Property Insurance Basics and Dwelling/Homeowners Coverage
Policy anatomy
Every policy contains declarations, insuring agreements, conditions, exclusions, and definitions. Conditions are the insured's duties - prompt notice, proof of loss, appraisal, and the suit-limitation period. Exclusions narrow coverage; exceptions to exclusions restore it.
Perils and forms
Named-peril forms list covered causes of loss. Open-peril (special) forms cover risks of direct physical loss unless excluded. Homeowners lineup: HO-2 broad named peril; HO-3 open peril on the dwelling and other structures (Coverages A and B) but named peril on personal property (Coverage C); HO-5 open peril on both; HO-4 renters (contents plus liability); HO-6 condo unit-owner; HO-8 modified form for older homes, often paying functional replacement cost. Coverage D (loss of use) and Coverage F (medical payments to others) apply without any coinsurance calculation.
Valuation and coinsurance
Actual cash value = replacement cost less depreciation. Replacement cost pays new without depreciation. Coinsurance is a property condition that penalizes underinsurance: payment = (limit carried / limit required) x loss, then subtract the deductible. If the fraction reaches 1.0, ignore it.
Worked example: 80% coinsurance, replacement cost $400,000, so required limit $320,000; the insured carries $240,000 and has an $80,000 loss with a $1,000 deductible. (240,000 / 320,000) x 80,000 = $60,000, less $1,000 = $59,000 paid. Had the limit been $320,000, the full $80,000 less the deductible would be paid.
Traps
The deductible comes off after the coinsurance math; coinsurance applies per loss, not per policy year; and a policy limit still caps the payment even when the formula produces more.