Lecture Ten： Homeowners Insurance

Learning Objectives Identify the major homeowners policies for homeowners, condominium owners, and renters. Explain the major provisions in Section1 of the homeowners 3 policy. Given a specific property loss situation Explain the insured’s duties after a loss occurs.

Main Contents Homeowners 2000 Program Analysis of homeowners 3 policy Section 1 coverage Discuss the homeowner property insurance in Chinese market

What’s Homeowners Insurance What’s homeowners insurance？ 2. How many types of homeowners policies? The designed groups of people of each form and the coverages

A homeowners policy on a private dwelling is designed for the owner-occupants of a family dwelling used exclusively for private residential purposes

Overview of homeowners policies

The insured subject The covered perils Exclusions the insurance amount Comparing various homeowners The insured subject The covered perils Exclusions the insurance amount

HO-2 (broad form) The insured subject: the dwelling, other structures, and personal property The covered perils: listed perils Exclusions: out of the listed The insurance amount: losses+ living expenses and/or fair rental value

HO-3 (special form) The insured subject: the dwelling, other structures The covered perils: risk of direct physical loss Exclusions: losses specifically excluded The insurance amount: full replacement costs

HO-4 (Contents broad form) The insured subject: the tenant’s personal property , and personal liability insurance The covered perils: the tenant’s property against loss, also personal liability insurance, additions or alterations to the building

HO-5 (comprehensive form) The insured subject: the dwelling, other structures, and personal property, personal liability The covered perils: open perils coverage (all risk coverage” ) Exclusions: losses specifically excluded The insurance amount: direct physical losses, liability

HO-6 (unit-owners form) The insured subject: condominium units and cooperative apartments. The covered perils: named perils listed in HO2. Exclusions: losses specifically excluded The insurance amount: direct physical losses of the building and other property, and minimum of $5000 of appliances, carpets, etc.

HO-8 (modified coverage form) The insured subject: older homes The covered perils: named perils listed in HO2. The insurance amount: repair cost, and limited coverage of theft of personal property (a maximum of $1000 per occurrence)

Comparison of Homeowners Coverages (see exhibit 1&2) coverage Ho-2(Broad form) Ho-3(special form Ho-4 (contents broad form) Dwelling Other structures Personal property Loss of use Minimum varies by company 10% of A 50% of A 30% of A Not applicable Amount varies 30% of C Covered perils Fire or lightning Windstorm or hail Explosion Riot of civil commotion Aircraft Vehicles Smoke Theft Falling objectives So on and so that Dwelling and other structures are covered against risk of direct physical loss to property. All losses are specifically excluded. Personal property is covered Same perils as Ho-2 for personal property

Comparison of Homeowners Coverages Ho-5(comprehensive form) Ho-6(unit owners form Ho-8 (modified coverage form) Dwelling Other structures Personal property Loss of use Minimum varies by company 10% of A 50% of A 30% of A Not applicable Amount varies 30% of C Covered perils Dwelling and other structures are covered against risk of direct physical loss to property. All losses are specifically excluded. Personal property is covered Same perils as Ho-2 for personal property Fire or lightning Windstorm or hail Explosion Riot of civil commotion Aircraft Vehicles Smoke Theft Falling objectives So on and so that

Analysis of Homeowners 3 Policy (Special Form) The insured Coverage Perils insurance against Exclusions

Analysis of Homeowners 3 Policy (Special Form) The insured: named insured and spouse family members other persons under age 21 full-time student away from home Related persons in section 2 Any person legally responsible for covered animals or watercraft With respect to a motor vehicle to which the insurance applies, employees of the insured while working for the insured.

Analysis of Homeowners 3 Policy (Special Form) Coverage coverage A: Dwelling coverage B: Other structures coverage C: Personal property coverage D: Loss of use Additional coverages

Analysis of Homeowners 3 Policy (Special Form) Coverage A: Dwelling cover the dwelling on the residence premises as well as any structure attached to the dwelling specifically excludes land

Analysis of Homeowners 3 Policy (Special Form) Coverage B: other structures insures other structures on the residence premises that are separated from the dwelling by clear space, including a detached garage, tool shed, or horse stable Exclusions: a rented private garage, a business structure, structures used to store business property (examples)

Analysis of Homeowners 3 Policy (Special Form) Coverage C: personal property Insures: personal property, also includes borrowed property, and the personal property of a guest or resident employee while the property is in an residence occupied by an insured. There are some special limits of the liability (see Exhibit 3) Exclusions: Certain types of property are excluded under Coverage C. (examples)

Special limits of liability (see exhibit 3) Type of property Amount 1.money, bank notes, bullion, gold, silver, platinum, coins, medals, stored valued cards, and smart cards 2. securities, valuable papers, manuscripts, personal records, passports, tickets, and stamps 3.Watercraft of all types 4. Trailers not used with watercraft of all types 5. Theft of jewelry, watches, furs, and precious stones 6. Property on the residence premises used primarily for business purposes 7. Electronic apparatus, while or upon a motor vehicle, but only if the apparatus is equipped to be operated by power from the motor vehicle’s electrical system. $200 $1500 $2500

Analysis of Homeowners 3 Policy (Special Form) Coverage D: loss of use Insures: provides protection when the residence premises cannot be used because of a covered loss. Three benefits are provided: additional living expense, fair rental value, and prohibited use. (examples)

Analysis of Homeowners 3 Policy (Special Form) Additional Coverage : In addition to basic Coverages A, B, C, and D, the HO-3 policy provides several additional coverages Including: additional living expenses, living expenses, fair rental value, and prohibited use) Debris Removal Reasonable Repairs Tree, Shrubs, and Other Plants Fire Department Service Charge Property Removal

Analysis of Homeowners 3 Policy (Special Form) Credit Card, Electronic Fund Transfer Card or Access Device, Forgery and Counterfeit Money Loss Assessment Collapse Glass or Safety Glazing Material Landlord’s Furnishings Ordinance or Law Grave Markers Deductible (examples)

Analysis of Homeowners 3 Policy (Special Form) Perils insurance against Dwelling and Other Structures Personal Property

Analysis of Homeowners 3 Policy (Special Form) Dwelling and Other Structures: The dwelling and other structures are insured against “risk of direct physical loss to property.” Excluded Losses : Collapse. Freezing. Fences, pavement, patio, and similar structures. Dwelling under construction. Vandalism and malicious mischief Mold, fungus, or dry rot. Other exclusions. (examples)

Analysis of Homeowners 3 Policy (Special Form) Personal Property: Personal property is covered on a named-perils basis. The policy pays for a direct physical loss to personal property from the perils discussed in the following : Fire or Lightning Windstorm or Hail Explosion Riot or Civil Commotion Aircraft , etc. (examples)

Analysis of Homeowners 3 Policy (Special Form) Exclusions: In addition to the specific exclusions previously discussed, several general exclusions appear in the policy. Including: Ordinance or Law Earth Movement Water Damage Power Failure Neglect War Nuclear Hazard Intentional Loss Governmental Action Weather Conditions Acts or Decisions Faulty, Inadequate, or Defective Planning and Design

Analysis of Homeowners 3 Policy (Special Form) Section 1: Conditions: Section I in the homeowners policy contains numerous conditions. The most important are discussed here. Insurable Interest and Limit of Liability Loss Settlement Loss to a Pair or Set Appraisal Clause Other Insurance and Service Agreement

Analysis of Homeowners 3 Policy (Special Form) Insurable Interest and Limit of Liability: If more than one person has an insurable interest in the property, the insurer’s liability for any one loss is limited to each insured’s insurable interest at the time of loss but not to exceed the maximum amount of insurance. --Duties After a Loss: Give prompt notice Protect the property Prepare an inventory of damaged personal property exhibit the damaged property File a proof of loss within 60 days

Analysis of Homeowners 3 Policy (Special Form) Loss Settlement: This section of the homeowners policy deals with the payment of losses. You should know how losses are paid under a homeowners policy.

Analysis of Homeowners 3 Policy (Special Form) Loss Settlement: personal property dwelling and other structures Extended and guaranteed replacement cost

Analysis of Homeowners 3 Policy (Special Form) Personal property: Covered losses to personal property are paid on the basis of actual cash value at the time of loss but not to exceed the amount necessary to repair or replace the property. Personal property can be insured for replacement cost by adding a replacement cost endorsement to the policy.

Analysis of Homeowners 3 Policy (Special Form) Dwelling and other structures: the losses are paid on the basis of replacement cost with no deduction for depreciation. If the amount of insurance carried is equal to at least 80% of the replacement cost of the damaged building at the time of loss, full replacement cost is paid with no deduction up to the limit of the policy.

Analysis of Homeowners 3 Policy (Special Form) If the insurance carried is less than 80% of the replacement cost, the insured receives the larger of the following two amounts: Actual cash value of that part of the building damaged or : (2) Amount of insurance carried ×Loss 80%×Replacement cost

Analysis of Homeowners 3 Policy (Special Form) Extended and guaranteed replacement cost: Some insurers make available an extended replacement cost endorsement, which pays an extra 20% or more above the policy limits, depending on the insurer.

Analysis of Homeowners 3 Policy (Special Form) Loss to a Pair or Set: In the event of loss to a pair or set, the insurer can elect either to repair or replace any part of the pair or set or to pay the difference between the actual cash value of the property before and after the loss.

Analysis of Homeowners 3 Policy (Special Form) Appraisal Clause: The appraisal clause is used when the insured and insurer agree that the loss is covered, but the amount of the loss is in dispute.

Analysis of Homeowners 3 Policy (Special Form) Other Insurance and Service Agreement: If other insurance covers a Section I loss, the insurer will pay only the proportion of the loss that its limit of liability bears to the total amount of insurance covering the loss. (examples )

Section 1 and 2 Conditions Section I and Ⅱ Conditions The homeowners policy contains several common conditions that apply to both Sections I and Ⅱ. They are summarized as follows: Liberalization Clause Waiver or Change of Policy Provisions Cancellation Nonrenewal of the Policy Assignment of the Policy Subrogation Death of Named Insured or Spouse

Case Discussion 农村家庭财产保险纠纷案

Summary The homeowners policy can be used to cover the dwelling, other structures, personal property, additional living expenses, and personal liability claims. Section 1 provides coverage on the dwelling, other structures, personal property, loss-of-use benefits, and additional coverage. Section 2 provides personal liability insurance to the insured and also covers the medical expenses of others. HO-2 policy is broad form covering the dwelling and other structures, and personal property. HO-3 is special form covers the dwelling and other structures against risk of direct physical loss to the described property. HO-4 is contests broad form designed for renters. HO-5 is comprehensive form insuring the dwelling, other structures, and personal property against the risk of direct physical loss to property. HO-6 is unit-owners form designed for condominium owners.

Review Questions 1. Identify the basic types of homeowner policies and indicate the groups for which each form is designed. 2. Explain the special limits of liability that apply to certain types of property. Why are these limits used? 3. List the various exclusions that are found in Section I of the Homeowners 3 policy. 4. What duties are imposed on the insured after a property loss occurs? 5. Describe the replacement cost provisions of the homeowners policy and five an example. 6. Explain how the homeowners policy responds to a covered loss if the loss is also covered by a home warranty or service agreement. 7. Explain the extended replacement cost endorsement. What is a guaranteed replacement cost policy? 8. Explain briefly how the mortgage clause protects the insurable interest of the mortgagee.

Search for Information 资料查询： 目前我国保险市场上居民财产保险单的 承保风险责任、除外责任及保险金额。 现实问题思考： 结合美国房屋所有者保险，为我国居民住宅保险发展给出建议

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