Chapter 9 Fire Flashcards
Standard Fire Policy
There are 3 dwelling policy forms available in Texas. T he dwelling policy forms are for residential property owners who do not qualify for HOI policies. The Dwelling Policy forms are contracts that that provide a package of coverages for dwellings. Most dwellings forms are for residential living. However, some business occupancies are permitted in the forms. I.e. some churches, photography studios, law offices, and private schools are permitted.
The 3 dwelling policy forms available in Texas:
Texas Dwelling Policy (TDP) Form 1 - Limited Form
TDP Form 2 - The Broad Form
TDP Form 3 - All Risk Form
Each policy form is designed to serve different insurance needs. Typically, dwelling forms are for individuals who own rental property, and the property is occupied by a tenant. The dwelling would be covered under the dwelling forms, while the tenant’s personal property would be covered under a renter’s policy.
TDP-1: the most basic insurance policy available for rental properties. It provides very basic insurance coverage for rental properties. There is no personal liability coverage. The TDP-1 policy is a named perils policy. This means all the perils that are insured are specifically listed in the policy itself. The coverage is restricted to the perils that show up in the policy.
The most common perils covered by TDP-1 policies:
- Fire (default)
- Lightning (default)
Optional perils:
- Riot
- Explosion
- Vehicle
- Civil commotion
- Hurricane
- Smoke
- Hail
- Windstorm
- Vandalism (optional)
- ** NO THEFT COVERAGE **
It is important to point out that not all TDP-1 policies cover all the perils listed above. I.e. Vandalism & Malicious Mischief is an endorsement (add-on) with many TDP-1 policies, and is not always automatically included. The above list is what the most common TDP-1 policy would cover.
Most TDP-1 insurance policies are ACV policies. ACT is the replacement cost, less applicable depreciation.
I.e. if a dwelling sustains hail damage to the roof. Replacement cost is $14k. The roof is 10 years old. If the depreciation rate was assessed at 5% per year, the depreciation would be at 50%. 50% of $14k is $7k. The ACV settlement would be $7k less the applicable deductible.
TDP-2
This policy is one of 3 policies that are most commonly used for rental properties. It provides adequate coverage for most landlords and property owners. The TDP-2 is considered a middle of the road landlord insurance policy, providing coverage that fits somewhere between 1 and 3. It is not the most basic, but not the best either.
The TDP-2 is Named Peril Policy. Rental dwelling policies come in two categories; named peril policies and all risk policies. The TDP-1 and TDP-2 are both named peril policies. The TDP-2 only covers perils listed in the policy. The following is a list of the most common perils that are included in a TDP-2 broad form policy:
- Fire
- Lightning
- Riot
- Explosion
- Vehicle
- Civil commotion
- Windstorm/Hurricane
- Smoke
- Hail
- Vandalism
- Accidental Discharge of Water
- Freezing of Household Appliances
- Falling objects
- Collapse of building
- No theft coverage
Under TDP2, if anything happens to the property that is not included on this list, the policy will not insure the damage, and it will not receive coverage.
One of the most important distinctions between TDP1 and TDP2 is the distinction ACV and RCV. ACV only insures the policy holder for the damage done to the home, less depreciation. The TDP2 is a replacement cost policy, which means that the initial settlement will be at ACV. Once the repairs to the property are completed, the depreciation that was withheld can be reimbursed to the policyholder.
One type of coverage that is available and often included in TDP2 is loss of rents coverage. Loss of Rents coverage is meant to provide the insured with continuing rental income while the home is being repaired due to damage from a covered peril.
Without Loss of rents coverage, if a rental property gets damaged to the point where renters have to move out while the home gets repaired, the PH will never collect rent from those months. Loss of Rents prevents the insured from having no rental income due to damage to the home.
Most TDP2 policies will not cover most of the perils if the home has been vacant for a period of time, typically more than 30 or 60 day, depending on the contractual language of the policy.
TDP-3
This policy is considered the best policy for rental properties. It provides full coverage for landlords.
TD3 insures all perils except for those explicitly excluded from the policy:
- Ordinance or law
- Earth Movement
- Water damage
- Power failure
- Neglect
- War
- Nuclear hazard
- Intentional Loss
- Governmental Action
- Wear and tear
TDP3 is a replacement cost policy.
The standard TDP3 comes with a similar package offered by HOI policies and will typically include the following sections:
- Dwelling
- Other structures
- Loss of use
- Liability
- Medical payments
TDP3 still has to insure the entire home and out-buildings and still provide general liability coverage. Personal Property is not included in TDP where it is in HOI. Since the policy is primarily for non-owner Occupied properties, the amount of personal property attached to dwelling policies is much less.
i.e. TDP3 may have enough personal property coverage to cover major appliances in the property.
Also includes loss of rents.
