A trade, profession, or occupation on a full, part-time, or occasional basis, including activities for money or compensation.
Excludes volunteer work, in-home daycare without pay, or daycare for relatives. An exception exists for receiving less than 2,000 total income in the twelve months prior to the policy period.

Civil Authority Prohibited Use

Covers additional living expenses and fair rental value for up to two weeks if the insured residence is unusable due to direct damage to neighboring premises by a covered peril.

Debris Removal

Covers removal of volcanic ash and debris from tree removal when a tree is damaged or felled by a covered peril (windstorm, hail, weight of ice, snow, or sleet).

Employee

An employee of the insured or an employee leased to the insured through a labor agency not related to duties performed by a resident employee.

Fair Rental Value

Pays the fair rental value of any part of the premises rented to another, minus expenses that do not continue while the premises are unfit to live in.

Fire

Combustion producing a spark, flame, or glow (derived from court decisions).

Grave Markers Protection

Pays up to 5,000 for loss/cost of grave markers, including mausoleums, on or away from the residence premises for loss caused by a peril under coverage c, whose limits are not increased.

Insured

The person named on the policy declaration.
Any resident of the household who is a relative of the named insured (any age).
Any person under 21 in the care of the insured or a resident relative.
The named insured's spouse, if a resident of the household.
A child of the insured living away at college (full-time student, up to age 24).

Insuring Agreement Clause

The provision containing the insurance company's promises and obligations to provide coverage as stated in the policy.

Insurer

The insurance company assuming risk and agreeing to pay claims or provide services (also known as the carrier).

Landlord’s Furnishings

Pays up to 2,500 for loss to carpeting, household appliances, and other household furnishings in premises rented to others on the resident's premises caused by a covered peril (excluding theft).

Landscape Coverage

Shrubs, trees, plants, and lawns are covered up to 5% of the dwelling (Coverage A) amount, with a maximum of 500 for each tree, shrub, or plant.
in HO-4 and HO-6, the coverage is 10% of the personal property coverage (Coverage C) amount, with a 500 per item limit.

Ordinance or Law

Covers costs due to ordinance/law requiring construction, repair, or demolition of property if the property owner’s maintenance skills are so poor the property is being condemned by a local government (no coverage).

Prorated Cancellation

Termination of a contract with the premium charge adjusted in proportion to the exact time the protection has been in force.
All unearned premium is returned to the insured.

Prorated Liability Clause

A clause that provides a method of sharing loss when more than one policy is applicable.
Each company covers no more than its share (also known as the Other Insurance Clause).

Property Damage

A type of loss covered under many liability contracts.
Includes the insured’s liability for damage to property of others or loss of use of tangible physical property.

Salvage

Property taken over by an insurance company to reduce its loss.
The company may dispose of or salvage property as it wishes, but on request and proper reimbursement, may return it to the insured.

Subrogation

The transfer to the insurance company of the insured's right to collect for damages.
After paying a claim, the company stands in place of the insured ensuing the negligent party, thus preventing the insured from collecting twice.

Theft

Included as a named peril.

Time Element Coverage

Provides protection for indirect loss that occurs when, following a direct property loss, there is a time lapse before the property can be used again.
Includes business income, contingent business income, extra expense, and fair rental value.

Unoccupancy

A dwelling or structure without people inside, but with contents.
No people for a continuous number of days, but personal property is present.

Vacancy

A dwelling or structure without people or contents inside.
No people and no personal property on the premises for a specified and continuous number of days.

You, Your, We, and Us

"You" and "your" refer to the insured and the spouse of the insured, if residing at the same address.
"We," "us," and "are" refer to the insurance company.

Homeowners Insurance Overview

Homeowners insurance provides comprehensive coverage for both the contents and structures of a home, as well as liability protection for homeowners.

Learning Objectives

By the end of this chapter, you'll be able to:

Understand the history and purpose of homeowners insurance policies.
Identify persons eligible to purchase homeowners insurance.
Explain the perils covered under Basic, Broad, and Special Cause of Loss forms.
Differentiate between the six different homeowners policy forms.
Explain how a standard homeowners insurance policy is structured and the coverages provided under each section.
Describe the general conditions applicable to a homeowners policy.
Identify and describe common policy endorsements.

Chapter Sections

Overview of the homeowner's insurance policy
Perils insured against
Coverage forms
Section I, property coverages
Section II, liability coverages
Exclusions
Conditions
Cancellation non renewal
Selected endorsements

History and Purpose

Prior to the 1950s, the standard fire policy (SFP) was the primary personal lines property contract for residences.
- It only covered property loss from three causes, with no liability coverage options.
To secure adequate coverage, property owners had to buy additional coverage perils known as the extended coverage (EC) perils to be included in the SFP by endorsement.
Insurers were prohibited from multiple different lines of insurance.
- This meant homeowners needed multiple policies to protect themselves.
In 1950, regulations changed, allowing insurers to offer multiple lines of insurance together under multiline policies.
- This led to the modern homeowners policy.
The modern policy expands the number of perils insured against and offers different policy forms for homeowners, renters, condo owners, and historic homes.
- Also, offers a vast amount of endorsements to allow consumers the flexibility to customize the homeowner's policy to their individual needs

Characteristics of Homeowners (HO) Insurance Policies

Multiline policy including both property and liability coverage.
Designed for individuals and families who own and occupy residential buildings.
Not for commercial residences like apartment complexes.

Standard Homeowners Policy Structure

Declarations Page: Insured's name/address, property description, policy term, coverage limits, discounts/surcharges, and lienholders.
- A lienholder is any third party that holds the loan used to purchase an insured property.
Insurance Services Office (ISO) Policy Form: Ensuring agreement, definitions,Section I (property coverages), Section II (liability coverages), Section I and II conditions, endorsements.

Insuring Agreement

States the insurer will provide insurance described in the policy in return for premium payment and compliance with policy provisions.

Definitions Section

Clarifies terms used throughout the policy to prevent confusion or misinterpretation.

Section I: Property Coverages

Discusses coverages provided, perils insured against, exclusions, and conditions.
Can include coverages A, B, C, and D (1-4 coverages).
- Coverage A (Dwelling): Residence on the declarations page, plus permanently attached structures or equipment.
- Coverage B (Other Structures): Unattached structures on the property (tool shed, swimming pool).
- Coverage C (Personal Property): Homeowner's personal property, both on and off the property.
- Coverage D (Loss of Use): Additional living expenses if the residence is uninhabitable due to a covered loss or civil authority order.

Section II: Liability Coverages

Discusses coverages, exclusions, and conditions related to liability insurance.
Provides comprehensive personal liability (CPL) coverage.
- Covers bodily injury and property damage of others caused by the insured's negligence.
Coverage E (Personal Liability): Claims due to injury/property damage to a third party caused by the insured's negligence (on or off insured property).
- Includes legal counsel in lawsuits.
Coverage F (Medical Payments to Others): Pays medical and funeral expenses of others, regardless of fault.
- Designed to extend funds before a liability claim/lawsuit is filed.

Section I and II: Conditions

Describe responsibilities of both the insurer and insured during a covered loss.
Include the insured's duties after a loss, how deductibles apply, and how losses are assessed/paid.
Certain conditions apply to both Section I and Section II, listed separately.

Endorsements

(Also known as Riders)
- Forms added to alter a standard policy.
- Used to comply with state laws, restrict/expand coverages, or add coverages.
Review this section of delivered policy form to ensure any requested coverages appear.

Eligibility to Purchase HO Policy

At least one named insured must occupy the home.
Applicant must purchase both property and liability coverage.

Eligible Insureds Include

Named insured and household relatives.
Persons under 21 in the care of the named insured or a resident relative.
Full-time students (under 24) who were residents before moving out for school.
Any person or organization legally responsible for animals or watercraft owned by an insured
Persons employed or using a motor vehicle with permission of the insured on the insured location

Eligible Properties

Must be used exclusively as a residence (can include incidental occupancies like offices or studios).

One to four unit dwelling structures.
Owner-occupied.
Property must not have abnormally high loss exposure.
Must meet minimum valuation threshold.
Maximum of two boarders/roomers per family.
Farms are ineligible.
Mobile homes are ineligible without a mobile home endorsement.

Under certain circumstances, the following properties may also qualify for homeowner's coverage:

Homes under construction
Homes being purchased under an installment contract
Homes occupied under a trustee or life estate arrangement
Homes used as secondary or seasonal residences

Dwelling Policies (DP)

Used when properties don't qualify for HO policies.
More expensive and require many endorsements to match HO coverages.
Acceptable for non-owner occupied, seasonal, vacation, vacant property, and those with high loss exposure/do not meet minimum property value requirements.

Definitions Section

The following definitions are commonly found in the definition section of a homeowner's insurance policy.

You, You're: The named insured and spouse (if residing in the same household).
We, Us: The insurance company providing the policy.
Bodily Injury (BI): Bodily harm, sickness/disease (including care), loss of services, and death.
Business: Trade, profession, or occupation (full, part-time, or occasional), including activities for compensation.
Volunteer work, in-home daycare without pay, or daycare for relatives are excluded.
Employee: An employee of the insured or an employee leased to an insured
Insured: The person or persons protected under an insurance contract.
named insured is the owner of the policy as designated on the decalarations page.
Insured Location
- All locations the insured is temporarily staying at such as friends houses, hotels, cottages etc.
- The insured premises includes grounds used by an insurance as residence as delineated on the declaration page.

Perils Insured Against

Can be divided into basic, bread and special perils building upon the list that came before it.
- Different Homeowners policies have different perls depending which perils the applicant selected.

Historically the order of Historical Coverage has been:

Basic Name Perils
Extended coverages plus vandalism and malicious mischief
Extended Coverages: REVVVC Shaw
Broad Name Perils – B.I.G. EFFECT
Special (Open) Perils
Windstorm is a peril when damage to insured property results from the direct action of wind, including objects hurled by the wind that directly cause damage, including our tornadoes, hurricanes, high winds, with little or no rain, and cyclones

Broad Perils

10 new perils that have never been offered before in the property policy
- Burglar damage
- Damage from ice, snow, and sleet weight
- Glass breakage
- Accidental discharge
- falling objects
- freezing
- electrical
- collapse
- tearing apart
- Theft
Insurance is designed to cover loss beyond the control of the insured.Insurance is designed to cover loss beyond the control of the insured.

Coverage Forms

Describe the coverages provided by the insurance contract.
The policy number used depends on a multitude of factors such as if an applicant wants a named perils policy of an open perils policy.
The main policy forms are H02, H03, H04, H05, H06 and H08 each with its own coverages depending on the policy selected.

Eligibility criteria includes

If the owner occupied the property.
An applicant only owns one unit among a multiunit building (such a condo.)
what materials were used for the structure and if replacing them would be difficult.
which coverages does the applicant wish to be settled on a replacement cost basis or an actual cash value ACV basis.

H02 (broad form)

used for on occupied dwellings and offer named perils coverage for a, b and c on all coverages offered

HO-3 (Special form)

considered the standard homeowners policy form
The most common homeowners policy in use and is thee form most commonly used.
Coverage A dwelling, coverage B other sturctures:
- Provide open perils coverage and coverage C personal property Provides name periks coverage.

H04 forms

Also known as renters insurance Is designed to protect contents and personal liability needs of renters who are occupying a building as a non owner.
No coverage for A and B coverage C provides coverage of perils in broadform.

H05 Comprehensive Form

offers Open perils coverage For coverage A&B.Open perils personal coverage

HO six unit owner form covers:

The portion of the condominium and owner specific condominium unit, for instance set aside for exclusive ownership to the association.

H0 8 Modified coverage form is used

Used when repalkement cost or home is far greater than the market value
In such cases the homeowner may be able to purchase the home at the reduced market price.Buyt could not afford the cost of restoration or the cost of insurance to facilite Restoration in case of a loss

Property Coverage

Covers HO policies for those covered under section one such as Residents of your household who are your relatives or other persons under the age of 21 are in your care or the care of resident of your household who is your relative such as children.