Understanding your Homeowner policy
There 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.
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
- 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
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
- 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.
Coverage B: Other Structures
- This is coverage for detached structures such as sheds, pools,
- 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
- 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
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
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.
- 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
- 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.
- 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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