1. Chapter 6 Homeowners Insurance
ISO Standard Policy
This set of overheads provide an overview of the homeowner’s program. No set of overheads can totally and accurately describe the homeowners contract. Overheads cannot substitute for the lengthy and complicated nature of the actual contract. This is why I actually go through the contract and explain and interpret it to my class.
The HO2 contract described in this book is part of a series of homeowners contracts that are used for different purposes. The contract is found in the Appendix to the text.
All of the contracts have Section II – the liability section – and the wording is identical in each contract The difference in the contracts stem from the extent of perils and whether certain property is covered in section I.
The HO1 contract covers buildings and contents for a limited set of perils.
The HO2 contract covers buildings and contents for additional perils compared to HO1.
The HO3 contract covers contents for the same perils as HO2 but covers the building on an open peril basis.
The HO4 contract covers contents for the same perils as HO2 but covers no building. This contract is designed for tenants.
The HO5 contract covers contents and building both on an open peril basis. Many insurers just endorse an HO3 to create this contract.
The HO6 contract is designed for condominium owners and is similar to the HO4.
The HO8 contract is designed for low value structures that do not meet underwriting standards for the other contracts.

2. Risk Factors for Homeowners Insurance
Type of home (single family, town home, high-rise)
Square footage
Number of rooms
Floor level (if in high-rise)
Address (city, state, county)
Pets
Pool
Proximity to fire station and fire hydrant
Business being conducted on premises?

3. Personal property (including furniture, electronics, high value items, etc.)
Special safety features (security, alarms, sprinklers)
Credit rating of policyholder
Prior insurance history (claims filed, etc.)
Construction type (brick, frame, etc.)
Roof type (shingle, tile, metal, flat, etc)
**Amount of coverage required**

4. WHY DO I NEED HOMEOWNERS INSURANCE
WHY DO I NEED HOMEOWNERS INSURANCE? Your home is likely to be the biggest investment you will ever make. Losing this asset would cause a financial disaster if you don’t protect it with insurance. Your home is likely to be the biggest investment you will ever make. Losing this asset would cause a financial disaster if you don’t protect it with insurance. WHY DO I NEED HOMEOWNERS INSURANCE?

5. The Components of Basic Homeowners Insurance
What does basic homeowners insurance cover?
Dwelling – Coverage that protects the structure of the home (roof, walls, wall-to-wall carpeting, etc.).
Other structures – Coverage for sheds, detached garages and other structures not connected to the main dwelling itself.

6. Personal Property – Coverage for personal items (clothing, furniture, appliances, computers, etc.). Provides coverage on and off the premises.
Loss of Use – Coverage for when an insured has to move out of the home while repairs are made as a result of damage caused by a covered loss.

7. Liability Insurance – Pays for damages the insured is legally obligated to pay due to bodily injury or property damage.
Medical Payments – Pays for medical and/or funeral expenses incurred by a person on or off the insured’s property
Most homeowners insurance contracts normally include coverage for the following items, but this can vary by company and state. Check your policy to be sure what is and what is not covered.

8. Trees, shrubs, plants and lawns – Coverage is provided to these items if damaged by a covered loss.
Debris removal – Coverage for removing the remains or rubbish of any property destroyed as a result of a covered loss.
Fire Department Charges – Provides coverage for customary fire department charges under contract or agreement. May be subject to limits depending on your policy.

9. Perils Covered by Homeowners Insurance
Fire and lightning
Windstorm and hail
Explosion
Riot and civil commotion
Impact from aircraft
Impact from vehicles
Smoke
Vandalism and malicious mischief

10. Theft
Falling objects
Weight of ice and snow
Glass breakage
Accidental overflow of water from plumbing
Accidental electrical damage to appliances (caused by power surge)

11. Perils NOT Covered by Standard Homeowners Insurance (You may need purchase a separate policy!!)
Flood
Earthquake
Acts of War
Nuclear Detonation

12. * Depending on where you live, hurricane or windstorm coverage may or may not be covered. Check with an insurance agent to determine if an extra policy is needed to cover these perils.

13. ADDITIONAL COVERAGES*
Jewelry, watches, furs
Guns
Tools
Cameras, camcorders
Silver, gold, pewter
Money, coins, securities, deeds
Watercraft, trailers, equipment, motors
Computers
Business property

14. * Coverage for these items is already included in the homeowners insurance policy up to certain limits. For an additional premium, you can increase the limits of these coverages to meet your needs.

15. LIABILITY COVERAGE
Protects you against legal claims you are legally obligated to pay for causing bodily injury, sickness, disease or death of others
Pays the cost of defending a claim against you
Covers damage to the property of others

16. Protecting your personal property
Two options for homeowner insurance

17. # 1: Actual Cash Value
Definition: The value of the property lost or damaged at the time of the loss. This method of valuation takes into consideration depreciation based on such factors as:
Age of the item
Market value
Condition of the property at the time of loss or damage.

18. #2: Replacement Cost
Definition: The cost of replacing damaged or destroyed property without deduction for depreciation in the value of the property.

19. Parts of the Homeowners Contract
SECTION INSURING AGREEMENT LIMIT
I A Dwelling $100,000 (e.g.)
B Other Structures 10 % of A
C Personal Property 50 % of A
D Loss of Use 20 % of A
II E Personal Liability $100,000
F Medical Payments to Others $1,000
I present the structure of the Homeowners contract and explain briefly what is covered by each section.
Section I covers all of the property coverages – direct and indirect
Section II covers the legal relationships and medical payment issues.
Each insuring agreement covers one type of loss
Dwelling
Other structures separated by a clear space
Personal property
Loss of use
Personal Liability
Medical Payments to Others
When an insured purchases the contract, the amount for the dwelling is set and all the other numbers are automatically filled in as a fraction of the dwelling amount. Section II, the minimum limits are shown. If an insured needs more coverage for example the other structures, it can be purchased. Coverage can be increased with an additional premium, but coverages generally cannot be reduced or eliminated because of the way the contract is priced. (Based on $100 of dwelling coverage.)