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The homeowners policy provides protection against the financial consequences of personal losses. A
homeowners policy is a combination of property and liability coverages. The
homeowners policy is tailored to meet the needs of a homeowner. The following
is a basic outline of the homeowners (HO-3) policy and the endorsements most
widely used on the HO-3 policy.
The HO-3 policy provides
coverages for one or two family dwellings that are owner occupied. The HO-3
policy provides coverage against risks of direct physical loss to real
property, except for those causes of loss that are specifically excluded.
Personal property is covered against direct physical loss caused by a
specified peril. In addition to the coverages stated under Section I, several
additional coverages are included. Some of the coverages included are; debris
removal, fire department charges, reasonable repairs charges, property removal
charges, and coverage for trees, shrubs and plants. Coverage is also included
for loss involving credit cards, forgery, and counterfeit money. These
additional coverages are included to provide protection for the insured
following a covered property loss. Each additional coverage has limitations
and is subject to certain conditions.
Dwelling
This amount of insurance
applies to the dwelling and attached structures. The limit of insurance for
the dwelling is based on the value of the home and what it would cost to
replace the home.
Other
Structures
This coverage limit applies
to detached structures such as a garage or storage shed. The limit of coverage
is set at 10% of the dwelling. The insured can purchase a higher limit.
Personal
Property
Coverage C provides
worldwide coverage for personal property of the insured. Special limits apply
to some types of property, and some property is excluded from coverage. The
overall limit for coverage C is 50% of the dwelling limit. Coverage C can be
modified in several ways with endorsements.
Loss of Use
This coverage applies in the
event of a loss under Coverage A. If the insured was to temporarily lose use
of the dwelling this coverage would apply. Payment would be made for expenses
incurred to live elsewhere following a loss that makes the home unsuitable for
living. Another method used to determine payment for loss of use is fair
rental value, which is the amount of rent that could reasonably be charged for
the premises, less any expenses that do not continue while the premises are
unsuitable for living.
Personal
Liability
Section II of the homeowners
policy provides liability coverage for personal loss exposures. The insuring
agreement under Coverage E provides liability coverage if a claim is made or
suit is brought against an insured because of bodily injury or property
damage. Coverage is provided for the residence premise as well as any other
premises used by the insured, as a residence, permanently or temporarily.
Liability coverage is provided for the named insured and members of the named
insured's household who are relatives. Personal liability has a basic limit of
$100,000 per occurrence, which the insured may increase for an additional
premium. In addition to the basic limit, Coverage E also provides additional
coverages for expenses such as defense cost, expenses incurred providing first
aid to others, damage to property of others and loss assessment charges. The
additional coverages provided under Section E are subject to limitations and
certain conditions.
Medical
Payments
This coverage will pay the
necessary medical expenses for bodily injury of others. Coverage applies to
accidents that occur on the insured premises or any location when caused by
action of the insured. The coverage has a basic limit of $1,000 per person.
The insured may select higher limits.
Endorsements
Limited Fungi, Wet or Dry Rot, or Bacteria Coverage
Policies now limit the amount that is paid out for a
claim resulting from
Limited Fungi, Wet or Dry Rot, or Bacteria. The limit on the homeowner's
policy is $10,000 for any claim for the dwelling, other structures, contents, &
loss of use and $50,000 for any liability claim. Many companies offer a
buyback of $25,000/$100,000.
Inflation Guard Endorsement
When this endorsement is
added to the policy, it increases the limit of coverage for A, B, C, and D.
The insured selects the percentage of increase for the year and the limits are
automatically increased at certain dates throughout the year.
Earthquake Coverage Endorsement
Earthquake coverage is
excluded under Section I of a homeowners policy. Adding this endorsement
removes the exclusion and adds earthquake coverage which is subject to a
deductible for each coverage under Section I.
Increase Other Structures Limit
This endorsement increases
the limit under coverage B, Other Structures.
The limit for unattached structures on the residence premise would be
increased, and the increase would be in addition to the limit already
provided.
Increase Special Limits
Certain types of personal
property under Coverage C have special limits of liability. Adding this
endorsement increases the limit for those particular types of property.
Scheduled Personal Property
The scheduled personal
property endorsement is used to provide coverage for risk of direct loss for
such items as jewelry, furs, cameras, musical instruments, silverware,
golfer's equipment, fine arts, postage stamps and rare coins. Scheduled
property can be insured for any amount the insured requires.
Personal Property Replacement Cost
Property loss settlements
under the homeowners policy are made on an actual cash value basis. When the
replacement cost endorsement is added, the loss settlement payment would be
sufficient to replace the item for the cost at the time of loss without
deductions for depreciation.
Water Back-Up/Sump Pump Failure
Water damage that is caused from a sump pump failure or
if water were to back-up through the sewers or drains is excluded from a
standard homeowner's policy. Many carriers will allow you to add this coverage
to your policy usually in the increments of $2500 or $5000.
Identity Theft Recovery
Carriers are now offering this endorsement to help those
insured's whose identity is stolen with the expenses
it costs to reestablish your credit. Although you are
usually not responsible for the bad debt it may be costly to correct your credit
such as lost time from work, affidavits, and legal fees. The endorsement usually
provides $10,000-$15,000 coverage for minimal cost (usually around $30/year)
Computer Coverage
The general homeowner's policy limits coverage for
electronic equipment, which includes computers, most companies offer an
endorsement to provide broader coverage for your computer, computer equipment,
and software.
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