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Homeowner's Insurance
Homeowner insurance is a package that provides coverage for your home and possessions. It also provides liability coverage when you're legally responsible for an accident not excluded under the policy. If someone other than you or a resident of your household is injured in a covered accident on your insured premises, your American Family homeowner insurance provides medical expense coverage.
Homeowner insurance provides protection against accidental direct physical loss. You'll have the peace of mind that you are protected financially against covered losses that occur to your house and contents. It also provides liability protection. This coverage will pay compensatory damages up to your policy limit if you're legally liable because of bodily injury or property damage as covered by the policy and not excluded. An important reason to have homeowner insurance is that banks and mortgage companies typically require it before they lend you money to purchase your home.
The home insurance policy is usually a term contract—a contract that is in effect for a fixed period of time. The payment the insured makes to the insurer is called the premium. The insured must pay the insurer the premium each term. Most insurers charge a lower premium if it appears less likely the home will be damaged or destroyed: for example, if the house is situated next to a fire station, or if the house is equipped with fire sprinklers and fire alarms. Perpetual insurance, which is a type of home insurance without a fixed term, can also be obtained in certain areas.
In the United States, most home buyers borrow money in the form of a mortgage, and the mortgage lender always requires that the buyer purchase homeowners insurance as a condition of the loan, in order to protect the bank if the home were to be destroyed. Anyone with an insurable interest in the property should be listed on the policy.
Types of Homeowners Insurance
United States
As described in Wiening et. al. [1], prior to the 1950's, there were
separate policies for the various perils that could affect a home. A
homeowner would have had to purchase separate policies covering fire
losses, theft, personal property, and the like. During the 1950s, policy
forms were developed, allowing the homeowner to purchase all the insurance
they needed on one complete policy. However, these policies varied by
insurance company, and were difficult to comprehend. The need for standardization
grew so great that a private company based in Jersey City, New Jersey,
Insurance Services Office, also known as the ISO, was formed in 1971
to provide risk information and issued a simplified homeowners policy
for resell to insurance companies. These policies have been amended
over the years until currently, the ISO has six standardized homeowners
insurance forms in general and consistent use . Of these HO-3 is the
most common policy followed by HO-4 and HO-6. Others that are less used,
though still significant, are HO-1, HO-2 and HO-5. Each is summarized
below:
HO-1
A limited policy that offers varying degrees of coverage but only for
items specifically outlined in the policy. These might be used to cover
a valuable object found in the home, such as a painting.
HO-2
Similar to HO-1, HO-2 is a limited policy in that it covers specific
portions of a house against damage. The coverage is usually a "named
perils" policy, which lists the events that would be covered. As
above, these factors must be spelled out in the policy.
HO-3
This policy is the most common written for a homeowner and is designed
to cover all aspects of the home, structure and it contents as well
as any liability that may arise from daily use as well as any visitors
who may encounter accident or injury on the premises. Covered aspects
as well as limits of liability must be clearly spelled out in the policy
to insure proper coverage. The coverage is usually called "all
risk". Also called an "open perils" policy.
HO-4
This is commonly referred to as renters insurance or renter's coverage.
Similar to HO-6, this policy covers those aspects of the apartment and
its contents not specifically covered in the blanket policy written
for the complex. This policy can also cover liabilities arising from
accidents and intentional injuries for guests as well as passers-by
up to 150' of the domicile. Common coverage areas are events such as
lightning, riot, aircraft, explosion, vandalism, smoke, theft, windstorm
or hail, falling objects, volcanic eruption, snow, sleet, and weight
of ice.[2]
HO-5
This policy, similar to HO-3, covers a home (not a condo or apartment),
the homeowner and its possessions as well as any liability that might
arise from visitors or passers-by. This coverage is differentiated in
that it covers a wider breadth and depth of incidents and losses than
an HO-3.
HO-6
As a form of supplemental homeowner's insurance, HO-6, also known as
a Condominium Coverage, is designed especially for the owners of condos.
It includes coverage for the part of the building owned by the insured
and for the property housed therein of the insured. Designed to span
the gap between what the homeowner's association might cover in a blanket
policy written for an entire neighborhood and those items of importance
to the insured, typically the HO-6 covers liability for residents and
guests of the insured in addition to personal property. The liability
coverage, depending on the underwriter, premium paid, and other factors
of the policy, can cover incidents up to 150' from the insured property,
all valuables within the home from theft, fire or water damage or other
forms of loss. It is important to read the Associations By-laws to determine
the total amount of insurance needed on your dwelling.
HO-7
For mobile home owners.
HO-8
It is usually called "older home" insurance. It lets house
owners with higher replacement cost than the market value insure them
at the lower market value rate.
In addition, a Dwelling Fire policy is generally available for non-commercial
owners of rented houses, covering property damage to the structure,
and sometimes to the owner's personal property (such as appliances and
furnishings). The owner's liability is generally extended from their
own primary home insurance, and does not comprise part of the Dwelling
Fire policy. It is a counterpart to the HO-4 renter's policy.
References
1. ^ {{^ Wiening, Eric, George Rejda, Constance Luthardt, Cheryl Ferguson
(2002). Personal Insurance, 1st edition, Malvern, Pennsylvania: American
Institute for Chartered Property Casualty Underwriters/Insurance Institue
of America. ISBN 0-89463-108-X. }}
2. ^ Rental Insurance: What Is Covered And What Is Not?. Retrieved on
2006-08-21.
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