THE HOMEOWNERS POLICY

1. Introduction

Just as companies that issue both property and casualty insurance policies are called multiline companies, policies that contain both property and casualty coverages in a single contract are called multiline policies or package policies. 

The homeowners policy is a multiline policy because it provides property and liability insurance in a single policy.

By obtaining property and liability coverage in one policy, the insured is more likely to avoid gaps in coverage and the overlapping of coverages that often happen when several monoline policies are purchased instead of a package policy.

 It also is advantageous to the insurance company because it means fewer contracts and records, simplified billing systems, and fewer duplicate services. 

These savings mean the price will be lower than the cost of separate policies offering equivalent coverage.

In this course, we’ll focus on the homeowners 2000 policy issued by ISO.

2. Eligibility, Insureds

Not every person or every house is eligible for coverage under a homeowners policy. The rules are stricter than those that apply to the dwelling policy.

■The named insured must be the owner-occupant of the dwelling or condominium or a renter who maintains a residential occupancy.

■The home cannot contain more than four families; one additional family or two roomers or boarders are allowed per family.

■The insured cannot purchase coverage for personal property only unless the insured is a renter.

■The dwelling must be used exclusively as a residence, except for certain incidental occupancies such as offices, professional or private schools, or studios.

■Farms may not be covered under a homeowners policy; mobile homes are eligible if the mobile home endorsement is attached.

■Dwellings under construction and secondary or seasonal residences are eligible.

■Homes being purchased on an installment contract or occupied under a trustee or life estate arrangement are eligible.

Insureds under the homeowners policy include the named insured and residents of the same household, provided they are relatives or are under age 21 and in the care of the insured or a resident relative.

3. Extent and Scope of Homeowners Coverage

The homeowners policy is divided into two sections: Section I provides property insurance, and Section II provides liability and medical payments insurance.

Just as there are several dwelling forms that provide increasing levels of coverage, there are different homeowners forms that vary in extent of coverage: HO-2, HO-3, HO-4, HO-5, HO-6, and HO-8.

 Each of these forms provides identical liability coverage. The property coverage varies with the homeowners form selected.

The HO-2 (HO 00 02), or broad form, provides broad coverage for the dwelling and personal property. 

The covered perils are similar to those covered by the DP-1 with the extended coverage perils and V&MM coverage. 

Breakage of glass and theft are also covered. In addition, it broadens certain perils and adds others.

The HO-3 (HO 00 03), or special form, provides open peril coverage for loss to the dwelling and other structures. 

It provides broad coverage for personal property, which is identical to the HO-2’s coverage of personal property.

The HO-4 (HO 00 04), or contents broad form, insures tenants—people who do not own the building where they reside. 

It provides broad coverage for personal property only that is similar to the HO-2’s and HO-3’s broad coverage of personal property, and no coverage for the dwelling.

The HO-5 (HO 00 05), or comprehensive form, provides open peril coverage for both the dwelling and other structures and personal property.

The HO-6 (HO 00 06), or unit-owners form, provides broad coverage on the personal property of condominium owners, similar to that provided under the HO-2, HO-3, and HO-4. It provides very limited dwelling coverage.

The HO-8 (HO 00 08), or modified coverage form, is designed for older homes with replacement values that may far exceed their market values. It provides basic coverage on the dwelling and personal property similar to the DP-1 with the extended coverage perils and V&MM coverage, but it also includes certain restrictions on valuation of losses. In many areas, the HO-8 is no longer available.