Tag Archives: all risk coverage

Homeowner’s Insurance

 

Homeowner’s insurance (HOI) is a type of property insurance that covers a private residence.  It is an insurance policy that combines various personal insurance protections.  It includes losses occurring to one’s home and its contents. Furthermore, it also includes loss of use (additional living expenses) or loss of other personal possessions.

The cost of Homeowner’s Insurance often depends on what it would cost to replace the house. Typically, claims due to floods or war are excluded from coverage.   Special insurance can be purchased for war and floods.

Homeowners should do annual comparisons on Homeowner’s Insurance policies.  Upgrades to your home improve the aesthetics of your residence but also increase its value.  Whenever an upgrade is done, you should contact your insurance company to ensure that you are not under-insured.  Items such as hot tubs, swimming pools and trampolines leave you more vulnerable to lawsuits.  These items will, therefore, increase your annual payment for Homeowner’s Insurance.

In every state except California, a low credit score can drive up the price of your Homeowner’s Insurance.  Someone with a credit score of 500 probably not only lets bills slip but also the general maintenance of a home which leads to claims.  Laura Adams, of insurancequotes.com, discourages clients from requesting a low deductible as this may encourage you to make frivolous claims.  In some instances, one claim can result in a 32% hike in premiums.

Insurance carriers give lots of discounts if, for example, your vehicle is insured with the same company as your residence.  Not smoking, being a retiree or living in a gated community can increase the number of discounts that you qualify for with the carrier.  When discounts expire, remembering to request new discounts can help save you money every month.

Many homeowners do not understand what exposures are covered under their home insurance policy. Furthermore, more than two in five Americans (41 percent) believe that a standard homeowner’s insurance policy protects against mould damage.   This misconception could prove extremely costly.  Mould remediation can cost tens of thousands of dollars.  It is often not covered by Homeowner’s Insurance, especially if it was caused by neglected maintenance such as a leaky pipe. http://www.insurancejournal.com/news/national/2013/05/14/291804.htm

The Insurance Services Offices has standardised the following homeowner’s insurance policy forms in general use:

HO0 – Dwelling Fire Form

A form that provides coverage on a home against fire, smoke, windstorms, hail, lightning, explosion, vehicles and civil unrest.  It does not cover your personal property, personal liability or medical expenses.

HO1 – Basic Form

This form provides coverage on a home against 11 listed perils. The perils include fire or lightning, windstorm or hail, vandalism or malicious mischief, theft, damage from vehicles and aircraft, explosion, riot or civil commotion, glass breakage, smoke, volcano eruptions, and personal liability.

Exceptions include floods, earthquakes.  Most states no longer offer this type of coverage.

HO2 – Broad Form

A more advanced form that provides coverage on a home against 16 listed perils (including 11 on the HO1).

HO3 – Special Form

The typical, most comprehensive form used for single-family homes.  The policy provides “all risk” coverage on the home with some perils excluded, such as earthquake and flood.

HO4 – Contents Broad Form
The contents Broad, is a form for renters.  It covers personal property against the same perils as the contents portion of the HO2 or HO3.  An HO4 generally also includes liability coverage for personal injury or property damages inflicted on others.

HO5 – Comprehensive Form

Covers the same as HO3 plus more.  The contents are covered on an open peril basis.  Thus as long as the cause of loss is not specifically excluded in the policy it will be covered for that cause of loss.

HO6 – Unit Owners Form

The form for condominium owners.  It insures your personal property, your walls, floor as well as the ceiling against all of the perils in the Broad Form.

HO8 – Modified Coverage Form

The form is for the owner-occupied older home whose replacement cost far exceeds the property’s market value.

Coverage Classification

For each policy, there are typically 5 claim classifications of coverage.  These are based on Standard Insurance Services office forms.

Section 1 – Property Coverage

Coverage A – Dwelling

Covers the value of the dwelling itself (not including the land).   This is in place to give a buffer against inflation.  HO4 (renters insurance)  typically has no coverage A, although it has additional coverages for improvements.

Coverage B – Other Structures

Typically limited at 10% to 20% of the Coverage A, with additional amounts available by endorsement.

Coverage C – Personal Property

Covers personal property, with limits for the theft and loss of particular classes of items.  (e. g. $200 for money, banknotes, bullion, coins, medals, etc.).   This has led to some calls for more choice.

Coverage D – Loss of use/Additional Living Expenses

Covers expenses associated with additional living expenses (i. e. rental expenses) and fair rental value, if part of the residence was rented, however only the rental income for the actual rent of the space, not services provided such as utilities.

Additional Coverage

Covers a variety of expenses such as debris removal, reasonable repairs,  as well as damage to trees and shrubs for certain named perils (excluding the most common causes of damage, wind and ice), fire department charges, removal of property, credit card/identity theft charges, loss assessment, collapse, landlord’s furnishing, and some building additions.  These vary depending upon the form.

Exclusions

These generally include earth movement, water damage, power failure, neglect, war, nuclear hazard, septic tank back-up expenses, intentional loss and concurrent causation (for HO3).

Floods

Flood coverage is available in the form of a separate policy both from National Flood Insurance Program and from a few private insurers.

Coverage E – Personal Liability

Covers damages which the insured is legally liable for and also provides a legal defence at the insurer’s own expense.   About a third of the losses for this coverage are from dog bites.

Claims process

Insurance policies typically require that the insurer is notified within a reasonable time period.   In addition, a claims adjuster will investigate the claim.

Filing a claim may also result in an increase in rates, or in non-renewal or cancellation.  In addition, insurers may share the claim data in an industry database (the two major ones are CLUE and A-PLUS) with Claim Loss Underwriting Exchange (CLUE) by Choice point receiving data from 98% of US Insurers.