How to protect your largest asset: your Home


How to protect your largest asset: your Home

It has come to our attention most people would prefer to buy their Homeowners Insurance online, but some people don’t read the policy or understand the coverages.  The purchase of a home is normally the largest asset/risk an individual or family can have.

We at InsuranceShark are here to be your partner in this journey so you can navigate the ocean of life informed and protected.

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As these are complicated topics for the consumer, we will try to remove as much insurance jargon as possible.  If you have specific questions about jargon, please see the Contact Us button and submit the question, we will respond as soon as possible.  Don’t be afraid to ask because any question is a good question, we will post the answers in our InsuranceShark Translator.

Available Homeowners forms:

  • Homeowners 2 – Broad Form
  • Homeowners 3 – Special Form
  • Homeowners 4- Contents Broad Form
  • Homeowners 5- Comprehensive Form
  • Homeowners 6- Unit Owners Form
  • Homeowners 8- Modified Coverage Form

Forms 2, 3, 5, and 8 are designed for when you are living in the home and are called “owner-occupied”.

Form 4 is for renters that are living in apartments they do not own, and form 6 is for condo owners.   Form 4 only provides coverages C and D below.

Form 6 provides modified version coverage A below, plus C and D.

Each form has its separate differences and unique features, however, all the ISO Homeowners’ forms (HO forms) provide coverages in similar format.   If your insurance company is using a different Homeowners form, we will teach you how to read the form in a topic called Reading your insurance policy.


Coverages:

Section I

The property coverages in Section I of your policy can differ among the various HO forms.  For the typically owner who is living in his/her home (forms 2, 3, 5, and 8) – the following coverages are offered:

  • Coverage A – Dwelling – this is the coverage and limit that covers physical loss or damage to your home.
  • Coverage B – Other Structures- This is the coverage that covers physical loss or damage to property such as a detached garage or shed.
  • Coverage C- Personal property – this is the coverage and limit that provides coverage to the property you own in your home
  • Coverage D– Loss of Use – this coverage and limit offers additional living expenses or loss of rental value when the home cannot be lived in, due to a covered loss

Covered Causes of Loss – this is important for a homeowner to understand what the insurance is actually intending on covering.  These are specific items addressed in the insurance contract; anything that falls outside of these defined causes may not be covered.  This is the scenario you want to avoid.  There are 3 levels of coverage: Basic, Broad, and Special.

  • Basic: this level of coverage will cover the following causes of loss that are specifically named in the policy, fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicle, smoke, vandalism or malicious mischief, theft and volcanic eruption.  Form 8 above covers only these items
  • Broad: this level of coverage will cover the following causes of loss that are specifically named in the policy, fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicle, smoke, vandalism or malicious mischief, theft and volcanic eruption.  Plus 6 other causes.  Forms 2, 4, and 6 above cover broad level.
  • Special: this level of coverage will cover any loss that is not specifically excluded. Form 5 uses special causes of loss.  This is important to understand your risks and understand how to Read your insurance policy,  do determine if you have adequate coverage, however, this form is more comprehensive than the broad level of coverage.

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Important Exclusions: this is important to understand these coverages are excluded on a HO policy.

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Valuation provisions:  We will cover under separate page – See Homeowners Valuation provisions to understand Replacement cost vs. actual cash value.   These topics will require individual discussion and the homeowners to understand their exposure.


Section II

This section is for your liability coverages.   This is for damage against claims or law suits for injury or property damage.

  • Coverage E– Personal Liability – this is the coverage and limit that covers the owner and others against lawsuit for injury or property damage for non-business related use of the home. This limit covers defense costs as well as any award for injury or property damage.  There are a few exclusions to this coverage, for example auto accidents will not be covered under a HO form coverage E.
  • Coverage F– Medical payments – this is insurance that covers medical bills for someone injured on the property but not living at the home, it is usually a small limit.

Endorsements:  There are many endorsements that can be added to modify coverage, these will be discussed in future discussions, but the most commonly used are related to personal property.

  • Personal property replacement cost- this is intended to replace property on a replacement cost basis
  • Schedule of Personal property – this covers valuable property on a specific schedule, typically without a deductible.

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InsuranceShark prediction:

Earthquake and Flood protection will certainly become more prevalent purchases in the market.  Flood is cheaper that is offered by the federal flood program, so makes sense to buy it now and if you are in an Earthquake zone buying EQ insurance is a no brainer, it may start to be required on mortgages going forward.

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