Unit 8 - Personal Lines: Dwelling & Homeowners Policies

Question 1

What are the ELIGIBILITY requirements for a dwelling insurance policy?

Answer 1

1) Dwelling must be occupied by tenant or owner
2) One to four units (single family structure)
3) Mobile homes must be TIED DOWN or on a permanent foundation
4) Farms, ranches, or business are not eligible.

Question 2

Define Coverages A-E in a dwelling policy

Answer 2

COVERAGE A… Dwelling (except mobile homes)

COVERAGE B… Other detached structures separated by a clear space from the dwelling and used in connection to the dwelling. COVERAGE LIMIT = 10% of Coverage A.

COVERAGE C… Personal property (contents), but does not cover property of renters. COVERAGE LIMIT = 50% of Coverage A. Is optional coverage.

COVERAGE D… Fair rental value (indirect loss of use). COVERAGE LIMIT = 10% of Coverage A.

COVERAGE E… loss of use (only when owner lives in dwelling). Used to cover additional living expenses required to allow the household to maintain normal standard of living. COVERAGE LIMIT = 20% of Coverage A, with no deductible.

Question 3

Is dwelling insurance a monoline policy?

Answer 3

Yes because liability coverage isn’t automatically built in. It can, however, be added by endorsement ONLY if the dwelling is owner occupied.

Question 4

Basic Dwelling Policy Form (DP-1)

Answer 4

Defined as limited named perils/causes of loss.

FLI - Fire, Lightening, Internal Explosion + Removal

Extended Coverage (EC), WC SHAVVER - Wind, Civic Commotion, Smoke, Hail, Aircraft, Vehicle NOT owned by insured, Volcanic Eruption, Explosion, Riot

Vandalism and Malicious Mischief (SFP policies lose this coverage after 30 days of vacancy, other policies lose it after 60 days of vacancy)

Question 5

Broad Dwelling Policy Form (DP-2)

Answer 5

Defined as more named perils (causes of loss) other than the basic form. DP-2 automatically includes coverage outlined in the DP-1 form.

BIG AFFECT

Burglary Damage to Building
Ice/Sleet/Snow
Glass Coverage

Accidental discharge/overflow
Freezing pipes
Falling objects
Electric Current
Collapse coverage
Tear apart

Question 6

Special/Open Dwelling Policy Form (DP-3)

Answer 6

Defined as open perils (causes of loss).

GWOWPENNI

Government Action
War
Ordinance/Law
Water/Flood
Power outage (off premises)
Earth Movements
Negligence
Nuclear Events
Intentional Damage

** NOTE: Broad perils are only covered for Coverage C.

Question 7

Dwelling Insurance

Answer 7

A monoline insurance policy used mainly for residential rental property, not usually for owner-occupied homeowners property.

Question 8

Homeowners Insurance

Answer 8

A package policy providing both property and liability coverages in the same contract; all homeowner policies are required to have theft coverage.

Question 9

Define Coverages A-D in Section 1 of a homeowner’s policy

Answer 9

COVERAGE A… Dwelling (except mobile homes)

COVERAGE B… Other detached structures separated by a clear space from the dwelling and used in connection to the dwelling. COVERAGE LIMIT = 10% of Coverage A.

COVERAGE C… Personal property (contents), but does not cover property of renters. COVERAGE LIMIT = 50% of Coverage A. SPECIAL LIMITS are attached to Coverage C (see separate slide)

COVERAGE D… Loss of use coverage provides payment for the additional costs over and above normal living expenses because of the inability to use property as a result of covered loss. There is no deductible on loss of use. COVERAGE LIMIT = Varies by insurance company

Question 10

Define Coverages E-F in Section 2 of a homeowner’s policy

Answer 10

COVERAGE E… Personal liability coverage (BI + PD)

COVERAGE F… Medical payments to others

Question 11

What are the ELIGIBILITY requirements for a homeowners insurance policy?

Answer 11

1) Residential structures with one to four units, one of which MUST be owner occupied.
2) Farms, mobile homes, and businesses aren’t eligible.
3) Homes under construction can be covered, as long as owner intends to occupy it after construction is completed.

Question 12

Basic Perils (HO-8 & DP-1)

Answer 12

FLI - Fire, Lightening, Internal Explosion + Removal

WCSHAVVER (ECs) - Wind, Civil Commotion, Smoke, Hail, Aircraft, Vehicle NOT owned by insured, Volcanic Eruption, Explosion, Riot

Vandalism + Malicious Mischief

THEFT

Question 13

Broad Perils (HO-2 & DP-2)

Answer 13

Basic Perils (+)

BIG AFFECT

Building damage caused by theft
Ice/Sleet/Snow
Glass Coverage

Accidental discharge/overflow
Freezing Pipes
Falling Objects
Electric Current
Collapse Coverage
Tear Apart

Question 14

Special/Open Form Perils (HO-3 & DP-3)

Answer 14

GWOWPENNI

Government Actions
War
Ordinance/Law
Water/Flood
Power outage (off premises)
Earth Movement
Negligence
Nuclear Event
Intentional Damage

Open-perils coverage on dwelling and other structures (i.e. Coverage A & B)

Broad form coverage on personal property (i.e. Coverage C)

Question 15

Tenants/Renters (HO-4)

Answer 15

Broad form coverage on personal property (i.e. Coverage C)

Question 16

Comprehensive Form (HO-5)

Answer 16

Open-perils coverage on buildings (Coverages A & B) and personal property (Coverage C)

Includes mysterious disappearance.

Question 17

Condominium Owners (HO-6)

Answer 17

Covers the structure and permanent fixtures NOT covered by the condominium association.

Coverage A limit = $1,000

Coverage D limit = 50% of Coverage C

Broad form coverage on personal property (i.e. Coverage C)

Question 18

Modified Form for Special Risks (HO-8/DP-1)

Answer 18

All losses settled on actual cash value (ACV) basis (i.e. applies to A, B, & C coverages)

Used primarily on older homes (where replacement costs are too high given skilled labor/craftmanship)

Basic perils covered + THEFT on Coverages A, B, & C.

Question 19

SPECIAL LIMITS under COVERAGE C (personal property) in Homeowners Policy

Answer 19

$200… Money, gold, and silver
$1,500… Securities, tickets, stamps, and deeds
$1,500… Watercraft, trailers, motors, and equipment
$1,500… Other trailers
$1,500… THEFT of jewelry, furs, or both
$2,500… THEFT of guns
$2,500… THEFT of silverware or goldware
$2,500… Business property OFF premises
$1,500… Business property OFF premises
$250… Media

Question 20

What are two important ADDITIONAL COVERAGES that property insurance contracts provide, at no additional cost?

Answer 20

1) Property removal… Saving property for a sure and certain loss (30 days)
2) Trees, shrubs, plants… replacement covered for $500 each up to a max of 5% of Coverage A (10% for HO-4 & HO-6)

Question 21

What are the 3 methods adjusters use to settle homeowners insurance claims?

Answer 21

1) Actual cash value (ACV) = Today’s replacement cost - depreciation
2) Replacement Cost = Today’s cost of materials & labor to rebuild structure (endorsement required to cover personal property under Coverage C)
3) Pair or set clause = Difference between the ACV before and after the loss

Question 22

Describe Liability Coverages E-F as outlined in Section II of the homeowners policy.

Answer 22

COVERAGE E… Personal liability coverage (BI & PD for which the insured is legally liable to a 3rd party)

COVERAGE F… Medical Payments to others (no fault/legal liability is required to pay out)

Question 23

Coverages E - F in a homeowners policy apply to injuries and damages caused by…

Answer 23

• The insured’s personal activities
• Activities of the insured’s children
• Conditions of the premises
• A resident employee
• Animal owned by or in the care of the insured.

Question 24

What are two important ADDITIONAL COVERAGES that liability coverage provides, at no additional cost?

Answer 24

Supplementary payments (BAILED)

Bonds
Aid
Interest
Loss of income
Defense

** NOTE: All of these are paid to the insured (not a 3rd party claimant)

Question 25

Under the homeowners policy, what are 2 important ENDORSEMENTS?

Answer 25

1) PERSONAL INJURY (liability endorsement)… Expands the definition of BI to include libel, slander, social media, invasion of privacy, wrongful entry, malicious prosecution, eviction, and false arrest. EXCLUDED–Discrimination of any kind is excluded, as well as criminal actions.
2) Personal property replacement cost…Allows losses under Coverage C to be settled for replacement cost rather than ACV.

Question 26

Valued Policy Law

Answer 26

Pays full face amount of insured structure ONLY for total loss during fire.

Question 27

Special personal property

Answer 27

“Optional” endorsement for high value items.

Question 28

Personal Articles Floaters Policy (monoline)

Answer 28

Coverage provided thru inland-marine.

INCLUDES… open perils, breakage, mysterious disappearance.

EXCLUDES… Wear abd tear, insects, inherent vice

** NOTE: Kept confidential from pubic record