1. Topic 11. Homeowners Insurance
BUS 200
Introduction to Risk Management and Insurance
Jin Park

2. Overview Risks faced by homeowners Types of Homeowners Policy
Structure of Homeowners Policy
Analysis of HO-3
Section I – Property coverages
Section II – Liability coverages
Endorsements
Personal Umbrella Policy

3. Risks Faced by Homeowners
Liability
Injury to others
Damage to property of others
Damage to, or destruction of, the home
Loss of use of the home
Loss of , or damage to, personal property
Defective title

4. Types of Homeowners Policy
Homeowner’s policy is a package policy!
Property
Liability
Limited Health Coverage
For Owner-Occupant
HO-1: Basic Form
HO-2: Broad From
HO-3: Special Form
HO-8: Modified Coverage
Used for special types of property: older homes
Provided by ACV, not RC.
For Tenants
HO-4: Contents Broad Form
For Condominium unit owners
HO-6: Condominium Unit Owners Form
This does not include condominium commercial-unit owners.

5. Types of Homeowners Policy
Coverage
1 and 2 3 4 6
Coverage A – Dwelling
$15,000 minimum
N/A
$1,000 minimum
Coverage B – Other Structures
10% of A
Coverage C – Personal Property
50% of A
$6,000 minimum
Coverage D – Loss of Use
20% of A
20% of C
40% of C
Covered Perils – A, B, & D
Named
Open
Covered Perils –
Personal Property
= HO-2

6. Structure of Homeowners Policy

7. HO-3 (Special Form) Insuring Agreement Definitions
We will provide the insurance described in this policy in return for the premium and compliance with all applicable provisions of this policy.
Definitions

8. Section I – Property Coverages
Coverage A – Dwelling
Residence Premises and Attached Structures
Coverage B – Other Structures
Structures on the Residence Premises separated from the dwelling
Coverage C – Personal Property
Covered property
Owned of used by any insured anywhere in the world
Limit for property at other residences
Special Limits
Property not covered
Coverage D – Loss of Use
Additional living expenses
Fair rental value
Civil authority prohibits use
Only up to 2 weeks

9. Section I – Property Coverages
Coverage E – Additional Coverages
Debris Removal
Reasonable Repairs
Trees, Shrubs, and Other Plants
Fire Department Service Charge
Property Removed
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

10. Section I – Property Coverages
Section I – Perils Insured Against
A. Dwelling and Other Structures
Open perils
B. Personal Property
Fire or lightning
Windstorm or hail
Explosion
Riot or civil commotion
Aircraft
Vehicles
Smoke
Vandalism or malicious mischief
Theft
Falling Objects

11. Section I – Property Coverages
Section I – Perils Insured Against
B. Personal Property (continued)
Weight of ice, snow, or sleet
Accidental discharge or overflow of water or steam
Sudden and accidental tearing apart, cracking, burning, or bulging of a water heating or transporting appliance
Sudden and accidental damage from artificially generated electrical current
Volcanic eruption

12. Section I – Property Coverages
Section I – Exclusions
Ordinance or Law
Earth movement
Water damage
Power failure
Neglect
War
Nuclear hazard
Intentional loss
Government action
Section I – Exclusions
Weather
Acts or decisions including groups, organizations or government body
Faulty, inadequate or defective plans, designs, material or maintenance

13. Section I – Property Coverages
Section I – Conditions
Insurable interest and limit of liability
Duties after loss
Loss settlement
Loss to a pair or set
Appraisal
Other Insurance or service agreement
Suit against us
Our option
Loss payment
Section I – Conditions
Abandonment of property
Mortgage clause
No benefit to bailee
Nuclear hazard clause
Recovered property
Volcanic eruption period
Policy period
Concealment or fraud
Loss payable clause

14. Section II – Liability Coverages
Coverage E – Personal Liability
Bodily Injury
Property Damage
Defense Costs
Damage includes special, general, and punitive damage.
Coverage F – Medical Payments to Others
Medical Expenses
No-Fault
Section II – Exclusions
Section II – Additional Coverages
Section II – Conditions

15. Section II – Liability Coverages
Coverage F – Medical Payments
To a person on the insured location with the permission of an insured
To a person off the insured location if the bodily injury:
Arises out of a condition on the insured location of the ways immediately adjoining
Is caused by the activities of an insured
Is caused by a residence employee in the course of employment
Is caused by an animal owned by or in the care of an insured

16. Section II – Liability Coverages
Section II - Exclusions
Motor vehicle liability
Watercraft liability
Aircraft liability
Hovercraft liability
Additional exclusions to Coverage E & F
Exclusions to Coverage E only
PD to property owned by or rented to an insured
BI which should be covered by workers compensation law, non-occupational disability law, or occupational disease law
BI and PD which can be covered by nuclear energy liability policy
Exclusions to Coverage F only

17. Section II – Liability Coverages
E. Additional Exclusions to Coverage E & F
Expected or intended injury
Business
Professional services
Insured’s premises not an insured location
Premises are owned by, rented to, and rented to others by an insured, but not insured.
War
Communicable disease
Sexual molestation, corporal punishment or physical or mental abuse
Controlled substance

18. Section II – Liability Coverages
Section II – Additional Coverages
These are in addition to limits of liability
Claim Expenses
First Aid Expenses
No payment for first aid to an insured
Damage to Property of Others
At replacement cost up to $1,000 per occurrence for PD to property of others caused by an insured
We will not pay for PD… (see page 568)
Loss Assessment
Up to $1,000 for an insured’s share of loss assessment charged

19. Section II – Liability Coverages
Section II – Conditions
Limit of Liability
Severability of Insurance
Insurance applies separately to each insured
Duties After Occurrence
Duties of An Injured Person – Medical Payments
Payment of Claim – Medical Payments
Suit Against the Insurer
Bankruptcy of An Insured
Other Insurance
Policy Period
Concealment or Fraud

20. HO-3 Other Provisions Section I and II – Conditions
Liberalization Clause
Insurer automatically broadens the coverage available though the policy if the insurer has instituted a change that broadens all homeowners policies without charging additional premium.
Cancellation
Insured may cancel the policy at any time
Insurer may cancel the policy only for reasons with a prior notice
10 days written notice
Non-payment of premium
For any reason - If the policy is not a renewal policy and in effect for less than 60 days.
30 days written notice
Material Misrepresentation, substantial change in risk - If the policy is in effect for more than 60 days.
For any reason - If the policy is written for more than a year

21. HO-3 Other Provisions Section I & II – Conditions
Waiver or Change of Policy Provisions
Must be in writing
Nonrenewal
Requires at least 30 days’ written notice
Assignment
Subrogation
Death

22. HO-3 Endorsements Earthquake Endorsement
To provide protection for property against losses caused by earthquake, including land shock waves or tremors before, during or after a volcanic eruption.
All earthquakes occurring in a 72-hour period are considered a single occurrence.
Personal Property Replacement Cost Endorsement
This endorsement changes the settlement basis under Coverage C from actual cash value to full replacement cost. Antiques, fine arts, paintings, collectors items and obsolete articles are not covered for replacement cost
Scheduled Personal Property Endorsement
To provide coverage for scheduled personal property on a special form basis, i.e., jewelry, coins, fur, musical instruments, etc…

23. HO-3 Endorsements Business Pursuits Endorsement
To provide coverage for the liability of an insured arising out of business activities, other than a business of which the insured is sole owner or a partner
Personal Injury Endorsement
To amend the definition of "bodily injury" in personal liability coverage to include "personal injury.”
Personal Injury
False arrest, imprisonment, malicious prosecution
Libel, slander, defamation of character, violation of the right of privacy
Invasion of right of private occupation, wrongful eviction of wrongful entry
Mold Endorsement
To specify coverage limits per incident of model that are lower than the limits available under the HO-3

24. Title Risk Title defect A title insurance
A claim against property that has not been satisfied
A title insurance
To protect the home buyer against loss caused by a defect in the title that existed at the time the policy was issued
If anything was wrong with the title to this property at the time this policy was issued, we will defend you and pay for the loss caused when it is discovered, within policy limits.

25. Personal Umbrella Liability
Protect against catastrophic losses
High limits
Excess over a basic coverage and Broader coverage
pay only after the limits of underlying coverage have been exhausted
Some cases, it covers some exposures that are not covered by underlying coverage
Require specified amounts and kinds of underlying coverage
Some exclusions

26. Personal Umbrella Liability

27. Special Limits
$200
Money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum other than platinumware, coins, medals, scrip , stored value cards and smart cards
$1,500
Securities, accounts, deeds, evidence of debt, L/C, notes other than bank notes, tickets, stamps, …
Watercraft of all types, including their trailers, equipment and engines
Trailers or semitrailers not used with watercraft of all types
Loss by theft of jewelry, watches, furs, precious stones
$2,500
Loss by theft of firearms and related equipment
Loss by theft of silverware, silver-plated ware, goldware, …
And more on pp. 3 & 4 of the HO-3 policy in your book