Property Insurance Basics and Personal Property Coverages
The homeowners package
A homeowners policy has two sections: Section I (property) covering the dwelling (A), other structures (B), personal property (C), and loss of use (D); and Section II (liability) covering personal liability (E) and medical payments to others (F).
Forms to know
- HO-2 broad form - named perils throughout.
- HO-3 special form - open perils on A and B, named perils on contents. The most common form.
- HO-4 tenants - contents plus liability, no building coverage.
- HO-5 comprehensive - open perils on both building and contents.
- HO-6 condo unit-owners - building items the association does not insure, plus contents.
- HO-8 modified coverage for older homes - functional replacement cost, named perils.
Details that get tested
Replacement cost versus ACV (replacement cost minus depreciation); a deductible applies per occurrence. Special limits cap money, jewelry, firearms, silverware, and business property - scheduled endorsements lift them. Additional coverages include debris removal, trees and shrubs (typically 5% of Coverage A with a $500 maximum per item), credit card and forgery, and limited ordinance or law (10%). Standard exclusions: flood, earth movement, neglect, intentional loss, war, nuclear hazards, and water backup/sewer, the last endorsable.
Traps
Questions swap HO-3 and HO-5 perils, treat medical payments as fault-based (it is not), or assume flood is covered. Loss of use pays added living expenses and lost fair rental value, not mortgage principal.
Rule of thumb
HO-3: building open, contents named. If the stem asks about a tenant's sofa, think HO-4 Coverage C.
Worked example. A tree falls and crushes a detached garage. HO-3 covers the structure under Coverage B, and removal of the tree falls under debris removal subject to limits.