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The homeowners insurance policy is actually several coverages combined for home or condominium owners, or renters. There are three different packages for homeowners, and one each for renters and condominium owners.
The following description of policy coverage and provisions is based on industry-wide revisions that took place in 1991.
Each policy provides fire, lightning, windstorm, theft and liability coverages. Various types of optional extra coverages are then added to tailor the policy to specific needs. Each policy lists the perils that are covered (a peril is the actual cause of loss). The major differences among the various homeowners policy forms are the perils included and the property covered.
Standard contents of a policy
Property Covered: Under most homeowners policies, the major property to be covered is the house or “dwelling.” In addition to living quarters, this includes such structures as an attached garage or other house additions. Detached garages, tool sheds and other structures on the insured property (referred to in some policies as “other private structures”) are also covered. Any detached structure on the premises that is rented or leased to others (except for garage purposes), or used for business purposes, is not covered under the homeowners policy—an endorsement or separate policy is needed for this.
Renters and some condominium owners do not own the building they live in and do not need to insure it. However, some condo owners may be responsible for selected building items. It is recommended to check with the condo association to determine where responsibilities lie.
Like home owners, renters and condo owners need coverage for personal property. This includes household contents and other personal belongings owned, worn or carried by you or your family. You are covered whether the loss occurs while you’re at home or away. You can also obtain coverage for the personal property of guests on your premises. Coverage for animals, such as birds and fish, is not included.
Homeowners coverage includes “Loss of Use” coverage for the increase in living expenses made necessary when your house, apartment or condominium cannot be occupied due to damage caused by an insured peril. This covers your expenses over and above your normal living expenses during the time your residence cannot be occupied (up to the limits stated in your policy).
Liability Coverage: All homeowners forms include liability coverage. This coverage protects you in the event you are sued by persons who claim that your negligence caused injury to them or damage to their property.
If a suit is filed, your insurance company covers the cost of your defense whether you are ultimately found liable or not. If you should be found liable, your insurer will pay damages assessed against you, up to the liability coverage limits in your policy. Defense costs will not affect your liability coverage limits. Lawsuits between people covered by the same policy are excluded. Liability protection covers you for accidents occurring away from your premises as well as at home. It provides coverage for accidents caused by you, a family member or your pets. If you employ one or more persons in your home or on your premises, special Ohio Workers’ Compensation laws may apply.
Medical Payments to Others: Included under the liability section of the homeowners policy is a medical payments coverage with minimum limits of $1,000 per person. This provides coverage for accidental bodily injury to others when it occurs on your premises or elsewhere if caused by you, a family member or pets. It provides coverage whether or not you are legally liable. It does not provide coverage for injury to the named insured or family members.
Damage to Property of Others: There is a $500 maximum limit for minor damage accidentally caused by you or someone in your family to another person’s property. Again, you need not be legally liable. Damage caused by children under age 13 is covered, whether accidental or intentional.
Exclusions: Homeowners policies exclude certain perils, such as earthquake, landslide, flood, surface water, waves, tidal water or tidal wave, sewer backup, seepage, war and nuclear radiation. Most of these perils are classified as “acts of God” or catastrophe exposures and are not considered normal accidental losses.
Flood insurance is available, however, through a program of the federal government to certain eligible communities (see “Flood Insurance” for more information). Earthquake insurance is also offered as an endorsement by most insurance companies. Mopeds, other motorized bicycles and other recreational vehicles are excluded from coverage under homeowners policies.
The Ohio homeowners liability section also includes exclusions. Examples include the transmission of communicable diseases, home daycare services, and businesses in the home. Coverage may be available for many excluded exposures so check with an insurance professional regarding coverage.
Types of homeowners policies
The five homeowners forms available from most companies are:
Three supplementary coverages are included in homeowner policies. The Fire Department Service Charge provides up to $500 in coverage for fire department charges when called to protect property from an insured peril such as a fire. This coverage typically does not apply if the property is located within the limits of the city, municipality or protection district that provides the fire department response.
The Debris Removal coverage pays for the cost of removing the debris of covered property that has been damaged by an insured peril, up to a stated amount.
The Credit Card Theft coverage will pay up to $500 for the theft or unauthorized use of credit cards or electronic fund transfer cards issued in the policyholder’s name.
Certain types of personal property covered by the homeowners policy are limited to specific amounts per loss. The amount designated generally suits the needs of most average homeowners. Special limits may vary with individual companies and policies. However, the following are typical limits:
Policy endorsements modify or extend specific coverages provided by the policy under certain conditions. They are readily available by insurers for additional charges. Common homeowners endorsements offered are:
Special Loss Settlement: An endorsement that modifies HO-2 and HO-3 policies by allowing the policyholder to carry less than 80% replacement cost and still retain replacement cost coverage on partial losses. It is used as an alternative to HO-8.
Replacement Cost—Personal Property: Most policies can be amended to include the full cost to repair or replace personal property that has been lost or damaged.
Backup of sewers and drains: Many insurance companies offer an endorsement that provides coverage for the backup of sewers and drains. Check coverage limits with your insurance agent or company representative, as they will vary.
Home Business: With changes in the business climate, more people are operating businesses in the home. While the standard homeowners policy excludes or greatly limits coverage for this exposure, several endorsements are available to modify the policy. Coverage varies from company to company, so be sure to check with your agent or company representative.
Earthquake Insurance: Although Ohio is not a prevalent earthquake region, tremors do occur occasionally like the ones in Mercer County (Jan. 2004), Lake County (June 2003) and Painesville (Apr. 2002). Earthquake protection is not provided under most homeowners policies but may be added by endorsement. Owners of frame structures pay lower rates than those in masonry buildings, since frame buildings are better able to withstand earth tremors.
A special deductible—at least $250 or an average of 5–10% of the total amount of the insurance in any one loss, whichever is greater—apply separately to the dwelling, other structures and personal property.
Identity theft: Many insurers have introduced an Identity Theft endorsement for the homeowners policy (costs about $25 to $50 for $15,000–$25,000 coverage). Generally, the endorsement provides reimbursement to ID theft victims for costs associated with restoring their ID and correcting their credit history. Coverage will vary by insurer.
Homeowners policy change
An important change to the homeowners policy adds coverage for increased costs of construction due to the enforcement of building ordinances or laws. The limit is 10% of the coverage available to the dwelling. Two optional endorsements could be used to change the 10% limit. This change was made as a result of the problems home owners incurred following Hurricane Andrew.
Cost of homeowners insurance
Generally, the more coverage you need, the more expensive the policy premium. A Homeowners 3 policy provides broader coverage than a Homeowners 2 policy and requires a higher premium.
Other factors that affect homeowners premiums include the following:
Click here for additional ways to cut costs.
Note: This is a general description of coverages; coverage varies based on your specific homeowners policy. It is important to read the policy and discuss any limitations or exclusions with your insurance agent or company representative.
Note: For dwelling and other structures, the HO-3 policy form provides coverage for risks of loss that are not otherwise excluded in the policy.
Major revisions to the homeowners policy
Insurance Services Office, Inc. (ISO) introduced a new homeowners insurance policy in March 2001—the first major revision since 1991. As a result, a number of Ohio insurers have implemented homeowner policy changes.
Some of the ISO homeowner policy revisions include the following:
These are just some of the revisions in the ISO homeowners policy. Check with your insurance agent or company representative to determine if these revisions affect your coverage.