RMI 3011 Notes Chapter 16 Homeowner s Insurance Homeowners Insurance Basics o Standard types of homeowners forms ISO o Know chart in slides of pages 388 389 o Remember that flood insurance is ALWAYS separate because it is a NON DIVERSAFIABLE risk o Theft is not covered if the home is vacant for more than 30 days H0 3 special form most common most comprehensive People insured o Named insured and spouse o Resident relatives o Full time student away from home o Anyone else under 21 living in the residence Section 1 Property coverages o Coverage A dwelling specifically EXCLUDES land About rebuilding materials for rebuilding the house o Coverage B insures other structures on the residence premises Includes a detached garage tool shed etc The amount of coverage is based on the amount of o Coverage C for contents o Coverage D loss of use Personal property is covered anywhere in the world both on and off the premises The amount you have is 50 of coverage A but can be increased In Florida you can drop it altogether Vacation home personal property is limited to 10 of coverage C of 1000 whichever is greater Can have limits placed for maximum amount paid for losses Provides protection when the residence premises cannot be used because of a covered loss 30 of coverage A Additional living expense expenses actually incurred by the insured to maintain the family s standard of living The policy pays the fair rental value for that part of the residence that is rented to others but is not fit to live in is the increase in living o Additional Coverages Coverage applies if the home is not damaged but a civil authority prohibits the insured from using the premises prohibited use Removal of debris Reasonable repairs Tree shrubs and plants for a limited set of perils but NOT windstorm Fire department service charge Collapse of building Landlord s furnishings Loss assessment charged against the name insured by a corporation or association of property owners because of the direct loss of property collectively owned by all members Grave markets H0 4 contents broad form renters H0 6 unit owners form condo owners History of homeowners insurance o Before the 1950s separate policies had to be purchased for everything homeowners o Standardization came with the insurance office in 1971 and American Association of Insurance Services AAIS It s the mortgage company s fault o Insurers don t force anyone to buy a policy It s the mortgage lender that requires it o With a mortgage loan the buyer purchases homeowner s insurance as a condition of o It protects the bank if the home is destroyed o Anyone with an insurable interest in the property is listed on the policy o 95 of homeowner s have insurance o 40 of renters have insurance o Mortgage Clause Lender get s loss payment to the extent of its interest in the property Protects mortgage s insurable interest namely the bank or lending institution The property is collateral for the loan Personal Property o Limits on personal property Refer to chart in slides why are there limits Because of moral hazard and loss adjustment challenges have the loan o Contents Claims Data Refer to chart in slides The number 1 claims loss is jewelry 16 Homeowner losses ranked by severity o Fire and Lightening claims are number 1 o Bodily injury is 2nd o Wind and hail is 3rd Homeowner losses ranked by frequency o Wind and hail is 1st o Water and damage to property is 2nd Personal Property Coverage o Section 1 an insured can use a schedule to insure certain personal property for a specific amount To schedule means to list and insure individual items with specifics amounts of insurance o There are limits because of moral hazard and loss adjustment challenges o Perils Insured Against special coverage form What is direct physical loss It means an alteration of the property or loss o Section 1 Exclusions Concurrent causation losses means if a single loss is caused by 2 or more perils and one is covered by the policy and the other is not the entire loss is excluded Any loss due to an ordinance or law except as described in the additional coverages can usually buy more Losses due to earth movement except sinkhole which is covered in FL Certain water losses Flood Water back up from sewers Water that seeps below the surface like from a pool leak Losses which are intentional or an accident of the homeowner
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