Topic 11. Homeowners Insurance

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

6. Structure of Homeowners Policy

7. HO-3 (Special Form) • Insuring Agreement • 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 – 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 Section I – Property Coverages

13. 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 Section I – Property Coverages

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 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