Dwelling policies were a precursor to the homeowners policy. The homeowners policy provides much of the same coverage as the dwelling policies, but have evolved to cover the need for both property insurance and the insured’s legal responsibility for bodily injury or property damage to others. Thus, a homeowners’ policy is considered “multi-line” coverage.
Section I of a homeowners policy provides property coverage. The personal liability coverage of the homeowners’ policy is referred to as Section II.
Section I Coverage
There are several policy forms available, and they differ according to the protection provided. Section I is comprised of four coverage sections which provide insurance on the insured’s residence and personal property.
Coverage A
Coverage A provides property insurance on the owner-occupied dwelling used for residential purposes. The location of the residence premises is identified in the declarations. This section of coverage provides protection against loss to any dwelling or structure attached to the dwelling and materials and supplies located on or next to the described premises used to construct, alter, or repair the dwelling or other structures on the residence premises. Coverage A appears in an HO2, HO3, and HO6 policy, which will be reviewed later.
Coverage B
This coverage area provides a specific limit of insurance coverage for detached structures on the residence premises. An automatic coverage limit of 10% of the Coverage A amount is provided for other structures for one or two-family dwellings and 5% of Coverage A for three or four-family dwellings. This coverage functions in a similar fashion to Coverage B under a DP form.
Coverage C
This coverage area protects all the unscheduled personal property of the insured while it is located in any part of the world. Coverage is 50% of coverage A for one or two-family dwellings, 30% for three-families, and 25% for a four-family dwelling, but includes “special limits” for certain types of property. There are several property exclusions applicable to Coverage C as well. For example, the policy does not cover loss to autos, itemized articles insured separately, or property belonging to a tenant not related to an insured.
Coverage D
This coverage area under a HO policy is referred to as loss of use or additional living expense. It functions in the same manner as the corresponding coverage found in a dwelling property policy and is also considered to be an indirect loss type of coverage. It provides coverage if the insured incurs additional expenses while living at another location if the residence premises are unlivable due to a covered peril. Only expenses incurred beyond an insured’s normal monthly living expenses will be paid.
Additional Coverages
All homeowners forms include supplementary coverages under Section I, in much the same manner as provided under the DP forms. These additional coverages are paid “in addition” to the other applicable coverage limits provided under each coverage area and include:
The exclusions found in a homeowners form include:
Limit of Liability
Each coverage area of Section I in a homeowners policy possesses a specific limit of liability. Losses are paid for each coverage area up to their limits (per occurrence). Additional coverages (i.e., debris removal) are also provided, which may increase the claim payment, if applicable.
There are 5 primary policy forms. These policy forms will vary according to the perils insured against and the individual exposure to be insured. These policy forms are:
HO2 (Broad Form)
The homeowners insurance equivalent of the Dwelling Property Broad form, this policy is known as the HO2 form and is available for owner-occupied homes. It is a broad-form peril policy protecting an insured against all the perils previously reviewed in a Dwelling Broad Form plus theft, damage caused by bursting pipes, volcanic eruption, etc. If the insured covered his home for $100,000, Coverage B would automatically provide $10,000 of coverage, and there would be $50,000 of coverage for Coverage C. Section II functions the same as all HO policy forms.
HO3 Open Perils Dwelling Coverage (Special Form)
This policy form provides open-peril coverage on Coverages A, B, and D. Coverage C, however, is protected on a named peril basis. The HO3 policy provides the broadest scope of coverage since it provides all-risk insurance protection. This homeowners form includes the four coverage areas of Section I. The percentage limitations allocated to Coverages B, C, and D are the same as the HO2.
HO4 Renter Insurance (Tenant Form)
This policy form is known as an HO4. It provides coverage for a renter’s unscheduled personal property (Coverage C) and loss of use (Coverage D). It is a broad form peril policy. If the insured tenant carries $10,000 of coverage on personal property, the policy will provide up to $3,000 of coverage for loss of use under Coverage D.
HO6 (Condominium Form)
This policy is also a broad form peril plan. It is designed for the unit owners of condominiums to protect against loss to personal property arising from a covered peril. If the insured carries $20,000 on Coverage C, 50% or $10,000 of coverage would be provided for loss of use coverage. This form also provides coverage up to $1,000 for unit additions or alterations. This amount may be increased for an additional premium.
HO8 Historic Homes (Modified Coverage Form)
The HO8 insures against basic perils. It insures older home where replacement costs may exceed market value.
Section II of a homeowners’ policy form provides personal liability protection and medical payments to others. Section II of all homeowners’ forms are identical in the scope of coverage provided.
Coverage E Personal Liability
This coverage protects the insured if a legal suit is brought against him/her as a result of legal responsibility for BI or PD to others. The initial coverage limit available is $100,000, but can be increased. This coverage protects an insured if another person is injured on any insured location. It also would protect the insured, spouse and family who is legally responsible for the BI or PD to others arising out of personal, nonbusiness activities. Supplementary payments for legal defense costs are also provided.
Coverage E Exclusions:
Coverage F Medical Payments to Others
Also known as guest medical, this coverage pays when someone is injured in the insured’s home or due to activities of the insured or the insured’s family. Negligence does not have to be established in order for medical expenses to be paid. If an accident occurs during the policy period, necessary medical expenses will be paid up to three years following the accident.
The limit provided by the policy is $1,000 per person and may be increased with additional premiums. Medical expenses are defined in the policy. In addition, claim expenses and first aid expenses are also covered under this policy section.
Coverage applies to the following injuries:
Exclusions applying only to Coverage F
Any payments under Section II may also include the supplementary cost of legal defense.
Homeowners insurance policies offer both property insurance and personal liability coverage for homeowners. Here are the key points regarding homeowners insurance:
Section II of homeowners policies offers personal liability and medical payments coverage:
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