Understanding your Homeowner policy

T20181024 200158764 iOS Copyhere are 6 basic policy types

Common Policy Types

  • HO-3, Homeowner
  • H0-4, Renters
  • H0-5, Homeowner (aka HO-3 + 15)
  • HO-6, Condominium
  • DP1 or DWG1 or Dwelling 1
  • DP3 or DWG3 or Dwelling 3


For the purposes of this video we are focusing on the HO-3 since

it is the most common.

Homeowner Overview

The homeowner’s policy is a package policy in which it will include 6

basic parts. We will talk generally about the what is included in each of

these parts.


  • Coverage A : Dwelling
  • Coverage B: Other Structures
  • Coverage C: Personal Property
  • Coverage D: Loss of Use
  • Coverage E: Liability
  • Coverage F: Medical Payments

Lets dig a little deeper

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Coverage A: Dwelling

  • This is coverage on your home itself. This is based on the

Replacement Cost of that home. Replacement Cost is the cost to

rebuild the home from the ground up.

We use this value because is a loss occurs, we need to have a

predetermined idea of the cost to repair or rebuild and not

necessarily the cost to re-buy since market and construction

costs can vary so much.

Coverage is subject to a deductible. Most of our policies have a

flat dollar deductible such as $1,000 that applies to all property

related losses.

  • Please note: many of our competitors will have a separate

percentage deductible that is much higher that applies to wind

or hail. A 2% deductible on wind on a home with a replacement

cost of $250,000 equates to $5,000 deductible on any wind

related claims, such as roof damage. You do not have to settle

for this. There are better options out there that we can offer for

probably no additional premium.

  • The Dwelling limit is used to calculate the other coverage parts

other than Liability and Medical Payments.

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Coverage B: Other Structures

  • This is coverage for detached structures such as sheds, pools,

fences, ect.

  • The coverage amount is automatically calculated at 10% of your

dwelling limit. So if you have $250,000 on your home, then you

will have $25,000 on your other structures automatically.

  • This limit can be adjusted up or down with most carriers.
  •  It is subject to a deductilbe


Coverage C: Personal Property

  • This is coverage for your belongings. Think moveable items such as furniture,

clothing, food, electronics, computers, jewelry, ect.

  • The automatic coverage limit is 50% of your dwelling coverage. This amount can

be changed.

  • Typically, this coverage is based on Actual Cash Value. We sometimes say that

the “evaluation basis” is Actual Cash Value. You need to watch out for this one. If

your Personal Property is insured at Actual Cash Value (ACV) then any claims for

personal property will be depreciate for age and wear and tear. Potentially this

could significantly reduce a claim payment. Typically you do not have to settle for

this option. Usually we can remedy this prior to a claim easily and inexpensively.

  • All policies have internal lower limits for items such as: jewelry, computers,

electronics, guns, collectibles, ect.

Coverage D: Loss of Use

  • This is coverage for additional living expense from being

displaced from your home due to a covered loss.

  • The coverage limit is 20%, it can be increase, and carries no


bp standing

Coverage E: Liability

  • This is coverage for bodily injury or property damage that you

are legally liable for.

  • Coverage limits usually start at $100,000 and you can typically

select up to $500,000.

  • There is no deductible.
  • You can purchase higher liability limits by purchasing an

Umbrella Policy. The cost is usually minimal for these policies

and will provide higher limits to other polices such as your auto

liability policy.

Coverage F: Medical Payments

  • Coverage for medical bills for people injured at your location

regardless of legal liability.

  • This is a “no-fault” coverage.
  • Typical limits are $1.000 to $10,000
  • There is no deductible.

Standard Exclusion

  • Flood
  • Typically purchased as a stand alone policy.
  • Policy limits typically cap out at $250,000 on your home and

$100,000 on your personal property.

  • In some areas Excess Flood policies can be purchased to provide

higher limits.

  • Most flood damage claims are a result of excessive rain.
  • Earth Quake
  • Can usually be added by endorsement

Common Insurance Terms

  • Replacement Cost
  • The cost to rebuild or replace with like and kind at today’s cost. This

does not apply depreciation to the evaluation.

  • Actual Cash Value
  • Replacement cost minus depreciation for wear and tear. This is less

desirable than replacement cost.

  • Open Perils
  • This refers to the list of perils or types of claims a policy will insure

against. Open Perils or All Risk means it is covered unless there is a

specific exclusion that limits coverage. Typical exclusions are meant to

limit coverage for maintenance, wear and tear, and intentional acts.

Named Perils

  • This also refers to the perils of a policy. In this case there is a specific

list of perils that are insured against.

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