Property Insurance Basics and Coverages
Know the skeletons of the forms
A homeowners policy is organized as Coverage A (dwelling), B (other structures), C (personal property), D (loss of use), E (personal liability), and F (medical payments to others), plus Section I and Section II conditions. HO-2 is broad named peril; HO-3 is special form, meaning the dwelling is open peril while personal property stays named peril; HO-5 is open peril on both; HO-4 (renters) and HO-6 (condo) carry no Coverage A or B; HO-8 uses functional replacement cost for older homes. The dwelling policy (DP-1, DP-2, DP-3) covers the structure and contents only and adds no liability unless endorsed -- it fits tenant-occupied or non-owner-occupied property.
Commercial property adds coinsurance, blanket versus specific insurance, business income with a period of restoration, extra expense, equipment breakdown, builders risk, and inland marine floaters that follow movable property.
Traps
- Calling HO-3 a named-peril form. Only the dwelling is open peril.
- Coverage C special limits (cash, jewelry, silverware, firearms) apply per category, not to the whole limit.
- Ordinance or law, earth movement, and flood are excluded unless added; debris removal is generally additional coverage.
- Replacement cost assumes you actually repair or replace; otherwise payment drops to ACV.
Worked example: the coinsurance formula
A building worth $1,000,000 is insured for $600,000 with an 80% coinsurance clause and a $1,000 deductible. Required insurance is 0.80 x $1,000,000 = $800,000. The insured carried $600,000, so the fraction is 600,000 / 800,000 = 0.75. A $100,000 loss pays 0.75 x $100,000 = $75,000, less the $1,000 deductible, or $74,000.