Chapter 6 Homeowners Insurance ISO Standard Policy Risk

Risk Factors for Homeowners Insurance § Type of home (single family, town home, high-rise)

§ Personal property (including furniture, electronics, high value items, etc. ) § Special safety

WHY DO I NEED HOMEOWNERS INSURANCE? Your home is likely to be the biggest

The Components of Basic Homeowners Insurance What does basic homeowners insurance cover? § Dwelling

§ Personal Property – Coverage for personal items (clothing, furniture, appliances, computers, etc. ).

§ Liability Insurance – Pays for damages the insured is legally obligated to pay

§ Trees, shrubs, plants and lawns – Coverage is provided to these items if

Perils Covered by Homeowners Insurance • Fire and lightning • Windstorm and hail •

§ § § Theft Falling objects Weight of ice and snow Glass breakage Accidental

Perils NOT Covered by Standard Homeowners Insurance (You may need purchase a separate policy!!)

* Depending on where you live, hurricane or windstorm coverage may or may not

ADDITIONAL COVERAGES* § § § § § Jewelry, watches, furs Guns Tools Cameras, camcorders

* Coverage for these items is already included in the homeowners insurance policy up

LIABILITY COVERAGE • Protects you against legal claims you are legally obligated to pay

Protecting your personal property Two options for homeowner insurance © 2013 Pearson Education, Inc.

# 1: Actual Cash Value Definition: The value of the property lost or damaged

#2: Replacement Cost Definition: The cost of replacing damaged or destroyed property without deduction

Parts of the Homeowners Contract SECTION INSURING AGREEMENT LIMIT I A B C D

© 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13

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Chapter 6 Homeowners Insurance ISO Standard Policy

Risk Factors for Homeowners Insurance § Type of home (single family, town home, high-rise) § Square footage § Number of rooms § Floor level (if in high-rise) § Address (city, state, county) § Pets § Pool § Proximity to fire station and fire hydrant § Business being conducted on premises? © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -2

§ Personal property (including furniture, electronics, high value items, etc. ) § Special safety features (security, alarms, sprinklers) § Credit rating of policyholder § Prior insurance history (claims filed, etc. ) § Construction type (brick, frame, etc. ) § Roof type (shingle, tile, metal, flat, etc) § **Amount of coverage required** © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -3

WHY DO I NEED HOMEOWNERS INSURANCE? Your home is likely to be the biggest investment you will ever make. Losing this asset would cause a financial disaster if you don’t protect it with insurance. WHY DO I NEED HOMEOWNERS INSURANCE? © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -4

The Components of Basic Homeowners Insurance What does basic homeowners insurance cover? § Dwelling – Coverage that protects the structure of the home (roof, walls, wall-towall carpeting, etc. ). § Other structures – Coverage for sheds, detached garages and other structures not connected to the main dwelling itself. © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -5

§ Personal Property – Coverage for personal items (clothing, furniture, appliances, computers, etc. ). Provides coverage on and off the premises. § Loss of Use – Coverage for when an insured has to move out of the home while repairs are made as a result of damage caused by a covered loss. © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -6

§ Liability Insurance – Pays for damages the insured is legally obligated to pay due to bodily injury or property damage. § Medical Payments – Pays for medical and/or funeral expenses incurred by a person on or off the insured’s property § Most homeowners insurance contracts normally include coverage for the following items, but this can vary by company and state. Check your policy to be sure what is and what is not covered. © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -7

§ Trees, shrubs, plants and lawns – Coverage is provided to these items if damaged by a covered loss. § Debris removal – Coverage for removing the remains or rubbish of any property destroyed as a result of a covered loss. § Fire Department Charges – Provides coverage for customary fire department charges under contract or agreement. May be subject to limits depending on your policy. © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -8

Perils Covered by Homeowners Insurance • Fire and lightning • Windstorm and hail • Explosion • Riot and civil commotion • Impact from aircraft • Impact from vehicles • Smoke • Vandalism and malicious mischief © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -9

§ § § Theft Falling objects Weight of ice and snow Glass breakage Accidental overflow of water from plumbing Accidental electrical damage to appliances (caused by power surge) © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -10

Perils NOT Covered by Standard Homeowners Insurance (You may need purchase a separate policy!!) • Flood • Earthquake • Acts of War • Nuclear Detonation © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -11

* Depending on where you live, hurricane or windstorm coverage may or may not be covered. Check with an insurance agent to determine if an extra policy is needed to cover these perils. © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -12

ADDITIONAL COVERAGES* § § § § § Jewelry, watches, furs Guns Tools Cameras, camcorders Silver, gold, pewter Money, coins, securities, deeds Watercraft, trailers, equipment, motors Computers Business property © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -13

* Coverage for these items is already included in the homeowners insurance policy up to certain limits. For an additional premium, you can increase the limits of these coverages to meet your needs. © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -14

LIABILITY COVERAGE • Protects you against legal claims you are legally obligated to pay for causing bodily injury, sickness, disease or death of others • Pays the cost of defending a claim against you • Covers damage to the property of others © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -15

# 1: Actual Cash Value Definition: The value of the property lost or damaged at the time of the loss. This method of valuation takes into consideration depreciation based on such factors as: • Age of the item • Market value • Condition of the property at the time of loss or damage. © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -17

#2: Replacement Cost Definition: The cost of replacing damaged or destroyed property without deduction for depreciation in the value of the property. © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. 13 -18

Parts of the Homeowners Contract SECTION INSURING AGREEMENT LIMIT I A B C D Dwelling Other Structures Personal Property Loss of Use $100, 000 (e. g. ) 10 % of A 50 % of A 20 % of A II E F Personal Liability Medical Payments to Others $100, 000 © 2013 Pearson Education, Inc. , publishing as Prentice Hall. All rights reserved. $1, 000 13 -19