Types of Policies
What is Insured.
Coverage A - Dwelling:
Provides protection for the dwelling on
an all risks basis up to the policy limits. The policy limit is set by
the policyowner at the time the insurance is purchased. You can choose
to insure your home and belongings for either replacement cost or actual
cash value. The home should be insured for replacement cost. Replacement
cost is the amount it would take to replace or rebuild your home or repair
damages with materials of similar kind and quality, without deducting
for depreciation. Depreciation is the decrease in home or property value
from the time it was first built or purchased because of age or wear.
Actual cash value is the amount it would take to repair or replace damage
to your home after depreciation. Most insurers require homeowners to insure
their homes for at least 80 percent of the replacement cost. If you insure
for less than 80 percent of the replacement cost of your home, any loss
payment from your insurance company will be subject to a coinsurance penalty.
You may wish to insure at 100 percent of replacement cost so you will
have sufficient coverage in the event of total loss.
Coverage B - Other Structures:
Provides protection for unattached structures
such as tool sheds, detached garages, houses and their contents. Coverage
B is usually equal to 10 percent of the policy limit on Coverage A.
Coverage C - Personal Property:
Provides protection for personal belongings.
Items such as clothing, furniture and standard electronics are covered.
Some policies may include credit card theft and away from home theft.
The policy limit on Coverage C is equal to 50 percent of the policy limit
on Coverage A. Most standard home insurance policies cover the contents
of your home on an actual cash value basis. Many insurers offer an option
to insure your belongings at replacement cost. The premium will be higher
for this coverage but may be worthwhile. Some forms of personal property,
such as, silverware, computers, guns, money, expensive antiques and jewelry,
have limited coverage under the homeowner's policy and may be added to
the policy as an endorsement
Coverage D - Additional Living Expenses:
If your home is damaged to the extent of
being uninhabitable, this coverage will pay for the living expenses away
from the home while repairs are being made. These expenses could include
limited motel, restaurant and warehouse storage. The policy limit to Coverage
D is equal to 20 percent of the policy limit on Coverage A.
Coverage E - Personal Liability:
This coverage protects you against a claim
or lawsuit resulting from bodily injury or property damage to others caused
by your negligence. For example, your dog bites someone, your child breaks
a window or a friend or stranger hits his or her head on something. This
coverage applies to you and all family members who live with you. The
amount of coverage is determined by the policyowner at the time the policy
Coverage F - Medical Payments to Others:
Regardless of who is at fault, this coverage
pays for the medical expenses for persons accidentally injured on your
Types of Policies
There are two types of policies: all
risks and named perils. A named
perils policy covers losses that are due to only those perils listed
in the policy. The perils typically covered include fire, windstorm, hail,
and other direct physical losses. An all risks
policy covers losses that are due to any peril except those specifically
excluded in the policy. It is important to note the all
risks policy provides broader protection than do named
HO-1 Basic Homeowner
The five types of homeowner packages offered
to owners of single family owner occupied homes are HO-1, HO-2, HO-3,
HO-3 with HO15 and HO-8.
Insures your property against the following
11 basic named perils: fire/lightning, loss
of property removed from premises endangered by fire or other perils,
windstorm/hail, explosions, riot/civil unrest, aircraft, vehicles, smoke,
vandalism/malicious mischief, theft, and breakage of glass constituting
a part of the building.
HO-2 Broad Basic Homeowner
Insures your property against the 11 basic
named perils in HO-1 plus 7 additional named
perils: falling objects, collapse of roof due to weight of ice or snow
or sleet, collapse of building(s) or any part thereof, bursting of steam/hot
water system , leaking of plumbing or heating system, freezing of pipes,
sudden and accidental damage from artificially generated currents to electrical
appliances or devices or fixtures or wiring,
HO-3 Special Extended Homeowner
Provides for comprehensive coverage (all
risks) on your home and the 18 (HO-2) broad named perils coverage
on your contents. This is the most popular of all homeowner policies.
HO-3 with HO-15 Comprehensive Homeowner (all risks)
Covers your home and personal property
for everything that is not specifically excluded. This policy usually
provides the broadest all risks coverage
available, but is not offered by all insurance companies.
HO-8 Modified Homeowner
Covers homes that have suffered extensive
depreciation. Historical or architectural features may make the home more
expensive than its market cost. This coverage is more restrictive much
like HO-1 but is geared towards older homes.
HO-6 Condominium Unit Homeowner
Covers items not insured by the condominium
association's policy, such as, property damage to personal belongings,
wall, floor and ceiling coverings, and any accessories not originally
installed in the unit. An HO-6 policy is basically an HO-2 policy. It
also provides additional coverage for personal property, loss of use,
personal liability and medical payments.
HO-4 Renter's Coverage
Insures your household contents and personal
belongings against the named perils in HO-2
policy. It also provides coverage for additional living expenses and includes
personal liability protection.
You can purchase optional coverage to add
to your policy. They are called endorsements or sometimes "floaters".
Some common endorsements:
Inflation Guard Endorsement
Allows your insurance company to automatically
change your policy limit. This is done to cover the replacement cost of
your home that is increasing with inflation to maintain your coverage
at 80% of replacement cost. Not all companies offer this endorsement.
Guaranteed Dwelling Endorsement
Covers the market value of your home. Often
the market value is higher than the replacement cost.
Guaranteed Contents Endorsement
Covers the cost to replace a personal item
even though you might have owned it for a number of years and it has depreciated
Other Structures Endorsement
Covers larger more elaborate structures
(gazebos, guest house etc.) that would exceed the standard 10% limit.
Sewer and Drains Endorsement
Covers damage to your finished or storage
basement in the event of faulty sewer lines or drains. This is not covered
by standard policies.
Scheduled Personal Endorsement
Sometimes called a "personal article floater"
covers possessions such as jewelry, furs, stamps, coins, guns, computers,
antiques, and other items that may exceed normal limits in a standard
policy. Each item is valued, itemized and described. Excluded perils are
listed. There is usually no deductible applied to this coverage.
Is used in place of a scheduled personal
endorsement. There is no itemizing but the Blanket Endorsement covers
what the standard policy does not cover such as jewelry, coins, etc..
Increased Limits on Money and Securities
Increases the coverage on money, bank notes,
securities, deeds, etc..
Secondary Residence Premises Endorsement
Applies to a secondary residence.
Home Daycare Endorsement
Covers any liability claims if you operate
a daycare in your home.
Business Pursuits Endorsement
Extends liability coverage if you operate
an at-home sales business or other small "franchised" ventures such as
Tupperware and Avon. It does not extend coverage if you own the business.
Home Business Endorsement
Extends liability coverage in your home
if you own and operate a business in your home. It must be a small business.
Personal Injury Endorsement
Extends liability coverage to you if you
are sued for Libel, Slander, and Defamation of Character. This is covered
in umbrella policies and may not be needed.
Income Property Endorsement
Extends liability coverage to areas of
your home or premise that you rent.
Ordinance and Law Endorsement
Extends coverage for additional costs of
reconstructing your home under current codes. This usually applies to
Extends personal liability and medical
payments on small sailboats and outboard motor boats.
Theft Coverage Protection Endorsement
Extends theft protection to the contents
of your motor vehicle, trailer or watercraft without proof of forced entry.
Credit Card Forgery and Depositors Forgery Coverage Endorsement covers
Covers the loss, theft or unauthorized
use of credit cards. It also covers forgery of any check, draft, promissory
note etc.. This endorsement has certain exceptions. No Deductible applies.
Should be required by your lender if your
home is located in a flood plain. Depending on where you live you may
qualify for flood insurance through the National Flood Insurance Program
(NFIP). They can be reached at 1-800-638-6620. Flood insurance covers
direct physical damage to the main home and its foundation and erosion
damage. It does not cover structures extended over water and structures
other than buildings such as pools and gazebos.
Earthquake Insurance Endorsement
Is available through most insurance companies.
It is regarded as catastrophic coverage and usually has a deductible of
10% of the home's value.
Covers windstorm and hail damage if it
is excluded from your standard policy. It usually depends on where you
May enjoy discounts up to 14%.
Such as deadbolt locks, simple alarm systems
and smoke detectors may reap discounts from 1-5%. Sophisticated monitoring
services and integrated sprinkler systems may reduce your premiums as
much as 20%.
If you combine your automobile and homeowner
policy with the same carrier you may obtain discounts from 5% to 15%.
If you maintain your coverage with the
same carrier for a number of years they will usually reward you with a
On average stays home longer and may be
rewarded with a 5% discount.
Some carriers reward non-smokers a 5% discount.
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