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Homeowner Insurance Education

This page gives detailed information about the most common home, condo, and renter's insurance coverage options that you must choose when selecting your homeowner's insurance. Insurance coverage requires a complicated legal set of requirements and agreements that vary for every state.

Homeowner Insurance is something that almost everyone has and that few understand. We're going to walk you through the basics of homeowner insurance, and after this "refresher" course, you should know generally what your insurance policy covers and be ready to shop your insurance with the confidence of knowing you can maintain great coverage while lowering price. Homeowner insurance comes as a package of coverages, and there are six standard coverages that most homeowner insurance policies will have:

 

Most Homeowner Insurance packages also have additional coverages that come with your policy free of charge. Perhaps more important than the coverage amounts, however, are the perils a homeowner insurance policy will cover you for. There are two different classes of policy you can purchase:

 

Finally, we will take a detailed look at the six different types of homeowner insurance policies you can purchase nationwide. Those different policies are:

 

Armed with this information you can obtain quotes with confidence!

Homeowner Insurance Package
Coverage A: Dwelling
  • This coverage is for your actual house, or your "dwelling".
  • Land is always excluded in homeowner insurance.
Coverage B: Other Structures
  • This coverage is for things on the property like fences, detached garages, mailboxes, etc.
  • Once again, land is excluded in this coverage.
  • This coverage is typically 10% of the dwelling coverage
    • For example, if your home is insured for $100,000 then your Other Structures coverage would typically be $10,000
Coverage C: Personal Property
  • This is for all of your belongings like TVs, couches, dishes, etc.
  • With this coverage, your property does not have to be on the premises (in your home) to be covered; most companies will cover your property worldwide.
  • Most homeowner insurance companies will not cover all of your belongings for their full value, but instead have "special limits" that they will cover certain types of property for. Although these numbers can vary from carrier to carrier, the most common amounts are listed below. Note: this is the maximum amount you would receive for this type of property if you were to file a claim.
    • $200 for money, bank notes, bullion, gold, silver, platinum, coins, medals, script, smart cards, stored value cards
    • $1,500 for securities, accounts, deeds, evidences of debt, letters of credit, notes, bank notes, manuscripts, personal records, passports, tickets, stamps
    • $1,500 for watercraft, trailers, equipment and outboard motors
    • $1,500 for theft of jewelry, watches, furs, precious stones
    • $2,500 for theft of firearms and related equipment
    • $2,500 for theft of silverware, silverplated ware, goldware, goldplated ware, platinumware, platinumplated ware, pewterware
    • $2,500 for property used primarily for business purposes
    • $500 for property away from premises used for business
    • $1,500 for electronic apparatus and accessories
    • $1,500 for electronic apparatus and accessories used for business while away from the residence
Coverage D: Loss of Use
  • This coverage applies if your home has been damaged by a peril you are insured against (something your insurance company will pay for), and your home is not fit to live in. Under these circumstances your insurance company will pay cost of living expenses that exceed the amount you would normally spend.
    • Example: a tornado tears through your home, making it unlivable. You still have to pay your mortgage, however. With Lose of Use, your insurance company will pay to put you up in a hotel and pay for any extra expenses you might incur.
  • This coverage may also cover loss of rents if you are renting out a part of your home and the renters have to move out due to the damage.
  • This coverage will also apply if you are prohibited to use your residence by a civil authority as a result of direct damage to a neighboring premises.
    • A maximum of 2 weeks applies in this scenario.
Coverage E: Liability
  • This coverage is designed to protect you from lawsuits that may be brought against you for almost any reason.
  • If a claim or a suit is brought against you for bodily injury or property damage, your homeowner insurance will:
    • Pay up to your limit of liability for damages for which you are found legally liable.
      • Example: someone sues you for slipping and breaking their back due to ice on your driveway. If they win the lawsuit, and the lawsuit was for $250,000, your homeowner insurance would pay for the entire amount if you had at least $250,000 in liability coverage.
    • Provide a defense of their choice, even if the suit is groundless, false or fraudulent.
Coverage F: Medical Payments to Others
  • This coverage will pay the "medical expenses" for others (up to the limit) for bodily injury. This coverage can be redeemed up to three years after an accident.
  • The types of medical expenses that are paid for under this coverage are: x-ray, dental work, ambulance rides, hospital bills, professional nursing, prosthetic devices, funeral services, and medical and surgical procedures.
  • This coverage does not apply to any insured or resident of the household.
  • This coverage applies to a person on your property with your permission. It also applies to a person off your property if the bodily injury:
    • Is caused by an activity of the "insured"
    • Is caused by an animal owned or in care of the "insured".
      • Example: you and your son go golfing. Your son hits a golf ball and it hits a man on the head, Coverage F: Medical Payments to Others could be used to pay the injured man's medical payments.

 

Exclusions to Liability Coverage

Because "General Liability" and "Medical Payments to Others" are liability coverages, there are certain types of liability that are not covered under your homeowner insurance package. The exclusions to both Liability and Medical Payments are listed below.

Motor Vehicle Liability
  • Motor Vehicles are required by law to have their own limits of liability. The only exceptions to this exclusion are:
    • If the vehicle is in dead storage on your property.
    • If the vehicle is designed to assist the handicapped, and at the time of the accident is either parked or being used to help a handicapped person.
    • If the vehicle is designed for recreational use and it is:
      • not owned by you
      • owned by you, and the accident takes place on your property.
    • If the vehicle is a motorized golf cart with a maximum speed of 25 mph and is being used in and around a golfing facility.
Watercraft Liability
  • Watercraft Liability is not covered under your homeowner policy. You are typically required to hold your own insurance for watercraft. The only exceptions (items that will be covered on your homeowner policy) are if the watercraft:
    • is stored, there is liability.
    • is a sailing vessel and is under 26 ft in length
    • is a sailing vessel longer than 26 ft in length, and not owned by or rented to you.
    • is not a sailing vessel with an inboard or inboard outboard motor with 50 hp or less.
    • is not a sailing vessel with an inboard or outboard motor with 50 hp or more and is not owned or rented to an insured.
    • has one or more outboard engines with a total of 25 hp or less.
    • has one or more outboard engines with a total of 25 hp or more and not owned by the insured.
    • If the watercraft has one or more outboard engines with a total of 25 hp or more and was bought by you during the policy period.
Aircraft Liability
  • Aircraft Liability is never covered under your homeowner policy.
Hovercraft Liability
  • Hovercraft Liability is never covered under your homeowner policy.
Expected or Intended Injury
  • This applies even if the expected or intended injury was directed at someone else other than the person that ultimately received the injury/filed the lawsuit.
    • Example: you, with malice in your heart, throw a baseball and John's head. He dodges the throw and it hits Susan in the head causing severe injury. This would not be covered under homeowner insurance policy.
  • Expected or intended injury is covered if it is to protect persons or property.
Business
  • This coverage does not apply when bodily injury or property damage results from business conducted on your property.
Professional Services
  • Professional services are excluded from liability in your homeowner policy.
Property You Own that is not Your Residence
  • Liability does not apply to property that is owned and/or rented to others by you if it is not an "insured location". It is a good idea to get separate liability coverage for rental properties.

War

Communicable Disease

Sexual Molestation, Corporal Punishment, Physical or Mental Abuse

Controlled Substances

In addition to the exclusions listed above for both Coverage E: Liability and Coverage F: Medical Payments to Others, each of these coverages comes with a few specific exclusions of their own.

No coverage is supplied for General Liability...
  • for bodily injury if that person is eligible to receive benefits provided under Worker's Compensation, non-occupational disability law, or occupational disease law.
  • for bodily injury or property damage if the insured is also insured under a nuclear energy liability policy
  • for property damage to property owned by the insured
  • for property damage to property rented to, occupied, used by, or in the care of the insured unless caused by fire, smoke or explosion.
  • under any contract or agreement entered into by you unless it directly relates to ownership of your property or the liability of others is assumed by you prior to an occurrence.
No coverage is supplied for Medical Payments...
  • for a "residence employee" (like a nanny or someone who works on your property for you) if it happens off your property or does not arise in the course of employment.
  • for someone who is eligible to receive benefits provided under Worker's Compensation, non-occupational disability law, or occupational disease law.
  • for any nuclear reaction, nuclear radiation, or radioactive contamination.
  • to any person regularly residing in the household.

Note: this is a fairly exhaustive list of what you will be covered for and what you won't be covered for in a liability suit, or if payments need to be made to others. However, although similar, not every homeowner package is exactly the same. Consult your broker, insurance representative, or actual policy for specifics on your policy.

Additional Coverages

Most homeowner insurance packages also come with a extra coverages in addition to the six coverages above that are standard in homeowner insurance. Not all companies will offer all of these additional coverages, so it is always good to ask or check with your company. But typically these will be included in the homeowner package.

Debris Removal
  • If a peril covered under your homeowner policy causes damage to your property and results in debris, coverage applies.
  • This coverage is "additional insurance".
    • Example: your home is insured for $100,000. Your house is completely burned in a fire. You file a claim and your insurance company pays out the full $100,000 to rebuild the home. In addition, they also spend $5,000 removing debris from your property. "Additional Insurance" means you can technically collect more than the limit that is shown for your Dwelling coverage.
  • Trees will also be removed from the property (up to a value of $1,000 worth of removal) if
    • the trees are felled by windstorm, hail, snow, sleet, or weight of ice.
    • A neighbor's tree falls (again, has to be "felled" by a peril named in your policy) and
      • damages your home or other structures.
      • does not damage property, but instead
        • blocks a driveway or
        • blocks a ramp designed for the handicapped
  • There is typically a $500 limit per tree for this coverage.
Reasonable Repairs
  • This coverage applies after your home has been damaged by a peril insured against in your policy. Reasonable costs you incur to protect your property from further damage will be reimbursed to you.
Trees, Shrubs, and Plants
  • Your homeowner insurance will pay up to 5% of your Coverage A: Dwelling limit to replace trees, plants, and shrubs if caused by:
    • fire or lightning.
    • explosion.
    • riot or civil commotion.
    • aircraft.
    • vehicles (people living at residence excluded).
    • vandalism and malicious mischief.
    • theft.
  • The limit for this coverage is $500 per item.
  • Any trees/shrubs/plants used for business or sale are excluded.
Property Removed
  • If you are removing your property from your home because the home has been endangered by a peril that is covered in your policy, then your property will be covered for direct loss for any reason.
  • This coverage has a 30 day maximum limit.
Credit Card, EFT Card, Forgery, and Counterfeit Money
  • Your homeowner insurance will pay up to $500 for:
    • Your obligation to pay because of theft or unauthorized use of your credit card.
    • Your obligation to pay because of theft or unauthorized use of your Electronic Funds Transfer card.
    • Loss caused by forgery.
    • Loss caused by acceptance in good faith of counterfeit money.
  • No deductible applies to this coverage.
  • No coverage if used by a residence of the household, a person entrusted with the card, or used for business.
Loss Assessment
  • Your homeowner insurance will pay up to $1,000 for your share in a loss assessment if it happened by a peril your homeowner policy covers and if it is charged by a corporation or association of property owners.
Collapse
  • The definition of collapse in this instance is: an abrupt falling down or caving in of a building.
    • A standing building in danger of falling is NOT considered to be in a state of collapse.
  • Collapse is covered if it was caused by one or more of the following:
    • Decay hidden from sight.
    • Insect or vermin damage hidden from sight.
    • Weight of contents, equipment, animals, or people.
    • Weight of rain.
    • Use of defective materials in construction.
    • Something that would be covered in your homeowner policy if it happened to your personal property (Coverage C).
  • Excluded under the collapse coverage are: awnings, fences, patios, decks, pavement, swimming pools, underground pipes, drains, septic tanks, foundation, retaining walls, and bulkheads.
    • Unless loss to the above items happened as a direct result of collapse of a building.
Glass or Safety Glazing Material
  • Glass is covered if it is broken by a peril your homeowner insurance covers.
  • Glass is also covered if it is broken due to earth movement.
  • Property is also covered if loss is caused by pieces or splinters of broken glass.
  • Glass coverage is excluded if the property has been vacant for 60 days or more.
Landlord's Furnishings
  • Your homeowner policy will cover up to $2,500 for appliances, carpeting, or furnishings in a rented bedroom if the loss happens from a risk for which your homeowner insurance covers your personal property.
    • Theft is excluded from this coverage.
Ordinance or Law
  • Up to 10% of your dwelling coverage can be used for the increased costs incurred due to an ordinance or law that regulates:
    • Construction, demolition, remodeling, or repair of a building that was damaged by a peril your homeowner policy covers.
    • Demolition, reconstruction, remodeling, or repair of an undamaged building when the ordinance requires the building to be totally demolished because of damage caused by a peril covered in your homeowner policy.
Grave Markers
  • Your homeowner insurance will pay up to $5,000 for grave markers if they are damaged by a peril that is covered in your homeowner's policy under Personal Property coverage.
  • These grave markers do not have to be on the property to be covered.

 

Policy Classes

Do you know what you are really "covered" for? If a tree falls on your home, are you covered? If a pipe bursts, flooding your kitchen, are you covered? The answer to the former questions depends on what type of homeowner policy you have. There are 6 different types of homeowner policies. Four of the six are for home owners; one is for condo owners, and one is for renters. All six policies can be generally classified as an "open peril" policy or a "named peril" policy. This difference between the two policy classes can be seen below.

Named Peril

This type of policy (HO8 HO2 HO4 HO6) will cover you for damages or losses only if the damage/loss was caused by one of the specific perils that are named in the policy.

Open Peril

This type of policy (HO3 HO5) will cover you for damages or losses incurred for any reason, unless that peril is specifically excluded on the policy.

To sum it up, a "named perils" policy lists the perils that you are covered for, while an "open perils" policy will cover you for anything and everything that could happen to your home except for a specific list of excluded perils.

Note: all homeowner policies treat Liability Coverage and Medical Payments to Others the same regardless of what policy class or type you choose. For the aforementioned coverage, you will be protected in any situation, unless the situation is specifically excluded in the above exclusions list. Thus, the difference in policy types only relates to Dwelling, Other Structures, Personal Property, and Loss of Use coverage.

Homeowner Insurance Policy Types

The four homeowner policies, from the most basic protection to the best protection homeowner insurance can buy, are called HO8, HO2, HO3, and HO5. In addition to these, there is also a condo owner policy (HO6) and a renter policy (HO4). The HO8, HO2, HO6, and HO4 are named peril policies. The HO3 and HO5 are open peril policies.

HO8 Policy - Basic Named Peril Coverage

HO8 is the most basic named peril homeowner policy that a person can purchase (in Texas this is called HOA coverage). A HO8 policy covers you for the following ten specific perils:

  1. Fire or lightning
  2. Windstorm or Hail
  3. Explosion
  4. Riot or Civil Commotion
  5. Aircraft
  6. Vehicles
    • note: damage caused by insured not covered
  7. Smoke
    • note: agricultural smudging, industrial operations, and smoke from a fireplace excluded
  8. Vandalism or Malicious Mischief
    • note: this coverage excluded if residence vacant more than 60 days)
  9. Theft
    • note: limit of liability in an HO8 policy is $1,000
      theft committed by an insured is excluded
  10. Volcanic Eruption
    • earthquake, land shock waves, or tremors that may be in conjunction with a volcanic eruption are excluded.

As you can see, an HO8 is very basic coverage. If something other than the perils listed above happens to your home or its contents, you will not be covered. These perils apply to all four coverages: Dwelling, Other Structures, Personal Property, and Loss of Use.

HO2 Policy - Named Peril Coverage

HO2 is the more inclusive named peril homeowner policy (in Texas called HOA+ and/or an endorsed HOA). This policy covers you for the 10 HO8 perils plus covers you for the six additional perils. All covered perils are listed below.

  1. Fire or lightning
  2. Windstorm or Hail
  3. Explosion
  4. Riot or Civil Commotion
  5. Aircraft
  6. Vehicles
    • note: damage caused by an insured to a fence/driveway/walkway not covered
  7. Smoke
    • note: agricultural smudging or industrial operations excluded
  8. Vandalism or Malicious Mischief
    • note: this coverage excluded if residence vacant more than 60 days
  9. Theft
    • note: theft committed by an insured is excluded
  10. Volcanic Eruption
    • earthquake, land shock waves, or tremors that may be in conjunction with a volcanic eruption are excluded.
  11. Falling Objects
  12. Weight of Ice, Snow, or Sleet
    • note: awnings, fences, patios, pavement, swimming pools, foundation, retaining wall, bulkhead, pier, and wharf excluded
  13. Accidental Discharge or Overflow of Water or Stream
  14. Sudden & Accidental Tearing Apart, Cracking, Burning, or Bulging
  15. Freezing
    • note: excluded if heat isn't properly maintained or if water supply not shut off
  16. Sudden & Accidental Damage from Artificially Generated Electric Current
    • note: loss to tubes, transistors, electronic components, or circuitry excluded

The HO2 policy significantly expands the HO8 coverage. These perils apply to all four coverages: Dwelling, Other Structures, Personal Property, and Loss of Use. Remember, since this is a named peril policy, if something happens to your home or contents that is not listed above, you are not covered.

HO3 Policy - Basic Open Peril Coverage

HO3 is the basic open peril homeowner policy (Referred to as an HOB in Texas). This is the most common and most popular type of insurance policy. An open peril policy means your home is covered for anything and everything except for exclusions specifically listed in the policy. If a peril isn't specifically excluded, that means it's covered. The standard exclusions in a HO3 policy are listed below.

Normal Exclusions:
  1. Earth Movement
    • note: earthquake, landshock waves, tremors, landslide, mudflow, sinkhole, earth sinking and shifting all fall in this category
      • In many states, this coverage can be endorsed onto the policy for additional premium.
  2. Ordinance or Law
  3. Water Damage
    • Sudden & Accidental Water Damage is included in most HO3 policies
    • Flood is NEVER included in your homeowner policy, it can be purchased through the government
    • Most other water damages can be endorsed on for additional premium
  4. Power Failure
  5. Neglect
  6. War
  7. Nuclear Hazard
  8. Intentional Loss
  9. Government Action
  10. Collapse
  11. Theft to a Dwelling Under Construction
  12. Vandalism or Malicious Mischief
    • only if dwelling has been vacant more than 60 days
  13. Mold, fungus, wet rot
    • If the mold, fungus or wet rot is hidden in walls, ceilings, or floors, then there is indeed coverage
  14. Wear & Tear, Deterioration
  15. Mechanical Breakdown
  16. Smog, rust & Corrosion
  17. Smoke from Agricultural Smudging & Industrial Operations
  18. Discharge, Dispersal, Seepage of Pollutants
  19. Settling, Shrinking, Bulging, or Expanding
    • of bulkheads, pavement, patios, footings, foundations, walls, floors, roofs, ceilings
  20. Birds, Vermin, Rodents, Insects
  21. Animals owned by Insured

In a HO3 policy, open perils describes the perils insured against for Dwelling, Other Structures , and Loss of Use. For your belongings ( Personal Property), it actually covers you for the same 16 perils that a HO2 policy would cover you for. In essence, a HO3 policy is in reality a hybrid of an "open perils" policy and a "named perils" policy.

HO5 Policy - Full Open Peril Coverage

The best policy you can buy is a HO5 homeowner policy. It is an open perils policy in its truest form. It will cover both your home and your contents for anything and everything that would damage your property, except for the exclusions listed in the policy.

For your Dwelling, Other Structures, and Loss of Use, the exclusions are the exact same exclusions that were listed for the HO3 policy. All these exclusions also apply to your Personal Property, with a few additional exclusions. The additional exclusions for your belongings are listed below:

  1. Breakage of Eyeglass, Eyewear, Statuary, Marble, Bric-a-brac, Porcelains, and similar fragile articles are excluded unless caused by:
    • Fire, lightning, windstorm, or hail
    • Smoke (not industrial smoke)
    • Explosion, riot, or civil commotion
    • Aircraft, vehicles, or vandalism and malicious mischief
    • Collapse
    • Water not otherwise excluded
    • Theft and attempted theft
    • Sudden and accidental tearing apart, cracking, burning, or bulging
  2. Dampness of Temperature or Extreme Temperature
    • This is not excluded if the direct cause of loss to your property is caused by rain, snow, sleet, or hail
  3. Refinishing, Renovation, or Repairing Property
  4. Collision
  5. Destruction, Confiscation, or Seizure by a Government Body or Public Authority.
  6. Acts by a Government Body

HO4 Policy - Renter's Coverage

A HO4 policy is very different from the rest of the homeowner policies, because there is NO coverage for the Dwelling, Other Structures, or Loss of Use. The only coverage that applies is loss to Personal Property. This policy is for people that do not own the dwelling they are living in, but would like to cover their contents. With a HO4 policy, you can still get Liability and Medical Payments to Others Coverage.

Renter Policies are named peril policies. Your contents with a HO4 policy are covered for the same 16 named perils that are covered in a HO2 policy. They are named again below for convenience.

  1. Fire or lightning
  2. Windstorm or Hail
  3. Explosion
  4. Riot or Civil Commotion
  5. Aircraft
  6. Vehicles
    • note: damage caused by an insured to a fence/driveway/walkway not covered
  7. Smoke
    • note: agricultural smudging or industrial operations excluded
  8. Vandalism or Malicious Mischief
    • note: this coverage excluded if residence vacant more than 60 days
  9. Theft
    • note: theft committed by an insured is excluded
  10. Volcanic Eruption
    • earthquake, land shock waves, or tremors that may be in conjunction with a volcanic eruption are excluded.
  11. Falling Objects
  12. Weight of Ice, Snow, or Sleet
    • note: awnings, fences, patios, pavement, swimming pools, foundation, retaining wall, bulkhead, pier, and wharf excluded
  13. Accidental Discharge or Overflow of Water or Stream
  14. Sudden & Accidental Tearing Apart, Cracking, Burning, or Bulging
  15. Freezing
    • note: excluded if heat isn't properly maintained or if water supply not shut off
  16. Sudden & Accidental Damage from Artificially Generated Electric Current
    • note: loss to tubes, transistors, electronic components, or circuitry excluded

HO6 Policy - Condo Owner's Coverage

A HO6 policy is very unique. Most condo owners are not responsible for any exterior loss that might occur, but they are responsible for the "studs in" on their condo, as well as their personal property. Because of their responsibility for the interior walls, flooring, and ceilings, HO6 policies must have Dwelling coverage.

Because condo owners are indeed owners, HO6 policies also have Loss of Use coverage. The primary difference between a regular homeowner policy and a HO6 condo policy is that condo policies do not have Other Structures coverage. They also typically have very low coverage amounts for the dwelling, because they aren't responsible for the entire structure.

Condo policies are named peril policies for the Dwelling,Personal Property, and Loss of Use. The perils covered are the same 16 perils that apply in a HO2 and a HO4 Renters Policy above.

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Last modified: Mon Jan 27 10:57:04 MST 2014