Property Insurance Coverages and Policy Provisions
Forms and structure
Homeowners forms differ mainly by perils: HO-3 insures the dwelling on an open-peril basis and personal property for named perils; HO-5 is open peril for both; HO-2 is broad named peril; HO-4 covers renters' personal property and liability; HO-6 covers condo unit owners; HO-8 addresses older homes with functional replacement. Dwelling forms (DP-1 through DP-3) cover non-owner-occupied property with no liability coverage unless endorsed.
Coverages are A dwelling, B other structures, C personal property, D loss of use, E personal liability, F medical payments to others. Commercial property forms use causes-of-loss forms-basic, broad, special-and often a coinsurance clause.
Key provisions and exclusions
Typical exclusions: earth movement, flood and surface water, ordinance or law, neglect, intentional loss, wear and tear, deterioration, insects, and limited mold or fungus. Personal property sublimits commonly apply to jewelry theft, cash, firearms, silverware, and business property. Replacement cost coverage usually requires repair or replacement and a claim within a stated period; otherwise settlement may be at ACV. The mortgagee clause protects the lender's interest. Vacancy (typically 60 days) limits or suspends coverage; unoccupancy is treated differently. Other provisions include pair and set, debris removal, and increased cost of construction.
Worked example
Commercial building replacement cost $1,000,000, 80% coinsurance, limit purchased $600,000, loss $200,000, deductible $5,000. Required limit = $800,000. Payment = ($600,000 ÷ $800,000) × $200,000 = $150,000, minus $5,000 = $145,000. The penalty applies only when the limit is below the coinsurance requirement.
Traps: confusing flood with water backup; assuming cosmetic damage or matching is always owed; applying coinsurance to a loss below the requirement; overlooking sublimits.