Chapter 20: Homeowners Insurance. Homeowners insurance forms, drafted by the Insurance Services Office (ISO) are widely used in

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1 Clquitt/Rejda McNamara Chapter 20 Chapter 20: Hmewners Insurance Hmewners Insurance Basics Hmewners insurance frms, drafted by the Insurance Services Office (ISO) are widely used in the US A plicy can be used t cver the dwelling, ther structures, persnal prperty, additinal living expenses, persnal liability claims, and medical payments t thers Current Hmewners Plicies : cvers the dwelling, ther structures, and persnal prperty n a named perils basis. : cvers the dwelling and ther structures n a riskf direct physical lss basis. All direct physical lsses are cvered except thse lsses specifically excluded. Persnal prperty is cvered n a named perils basis. : cvers a tenant s persnal prperty n a named perils basis. : prvides pen perils cverage ( all risks cverage ) n the dwelling, ther structures and persnal prperty. All direct physical lsses are cvered except thse lsses specifically excluded. : cvers persnal prperty n a named perils basis. A minimum f $5,000 f insurance is als prvided n the cndminium unit that cvers imprvements and additins. : designed fr lder hmes. Dwelling and ther structures are based n the amunt required t repair r replace using cmmn cnstructin materials and methds. Analysis f the HO 3 Plicy The HO 3 plicy has tw sectins f cverage: Sectin I : Cverage A: Dwelling Cverage B: Other Structures Cverage C: Persnal Prperty Cverage D: Lss f Use Additinal Cverages Sectin II : Cverage E: Persnal Liability Cverage F: medical Payments t Others

2 Clquitt/Rejda McNamara Chapter 20 Analysis f the HO 3 Plicy The fllwing persns are cnsidered insureds under the plicy: Resident relatives Full time student away frm hme Sectin I Cverages Cverage A cvers the dwelling n the residence premises and any structure attached t the dwelling The cverage specifically excludes land Cverage B insures ther structures n the residence premises The amunt f cverage is based n the amunt f insurance in Cverage A (dwelling) Cverage C insures persnal prperty wned r used by an insured Persnal prperty is cvered anywhere in the wrld, bth n and ff premises Cverage fr persnal prperty at anther residence, such as a vacatin hme, is limited t 10% f Cverage C r $1000, whichever is greater

3 Clquitt/Rejda McNamara Chapter 20 An insured can use a t insure certain persnal prperty fr a specific amunt Cverage C als excludes certain types f prperty: Animals, birds, and fish Aircraft and parts Prperty f rmers, barders, and ther tenants Cverage D prvides prtectin when the residence premises cannt be used because f a cvered lss is the increase in living expenses actually incurred by the insured t maintain the family s nrmal standard f living Additinal cverages in Sectin I include: Reasnable repairs t prtect the prperty frm further damage Trees, shrubs, and plants, fr a limited set f perils Remval f prperty that is endangered by an insured peril Unauthrized use f credit card, electrnic funds transfer card r access device; frgery and cunterfeit mney

4 Clquitt/Rejda McNamara Chapter 20 Sectin I Perils Insured Against The dwelling and ther structures are insured against risk f all direct physical lsses unless specifically excluded Persnal prperty is insured fr a direct physical lss if it is caused by ne f the perils listed in the plicy Named perils include fire, windstrm r hail, explsin, rit r civil cmmtin, aircraft, vehicles, smke, vandalism, theft, etc. Sectin I Exclusins The plicy excludes: Any lss due t an rdinance r law, except as described in the Additinal Cverages Certain water lsses Lsses which are intentinal Sectin I Cnditins The insurer s liability fr a lss is limited t the insured s insurable interest at the time f lss A deductible f $250 applies t any lss cvered by Sectin I cverages In states that are vulnerable t natural catastrphes, insures can use percentage deductibles

5 Clquitt/Rejda McNamara Chapter 20 The insured must perfrm certain duties after a lss ccurs: Prepare an inventry f damaged persnal prperty File a prf f lss within 60 days after the insurer s request Lsses t persnal prperty are paid n the basis f actual cash value After giving ntice t the insured, the insurer has the right t repair r replace any part f damaged prperty with like prperty Lsses t the dwelling and ther structures are paid n the basis f replacement cst with n deductin fr depreciatin If the dwelling is insured fr at least 80% f replacement cst at the time f lss, partial lsses are paid in full