1. Named-Peril & Open-Peril Forms
Homeowners Policies
Named-Peril & Open-Peril Forms

2. Six Major HO Policies
Each of which provides a different type of coverage

3. HO-2 Broad Form Insures against all 17 Broad Form Perils
Covers the insured’s house and personal property

4. 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

5. HO-6 Unit Owner’s Form (CONDO)
Known as the Condo Form
Covers the owner’s belongings
Covers all finished surfaces of the individual condo unit
Includes Broad Form Perils

6. HO-8 Modified Coverage Form
Named-peril coverage
Covers fewer perils
Covers property at ACV (deducts depreciation for age, condition, and wear)
It’s cheaper
Example: 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 HO-8 covers only the perils listed here, and pays only for repair costs or actual cash value, since replacement cost coverage would make it too expensive. Even number forms are named –peril (2,4,,6,8). If it’s not even its an open peril form.

7. Covered Perils for HO-8 Fire Lightning Windstorm Hail Explosion
Riot or Civil Commotion
Aircraft
Vehicles
Smoke
Vandalism or Malicious Mischief
Theft
Volcanic Eruption

8. 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
Grants ALL risks to be covered, but uses exclusions to determine what they will not cover.

9. HO-3 vs HO-5 HO-5 Comprehensive Form HO-3 Special Form
Open-peril coverage for dwelling and other structures
Named-peril coverage for personal property (covered against all Broad Form perils)
Open-peril coverage for structures and personal property
Most comprehensive coverage available

10. 6 Section of an HO Policy:
Declarations
Insuring Agreement
Definition
Section I – Property Coverage
Coverage A – Dwelling
Coverage B – Other Structures
Coverage C – Personal Property
Coverage D – Loss of Use
Additional Property Coverages
Exclusions
Conditions
Section 11 – Liability Coverage
Coverage E – Personal Liability
Coverage F – Medical Payments
Additional Liability Coverages
General Conditions and Endorsements

11. Coverage A - Dwelling Property covered: Dwelling
Structures attached to dwelling
Materials located in or near the “residence premises” used to construct, alter, or repair dwelling and other structures on property
Items that service the dwelling (AC compressor, fuel tanks)
Under HO-6 (Condo Form): alterations, appliances, fixtures, and improvements that are part of building contained within residence

12. Coverage B – Other Structures
Designed for detached structures, including:
Garages
Gazebos
Fences
Mailboxes
Lampposts
Sheds
Pays in addition to the limit for Coverage A
Typically set at a percentage of Coverage A limit
Example Coverage A: $325,000
Coverage B: 10% of Coverage A ($32.500)
Insured could receive up to $357,500

13. Coverage B does not cover:
Detached structures wholly rented out
Structures held for rental
Detached structures used for business
Here is what it covers:
Structures rented to an insured or tenant of the primary dwelling
Garages rented as private garages
Example: Jeff operates a small engine repair shop out of a building on his residence premises that was originally intended to be a detached garage. Even when damaged by a covered peril, this structure would not be covered under Jeff’s Homeowners form, since he uses it for business purposes.

14. Coverage C – Personal Property
Real Property:
Buildings
Elements attached to buildings
Building materials/supplies that are located on or next to the residence premises and intended for use on those premises
Personal Property
All property that does not qualify as real property
Covered anywhere in the world
Buildings, furniture, clothes, belongings, food; toys; personal effects, etc

15. Coverage C – Personal Property
Coverage C – Limits
Two categories of personal property
1. Property usually situated at the residence premises: full coverage
2. Property usually situated somewhere other than the residence premises: 10% of Coverage C limit or $1000, whichever is greater

16. Coverage C – Special Limits
$200 coins and money
$1500 securities, accounts, deeds, letters of credit, manuscripts, personal records, passports, tickets, and stamps
$1500 theft of jewelry, watches, furs, and precious stones
$2500 theft of firearms
$2500 theft of silver, gold, and platinum
$1500 boats and their trailers, furnishings, equipment, and engines
$1500 other types of trailers
$2500 personal property used for a business
$1500 personal property used when away from the residence
$1500 portable electronics and accessories that are in a vehicle
$250 antennas, tapes, wires, records, disks, and other media while in a vehicle

17. Coverage C Exclusions Personal Property not covered: Pets
Motor vehicles
Aircraft and hovercraft
Property of a renter or boarder
Personal property the insured is renting out
Credit cards
Value of water or steam (like from a water heater)

18. Coverage D – Loss of Use
For Indirect losses that result from direct losses
3 coverages for Loss of Use:
Additional Living Expenses (ALE)
Fair Rental Value (FRV)
Prohibited Use (a.k.a Civil Authority)
Ben has to stay in a Airbnb because his home suffered broken windows after a storm. Coverage D pays for his stay during home repairs because the direct loss of the windows is the cause of the Airbnb expenses.

19. Additional Living Expenses
Most common type of Coverage D – Loss of Use
Pays increase in expenses needed for the insured to maintain normal standard of living after a covered loss
Requirements:
Dwelling must be uninhabitable
Damage must have been caused by a covered peril
Only covers costs that exceed the insured’s normal living expenses

20. Additional Living Expenses Example - Coverage D – Loss of Use
Amanda’s regular expenses:
Mortgage payment
$20/week for laundry and dry cleaning
Amanda’s expenses after the loss:
Hotel bill
$60/week for laundry and dry cleaning
Increase in Amanda’s expenses due to the loss:
$40/week for laundry

21. Fair Rental Value (FRV) – Coverage D – Loss of Use
Type of Coverage D – Loss of Use
Indemnifies insured for lost rent if a tenant has to move out due to covered damages
Pays lost rental income until unit is habitable again
Only pays net loss: subtracts any expenses that do not continue while the tenant is gone

22. FRV Example - Coverage D – Loss of Use
Before the loss:
Dana’s rental income: $1200
Dana’s water bill for rented unit: $40/month
After the loss:
Dana’s lost rent: 3 weeks (3/4 month = $900)
Water turned off: 3 weeks (3/4 month = $30)
Dana’s net loss: $900 - $30 = $870

23. Fair Rental Value – Important Note - Coverage D – Loss of Use
Coverage does not include losses due to cancelled lease or agreement
Only pays up until the unit is repaired, not until the insured finds a new tenant, if applicable

24. Civil Authority Coverage - Coverage D – Loss of Use
Pays for ALE and FRV when a civil authority prevents the insured from using the home
Civil authority: any government entity acting on behalf of, or to protect, people or property
Only applies if the damage was caused by a peril covered in the insured’s policy

25. Civil Authority Example
After a fire destroys a national landmark, the fire department block off access to Kevin’s house. Since fire is a covered peril in Kevin’s policy, and since a civil authority has prevented Kevin from access his home, Civil Authority coverage will apply.

26. Coverage D – Limits Measure in time rather than dollars
Additional Living Expenses are paid:
Until the premises is repaired or replaced or
Until the insured’s household can settle elsewhere
Fair Rental Value is paid:
For the shortest amount of time needed to restore the rented area to rentable condition
Civil authority coverage pays ALE and FRV:
Until access to the home is restored
Up to a max of 2 weeks

27. Limits of Coverage D
Designed to cover the insured until the dwelling is habitable
Allow additional living expenses and Fair Rental Value to extend beyond the policy expiration date if needed
Remember: FRV does not include time spent finding a new tenant if precious tenant cancels lease

28. Loss of Use Deductibles
Additional Living Expenses and FRV subject to the policy deductible
Civil authority coverage: not subject to any deductible

29. 18 Perils Covered Under HO-2
fire, lightning, explosion, smoke, windstorm, hail, riot/civil commotion, aircraft, vehicles, vandalism, tearing apart, sinkhole collapse, volcanic action), plus the following additional perils: falling objects; weight of snow, ice, or sleet; accidental discharge of water; artificial current, and collapse from specified causes.