Property Insurance Policy Types and Coverages
Personal lines forms
Homeowners forms differ mainly by perils and valuation. HO-2 is broad named peril; HO-3 insures the dwelling on an open-peril basis but personal property for named perils only; HO-5 is open peril on both; HO-4 is tenants (contents and liability, no building); HO-6 is condominium unit-owners; HO-8 is for older homes and uses functional replacement cost. Standard relationships: Coverage B other structures 10% of A, Coverage C personal property 50–70% of A, Coverage D loss of use 30% of A, Coverage E personal liability $100,000, Coverage F medical payments to others $1,000.
Dwelling and flood
Dwelling forms (DP-1 basic, DP-2 broad, DP-3 special) cover the dwelling and are used for rentals and non-owner-occupied risks. The NFIP writes flood coverage with a 30-day waiting period and, for a one-to-four family residence, limits of $250,000 on the building and $100,000 on contents.
Commercial property
Commercial property uses building and personal property coverage, a causes-of-loss form (basic, broad, or special), and either specific or blanket limits. Business income responds during the period of restoration, subject to a waiting period; extra expense pays to continue operations. Equipment breakdown, builders risk, inland marine floaters, crime, and cyber are separate coverage parts.
Worked example
An HO-3 with $400,000 Coverage A pays at most $40,000 for a detached garage under Coverage B unless the limit is increased by endorsement - a common test of the percentage relationships.
Traps
Believing HO-3 is open peril for contents; assuming flood or earthquake is included; and forgetting that the NFIP imposes both a waiting period and statutory maximum limits.