Bảo hiểm - Chapter 20: Homeowners insurance, section I

Chapter 20Homeowners Insurance, Section IAgendaHomeowners Insurance BasicsAnalysis of Homeowners 3 PolicySection I CoveragesSection I Perils Insured AgainstSection I ExclusionsSection I ConditionsSection I & II ConditionsHomeowners Insurance BasicsHomeowners insurance forms, drafted by the Insurance Services Office (ISO) are widely used in the USThey are designed for the owner-occupants of family dwellingsA policy can be used to cover the dwelling, other structures, personal property, additional living expenses, personal liability claims, and medical payments to othersSix forms are availableCurrent Homeowners PoliciesHO-2 (broad form): covers the dwelling, other structures, and personal property on a named perils basisHO-3 (special form): covers the dwelling and other structures on a risk-of-direct-physical loss basis. All direct physical losses are covered except those losses specifically excluded. Personal property is covered on a named perils basisHO-4 (contents broad form): covers a tenant’s personal property on a named perils basisHO-5 (comprehensive form): provides open perils coverage (“all-risks coverage”) on the dwelling, other structures and personal property. All direct physical losses are covered except those losses specifically excludedHO-6 (unit owners form): covers personal property on a named perils basis. A minimum of $5,000 of insurance is also provided on the condominium unit that covers improvements and additionsHO-8 (modified coverage form): designed for older homes. Dwelling and other structures are based on the amount required to repair or replace using common construction materials and methodsExhibit 20.1 Comparison of ISO Homeowners Coverages (con’t)Exhibit 20.1 Comparison of ISO Homeowners CoveragesAnalysis of the HO-3 PolicyThe HO-3 policy has two sections of coverage:Section I: Property CoveragesCoverage A: DwellingCoverage B: Other StructuresCoverage C: Personal PropertyCoverage D: Loss of UseAdditional CoveragesSection II: Liability CoveragesCoverage E: Personal Liability Coverage F: Medical Payments to OthersAnalysis of the HO-3 PolicyThe following persons are considered “insureds” under the policy:Named insured and spouseResident relativesOther persons under age 21Full-time student away from homeSection II coverage also includes:Any person legally responsible for covered animals or watercraft With respect to a motor vehicle covered by the policy (e.g., a riding mower), persons employed by the named insuredSection I CoveragesCoverage A covers the dwelling on the residence premises and any structure attached to the dwellingMaterials intended for construction are includedThe coverage specifically excludes landCoverage B insures other structures on the residence premisesIncludes a detached garage, tool shed, etcStructures that are rented out or used for a business are excludedThe amount of coverage is based on the amount of insurance on the dwelling (Coverage A)Section I CoveragesCoverage C insures personal property owned or used by an insuredPersonal property is covered anywhere in the worldThe amount of coverage is 50% of the insurance on the dwelling, which can be increased if desiredPersonal property is covered both on and off the premisesCoverage for personal property at another residence, such as a vacation home, is limited to 10% of Coverage C or $1000, whichever is greaterCertain types of personal property have maximum dollar limits on the amount paid for any lossExhibit 20.2 Special Limits of LiabilitySection I CoveragesAn insured can use a schedule to insure certain personal property for a specific amountCoverage C also excludes certain types of property:Articles separately defined and specifically insuredAnimals, birds, and fishMotor vehiclesAircraft and partsHovercraft and partsProperty of roomers, boarders, and other tenantsProperty in a regularly rented apartmentProperty rented or held for rental to others off the residence premisesBusiness recordsCredit cards, electronic transfer devices, or other access devices (some coverage in Additional Coverages)Water or steamSection I CoveragesCoverage D provides protection when the residence premises cannot be used because of a covered lossCoverage is 30% of the amount of insurance on the dwelling (Coverage A)Additional living expense is the increase in living expenses actually incurred by the insured to maintain the family’s normal standard of livingFor example, the cost of renting a furnished apartmentThe policy pays the fair rental value for that part of the residence that is rented to others, but is not fit to live inCoverage applies if the home is not damaged, but a civil authority prohibits the insured from using the premisesSection I Coverages: Additional CoveragesThere are some additional coverages in Section ICoverages that provide additional insurance include:Removal of debris following an insured perilTrees, shrubs, and plants, for a limited set of perilsFire department service chargeUnauthorized use of credit card, electronic funds transfer card or access device; forgery and counterfeit moneyLoss assessment charged against the named insured by a corporation or association of property owners because of the direct loss of property collectively owned by all members.Increased costs of construction or repair because of a lawSection I Coverages: Additional CoveragesCoverages that do not increase the limit of insurance that applies to the damaged property include:Reasonable repairs to protect the property from further damageRemoval of property that is endangered by an insured perilCollapse of a building, for certain perilsBreakage of glass or safety glazing materialLandlord’s furnishingsGrave markersSection I CoveragesA deductible of $250 applies to any loss covered by Section 1 coveragesPremiums can be reduced by increasing the deductibleIn states that are vulnerable to natural catastrophes, insurers can use percentage deductibles Percentage deductibles for windstorm and hail losses vary from 1% to 15% of the limit of insurance on the dwelling Section I Perils Insured AgainstThe dwelling and other structures are insured against risk of direct physical lossesAll direct physical losses are covered unless specifically excludedPersonal property is insured on a named-perils basisA direct physical loss is covered if it is caused by one of the perils listed in the policyNamed perils include fire, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism, theft, etc.The peril must be the proximate cause of the loss Section I ExclusionsThe policy excludes:Concurrent causation lossesIf a single loss is caused by two or more perils that occur concurrently or in any sequence, and one peril is covered under the policy and the other peril is excluded, the entire loss is excludedAny loss due to an ordinance or law, except as described in the Additional CoveragesProperty damage from earth movementProperty damage from certain water losses Losses due to power failureLosses due to neglectProperty damage due to war or nuclear hazardAny intentional lossSection I ConditionsThe insurer’s liability for a loss is limited to the insured’s insurable interest at the time of lossThe insured must perform certain duties after a loss occurs:Give prompt notice to insurerProtect the property from further damagePrepare an inventory of damaged personal propertyExhibit damaged personal propertyFile a proof of loss with 60 days after the insurer’s requestLosses to personal property are paid on the basis of actual cash valueIf the insured purchases a replacement cost endorsement, there is no deduction for depreciationAfter giving notice to the insured, the insurer has the right to repair or replace any part of damaged property with like propertySection I ConditionsLosses to the dwelling and other structures are paid on the basis of replacement cost with no deduction for depreciationIf the dwelling is insured for at least 80% of replacement cost at the time of loss, partial losses are paid in fullReplacement cost is the amount necessary to repair or replace the dwelling with material of like kind and quality at current pricesIf the dwelling is insured for less than 80% of the replacement cost, the insured receives the larger of the actual cash value of that part of the building damaged or(2) Section I ConditionsSome insurers offer an extended replacement cost endorsement, which pays an extra 20% or more above the policy limits Under a guaranteed replacement cost policy, the insurer agrees to replace the home exactly as it was before the loss even if the replacement cost exceeds the amount of insurance stated in the policyIn the event of a loss to a pair or set, the insurer can elect either repair or replace any part of the pair or set or to pay the difference between the actual cash value of the property before and after the lossThe appraisal clause is used when the insured and insurer agree that the loss is covered, but the amount of loss is in disputeSection I ConditionsIf other insurance covers a Section I loss, the insurer will only pay the proportion of the loss that is limit of liability bears to the total amount of insurance covering the lossFor example, the HO policy is excess over any amount payable under a home warranty or service agreementThe insurer is generally required to make a loss payment directly to the named insuredThe mortgage clause is designed to protect the mortgagee’s insurable interestIf the mortgagee is named in the policy, the mortgagee is entitled to receive a loss payment from the insurer to the extent of its interest, regardless of any policy violation by the insuredConcealment or misrepresentation of any material facts, fraudulent conduct, and false statement relating to the insurance will void insurance coverageSection I and II ConditionsSome conditions apply to both Section I and Section II coverages. These include:A liberalization clause to address issues with broadening coverageA waiver or change of policy provisionsMust be in writingTerms and conditions for cancellationTerms for nonrenewal of the policyAssignment of the policy to another partyInsurer must give written consentA subrogation clause to address recoveries from third partiesExtension of policy terms to a legal representative upon the death of the named insured or spouse