1. Chapter 12 Other Property and Liability Insurance Coverages

2. Agenda ISO Dwelling Program Mobile Home Insurance
Inland Marine Floaters
Watercraft Insurance
Government Property Insurance Programs
Title Insurance
Personal Umbrella Policy

3. Homeowners Insurance Basics( Review of Chapter 20)
Homeowners insurance forms, drafted by the Insurance Services Office (ISO) are widely used in the US
They are designed for the owner-occupants of family dwellings
A policy can be used to cover the dwelling, other structures, personal property, additional living expenses, personal liability claims, and medical payments to others
Six forms are availables

4. Current Homeowners Policies (Chapter 20)
Transparency Master 1.2
Current Homeowners Policies (Chapter 20)
HO-2 (broad form): covers the dwelling, other structures, and personal property on a named perils basis
HO-3 (special form): covers the dwelling and other structures on a risk-of-direct-physical loss basis.
All direct physical losses are covered except those losses specifically excluded.
Personal property is covered on a named perils basis

5. Current Homeowners Policies
HO-4 (contents broad form): covers a tenant’s personal property on a named perils basis
HO-5 (comprehensive form): provides open perils coverage (“all-risks coverage”) on the dwelling, other structures and personal property.
All direct physical losses are covered except those losses specifically excluded

6. Current Homeowners Policies
HO-6 (unit owners form): covers personal property on a named perils basis.
A minimum of $5,000 of insurance is also provided on the condominium unit that covers improvements and additions
HO-8 (modified coverage form): designed for older homes.
Dwelling and other structures are based on the amount required to repair or replace using common construction materials and methods

7. Analysis of the Homeowner Policy
The following persons are considered “insureds”under the policy:
Named insured and spouse
Resident relatives
Other persons under age 21
Full-time student away from home

8. ISO Dwelling Program(Chapter 12)
Some dwellings that are ineligible for coverage under the HO policy can be insured under an ISO dwelling policy
The forms are narrower in coverage
The forms do not include coverage for theft or personal liability without appropriate endorsements

9. ISO Dwelling Program
Dwelling Property 1 (Basic Form) provides coverages similar to the Homeowners Policy
Coverages A and B insure the dwelling and other structures
Coverage C covers personal property
Coverage D covers the fair rental value if part of the dwelling is rented
Coverage E can be added to provide coverage for additional living expenses
Only a limited number of named perils apply to both the dwelling and the personal property
All covered property losses are paid on an actual cash value basis, with some exceptions

10. Basic forms covers only a limited number of perils that apply to both the dwelling and personal property.
Fire and lightening
Internal explosion
Windstorm or hail
Explosion
Riot or civil commotion
Aircraft
Vehicles
Smoke
Volcanic eruption
Vandalism or malicious mischief

11. ISO Dwelling Program
Dwelling Property 2 (Broad Form) covers losses to the dwelling and other structures on a replacement cost basis
The broad form includes all of the perils listed in the basic form plus the following additional perils:
-Damage by burglars
-Falling objects
-Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or steam
- Explosion of a steam or hot water heating system, an air conditioning or automatic fire protective sprinkler , or an appliance for heating water
- Freezing of plumping , heating, air conditioning or automatic fire protective sprinkler system or household appliance.
- Sudden and accidental damage from an artificially generated electrical current
- Volcanic eruption

12. Dwelling Property 3 ( Special Form) covers the dwelling and other structures on an “all risks” or “open perils” basis
Endorsements to the dwelling form include:
Theft coverage can be written on a limited or broad basis by an endorsement.
Personal liability supplement provides personal liability insurance similar to the liability coverage found in the homeowner policy.

13. Mobile Home Insurance Cost less than conventional housing.
Purchased as an alternative for families as a vacation home or second home.
Under the ISO program, mobile home insurance is written by adding an endorsement to an HO-2 or HO-3 policy
The mobile home must be at least 10 feet wide and 40 feet long, and capable of being towed on its own chassis
The coverages are similar to those found in a homeowners policy

14. Mobile Home Insurance
Coverage A covers the mobile home on a replacement cost basis
Coverage B insures other structures and is 10 percent of coverage A, with a minimum limit of$2,000. Example, a shed damaged in a windstorm would be covered.
Coverage C insures unscheduled personal property
Coverage D insures for loss-of-use
An additional coverage pays up to $500 for the cost incurred in transporting the mobile home to a safe place to avoid damage when it is endangered by a covered peril, such as a fire
Coverages E and F provide for comprehensive personal liability insurance and medical payments to others

15. Inland Marine Floaters
Transparency Master 1.2
Inland Marine Floaters
An inland marine floater provides broad coverage on property frequently moved from one location to another and on property used in transportation and communications
Coverage can be tailored to the specific type of personal property to be insured
Example: Personal property such as jewelry , coins, or stamps can be insured under a personal articles floater.

16. Desired amounts of insurance can be selected.
Homeowners policy has several limits on personal property
Example: $200 limit on money and coins, a $1500 limit on stamp collections, and a $2500 limit for the theft of silverware or goldware.
Broader coverage can be obtained
Example: A personal articles floater insures against risks of direct physical loss to covered property( all direct physical losses except losses specifically excluded).
Most floaters cover insured property anywhere in the world
Inland marine floaters are often written without a deductible

17. Inland Marine Floaters
The personal articles floater (PAF) is an inland marine floater that provides comprehensive protection on valuable personal property
This coverage can be written as a stand-alone contract
The PAF insures certain classes of personal property on an “open perils” basis.
The classes of personal property that can be covered include the following:
Jewelry
Furs

18. Cameras
Musical instruments
Silverware
Golfer’s equipment
Fine arts
Stamp and coin collections
The coverage can also be added as a scheduled personal property endorsement to an HO policy

19. Watercraft Insurance
A boatowners package policy combines physical damage insurance on the boat, medical expense insurance, liability insurance, and other coverages into one policy
Physical damage is covered on an “open perils” basis
The insured is covered for property damage and bodily injury liability arising out of negligent use of the boat
The policy also includes medical expense coverage and may include uninsured boaters coverage

20. Watercraft Insurance Yacht insurance is designed for larger boats
Policies are not standard, but have many common features
Hull coverage insures the yacht and its equipment for property damage on an “all risks” or “open perils” basis
The policy includes liability coverage, medical expense coverage, and uninsured boaters coverage

21. Government Property Insurance Programs
Some government insurance programs are necessary because certain perils are difficult to insure privately
Coverage may not be available or may not be affordable

22. National Flood Insurance Program
The National Flood Insurance Program provides insurance coverage to property owners in flood-prone areas
Flood insurance is purchased from agents or brokers who represent private insurers
Private insurers sell federal flood insurance under their own names, collect the premiums, and receive an expense allowance
The federal government is responsible for all underwriting losses
The program is self-supporting for the average historical loss year
In 2012, Congress acted to reform and extend the program for five years

23. National Flood Insurance Program
Federal law requires individuals to purchase flood insurance if they have federal guaranteed financing to build, buy, refinance, or repair structures located in special hazard flood areas
Buildings and their contents can be covered by flood insurance if the community agrees to adopt and enforce sound flood control and land use measures
A flood hazard boundary map shows the general areas of flood losses
Residents can purchase limited amounts of insurance at subsidized rates under the emergency portion of the program

24. National Flood Insurance Program
A flood is defined in the Standard Flood Insurance Policy as:
A general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from overflow of inland or tidal waters, from unusual and rapid accumulation or runoff of surface waters from any source, or from mudflow
There is a 30-day waiting period for new applications and endorsements for flood coverage

25. Exhibit 24.1 Amount of Federal Flood Insurance under the Emergency and Regular Programs

26. National Flood Insurance Program
Flood insurance coverage is available in three Standard Policy Forms:
The Dwelling Form is used to insure one- to four-family residential buildings and single family dwelling units in a condominium building
The General Property Policy Form is used to insure five or more family residential buildings and non-residential buildings
The Residential Condominium Building Association Policy Form is issued to residential condominium associations on behalf of association and unit owners

27. Exhibit 24.2 Summary of Property Covered under National Flood Insurance Program (NFIP)

28. National Flood Insurance Program
The federal flood insurance program faces several critical problems, for example:
The NFIP has a substantial deficit, largely due to Hurricane Katrina in 2005
Many property owners do not pay premiums that adequately reflect the risk of flooding
NFIP is required to insure multiple loss properties
Operational and management issues plague the program

29. National Flood Insurance Program
The Biggert-Waters Act of 2012 extends the NFIP program through September of 2017
Some key provisions of the Act include:
Rate subsidies on certain properties are phased out over four years
Annual premium rate increases of up to 20 percent are allowed
A reserve fund is created to help fund claims in years when catastrophic losses occur

30. FAIR Plans
The Urban Property and Reinsurance Act of 1968 created FAIR plans (Fair Access to Insurance Requirements)
Plans provide coverage to urban property owners who are unable to obtain coverage in the standard market
Plans cover property for fire and extended-coverage perils, vandalism, and malicious mischief
A building insured under a FAIR plan must meet certain underwriting standards
A state with a FAIR plan creates a pool or syndicate of private insurers to provide basic property insurance

31. FAIR Plans
FAIR plans have been established in 32 states and the District of Columbia
Several states have beach and windstorm plans, where property is vulnerable to damage from severe windstorms and hurricanes
Two states established insurance companies to write coverage
In 2012, Florida Citizens Property Insurance Company insured 1.4 million policyholders

32. Title Insurance
Title insurance protects the owner of property or the lender of money for the purchase of property against any unknown defects in the title to the property under consideration
If there is a defect in a title, the owner could lose the property to someone with a superior claim
Examples of defects to the title include an invalid will, incorrect description of the property, and undisclosed liens

33. Title Insurance
A title insurance policy provides protection against title defects that have occurred in the past, prior to the effective date of the policy
The insurer assumes no losses will occur
The premium is paid only once when the policy is issued
The policy term runs indefinitely into the future
If a loss occurs, the insured is indemnified in dollar amounts up to the policy limits (usually the purchase price of the property)

34. Title Insurance
Consumer advocates argue that the title insurance market has several major defects, including:
Homeowners do not shop around for title insurance
Home buyers are over-charged for title insurance
The title insurance market is flawed by reverse competition
Kickbacks to real estate agents, lenders, and builders are widespread

35. Personal Umbrella Policy
Transparency Master 1.2
Personal Umbrella Policy
The personal umbrella policy provides protection against a catastrophic lawsuit or judgment
Excess liability insurance is provided in amounts from $1–$10 million
Certain minimum amounts of liability insurance must be carried on the underlying contracts
Coverage is broad and includes protection against certain losses not covered by the underlying contracts
A self-insured retention must be satisfied for losses covered by the umbrella policy but not by any underlying contract

36. Exhibit 24.3 Typical Underlying Coverage Amounts Required to Qualify for a Personal Umbrella Policy

37. Personal Umbrella Policy
Insurers can use a standard Personal Umbrella Policy developed by the ISO
The policy pays for damages in excess of the retained limit for bodily injury, property damage, or personal injury for which the insured is legally liable
The policy covers some additional expenses including legal defense costs
Exclusions include liability for expected or intentional injury, certain personal injury losses, business liability, and professional services