Property Insurance Principles, Coverages, and Policy Provisions
The homeowners forms
HO-3 is the benchmark: open-perils coverage on Coverage A (dwelling) and B (other structures), broad named perils on C (personal property). HO-2 is named perils throughout; HO-5 is open perils on both real and personal property; HO-4 covers a renter's contents and liability with no building; HO-6 is the condo form; HO-8 serves older homes using functional replacement cost. Coverage D is loss of use, E is personal liability, F is medical payments to others. Watch the B trap: it insures structures not attached to the dwelling - detached garages, fences, sheds.
Exclusions and endorsements
Standard property exclusions include earth movement, water damage from outside the dwelling (flood, surface water, sewer backup absent endorsement), neglect, intentional loss, ordinance or law, and business pursuits. Flood coverage comes from a separate NFIP policy, not an endorsement to the homeowners form.
Valuation and the 80% requirement
Under HO-3, dwelling losses settle at replacement cost only if Coverage A is at least 80% of full replacement cost; otherwise the insurer pays the greater of actual cash value or a proportional share of the loss. Commercial property uses a hard coinsurance clause.
Worked example
A building worth $1,000,000 carries an 80% coinsurance requirement ($800,000) but is insured for $600,000. A $100,000 covered loss pays (600,000 ÷ 800,000) × 100,000 = $75,000, less the deductible. The insured is a coinsurer for the gap - the reason agents document replacement values at every renewal.