Home Insurance

What is Home Insurance?

Home insurance, also commonly called hazard insurance or homeowner’s insurance (and often abbreviated in the US real estate industry as HO1), is a type of property insurance that covers a private residence.

Home insurance is a type of policy that combines various personal insurance protections, which can include losses to one’s home, its contents, loss of use (incurring additional living expenses), or loss of other personal possessions. Homeowner’s insurance also provides liability coverage for accidents at the home or due to the actions of the homeowner within the policy territory.

Typical Home Insurance Coverages

Section 1. Property Coverages

· Coverage A: Dwelling

Covers the value of the dwelling itself (not including land). Typically, a coinsurance clause states that as long as the dwelling is insured to 80% of actual value, losses will be adjusted at replacement cost up to the policy limits. This exists to provide a buffer against inflation. HO-4 (renter’s insurance) typically has no Coverage A, though it has additional coverages for improvements.

· Coverage B: Other Structures

Covers other structures around the property not used for business except as a private garage. Typically limited at 10%- —20% of Coverage A with additional amounts available by endorsement.

· Coverage C: Personal Property

Covers personal property with limits for the theft and loss of particular types of items (e.g., $200 for money, banknotes, bullion, coins, medals, etc.). Typically, 50—70% of coverage A is required for contents, which means that consumers often pay for more coverage than necessary. [14]

· Coverage D: Loss of Use/Additional Living Expenses

Covers expenses associated with additional living expenses (e.g. rental expenses) and fair rental value if part of the residence was rented. However, that includes only the rental income for the actual rent of the space, not services provided such as utilities.

· Additional Coverages

Covers a variety of expenses such as debris removal, reasonable repairs, damage to trees and shrubs for certain named perils (excluding wind and ice, the most common causes of damage), fire department changes, removal of property, credit card and/or identity theft charges, loss assessment, collapse, landlord’s furnishing, and some building additions. These vary depending on the form.

· Exclusions

In an open perils policy, specific exclusions will be stated in this section. These generally include earth movement, water damage, power failure, neglect, war, nuclear hazard, septic tank back-up expenses, intentional loss, and concurrent causation (for HO3).[15] The concurrent causation exclusion excludes losses where both a covered and an excluded loss occur. In addition, the exclusion for building ordinance can mean that increased expenses due to local ordinances may not be covered.[16] A 2013 survey of Americans found that 41% believed mold was covered, although it is typically not covered if the water damage occurs over time, such as through a leaky pipe.[17]

· Floods

Flood damage is typically excluded under standard homeowner’s and renter’s insurance policies. However, flood coverage is available in the form of a separate policy both from the National Flood Insurance Program (NFIP) and from certain private insurers. [18]

Section 2. Liability Coverages

· Coverage E: Personal Liability

Covers damages that the insured is legally liable for and provides legal defense at the insurer’s expense. About a third of the losses for this coverage are from dog bites.[19]

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