Homeowners Insurance
Forms and structure
HO-3 insures the dwelling on an open-peril basis and personal property on a broad named-peril basis; HO-5 is open peril on both; HO-2 is broad named peril; HO-4 covers tenants' personal property and liability; HO-6 covers condo unit owners; HO-8 accommodates older homes with functional replacement cost. Section I coverages are A dwelling, B other structures, C personal property, D loss of use; Section II is E personal liability and F medical payments to others.
Key rules
- Standard percentages: B is 10% of A, C is typically 50–70% of A, D is 30% of A, though endorsements change them.
- Loss settlement on the dwelling requires insurance to at least 80% of replacement cost; below that, payment is the greater of ACV or the coinsurance-proportioned amount.
- Internal special limits apply to money, securities, jewelry and furs (theft), firearms theft, and business property in the home.
- Exclusions include earth movement, flood, ordinance or law, neglect, intentional loss and business pursuits.
Worked example
Coverage A is $300,000 with an 80% requirement of $240,000, but the insured carries only $180,000 (75% of required). A $100,000 dwelling loss settles at 75% × $100,000 = $75,000, less the deductible, because the greater-of calculation favors the ACV figure only if ACV exceeds $75,000. Had the limit been $240,000, the full loss would be payable up to the limit.
Traps
Applying the 80% test to personal property or to other structures; ignoring that loss of use is additional; forgetting that water backup and sump overflow need an endorsement; treating scheduled personal property as subject to the policy deductible when the schedule states otherwise.