, or overflow of water or steam.
Falling objects
9/22/2018

42. Section I - Exclusions
Since coverage for the dwelling and separate structures is basically defined by the exclusions, it’s important to review them. You and the insured need to know exactly what they are purchasing.
9/22/2018

43. Section I - Exclusions Water Damage
Including damage from flooding, surface water, tidal waves, and water backing up through sewers and drains. The policy provides examples to clarify this particular exclusion. They are located on page 7, #1 I of the policy contract. Please take time to review this and prepare to discuss any questions in next weeks class.
IMPORTANT: Flood insurance is available through the federally sponsored Flood Program. This will be discussed in detail later in your training.
9/22/2018

44. Section I - Exclusions Nuclear hazard
This includes any nuclear reaction, radiation, or radioactive contamination. If however, nuclear hazard causes direct loss by fire, the loss will be covered.
9/22/2018

45. Section I - Exclusions Enforcement of any ordinance or law
Any enforcement of any ordinance or law regulating the construction, repair or demolition of a building or other structure, unless specifically provided (endorsed) by the policy.
9/22/2018

46. Section I - Exclusions Power failure
Power failure off the insured premises, except when a peril insured against ensues on the premises. In such a case, coverage applies only for the ensuing loss.
9/22/2018

47. Section I - Exclusions Neglect
If the insured does not use reasonable means to protect the property at and after the time of loss, the loss is not covered.
9/22/2018

48. Section I - Exclusions
War
No additional explanation needed!
9/22/2018

49. Section I - Exclusions Theft
Theft from a home under construction, including any building material and supplies for use in the construction not on the residence premises.
Policy Contract page 4 d (2)
9/22/2018

50. Section I - Exclusions Vandalism
Vandalism or glass breakage if the house has been vacant for more than 60 days.
9/22/2018

51. Section I - Exclusions Other exclusions include: Wear and tear
Inherent vice (a latent defect in the property that may cause loss or damage to it.
Mechanical breakdown
Birds, insects, vermin, rodents, or domestic animals
Rust
Mold
Wet or dry rot
9/22/2018

52. Section I - Exclusions Other exclusions include: Smog
Smoke from agricultural smudging or industrial operations
Contaminants, pollutants, insecticides, or hazardous gases or chemicals
Cracking, shrinking, bulging or expansion of pavements, patios, foundations, walls, floors or ceilings
9/22/2018

53. Section I - Conditions
The Homeowners policy contains three sets of conditions. The first applies to Property coverage's, the second applies to Liability coverage's, and the third applies to the entire policy.
9/22/2018

54. Section I - Conditions Insurable Interest and Limit of Liability
When there is more than one person with an insurable interest in the covered property, the company’s liability will be no greater than the insured’s interest at the time of loss or for more than the limit of coverage.
This condition also states that upon each occurrence of loss to the property, the amount of insurance designated as “loss by fire” is reduced by the amount of that loss. However, it also provides that as repairs are made, the amount that was reduced is restored to the policy (according to the amount spent on repairs).
9/22/2018

55. Section I - Conditions Duties after a loss
This clause specifies what the insured must do when a loss occurs and what the company’s duties are after a loss.
Review a few of these duties beginning on page 5, #3 of the policy contract.
9/22/2018

56. Section I - Conditions Loss Settlement
The Loss Settlement clause specifies how losses will be paid.
Losses can be settled in one or two ways:
ACV
Replacement
Take a moment to review this condition listed on page 9-10 of the policy contract.
9/22/2018

57. Section I - Conditions Other Insurance
If there is other insurance applying to the loss, the company will pay its proportionate share. The contract states that while other insurance is permitted on property covered by this policy, other insurance covering the dwelling is not permitted.
9/22/2018

58. Section I - Conditions Deductible Clause
The company pays for loss to covered property, less the deductible specified in the Declarations.
There are two deductible clauses that apply to the Property section. They are:
Windstorm, hurricane, hail or wind driven rain
All other perils
9/22/2018

59. Section I - Conditions Loss to a Pair or Set
In the case of loss to an item which is part of a pair or set, the measure of loss shall be a reasonable and fair proportion of the total value of the pair or set. The importance of the item will be considered in assessing the loss. Such loss will not be considered a total loss of the pair or set.
9/22/2018

60. Section I - Conditions Glass Replacement
When required by law, glass damage caused by a covered loss will be replaced with safety glazing materials.
Incidental glass breakage will only be covered if the HO105 is attached. Stop here and review that endorsement.
9/22/2018

61. Section I - Conditions Appraisal
There are times when the company and the insured cannot agree on the amount of loss. This condition describes the ground rules to be used in such a situation:
Selection of appraisers and notification (including time) requirements
Appointment of an umpire
Payment of appraisers and other expenses.
9/22/2018

62. Section I - Conditions Suit Against Us Our Option
Insureds cannot bring suit against the company unless they comply will all the policy provisions. Any suit or action must be brought within 2 years and 1 day of the date of loss.
Our Option
If we give the insured notice within 15 days, we have the option of repairing or replacing the damaged property.
9/22/2018

63. Section I - Conditions Loss Payment Mortgage Clause
The company agrees to make any loss payments to the insured. Payment will be made within 5 business days after notifying the insured that we will pay the claim.
Mortgage Clause
This clause discusses the rights and obligations of the mortgagee (lender) and the insured, as well as those of the company, in the event of a loss. Take time to review this clause listed on page 7 of the policy contract.
9/22/2018

64. Section I - Conditions No Benefit to Bailee
This supports the company’s right to subrogate against a Bailee (one who has custody of the property of another) if they were liable for the loss. This clause is listed on page 8 of the policy contract.
9/22/2018

65. Preparing for next week
Next we will be covering Section II of the the policy contract.
Please read the policy contract in full and ask questions on the information which was covered today.
9/22/2018