Basic Property Insurance Information
‘HO’ (Homeowner) policy: for owner-occupied buildings.
‘DP’ (Dwelling Policy) policy covers the owner of a building that is rented to others.
‘BOP’ (Business Owners Policy): covers property and a typical business.
‘CPP’ (Commercial Package Policy): these are ala carte policy packages – you pick the exact coverage you need and thereby custom design your policy for your needs.
HO, DP & CPP are forms created by the Insurance Services Office (ISO). Some companies do not follow this format and therefore label their forms differently. However, even the proprietary language forms used by some companies normally follow similar coverage as the ISO forms, but it is always better to ask your broker or agent and be sure before a loss occurs.
Good A DP-01/HO-01 is called a Basic or Fire policy and provides the least coverage. It is a named peril policy (specified coverage) and covers up to ten named perils.
Better A DP-02/HO-02 is called a Broad policy; it is a named peril policy, too and covers the same perils as a basic policy plus several more and depending on how your policy is written, may provide up to a total of seventeen.
Best A DP-03/HO-03 is called a Special or All Risk policy. This policy does not list named perils, but rather lists Exclusions of what is NOT covered.
Some companies have policies equivalent to the aforementioned policies but are written in their own proprietary language and are named differently by the insurance company.
With the DP-01/HO-01 and DP-02/HO-02 policies, in the event of a loss, the burden of proof of coverage of a loss is upon the claimant (that’s you). However, with either a DP-03 or HO-03 the burden of proof that a loss is not covered is upon the insurance provider.
Other Types of ‘HO’ Policies
HO-04: Aka – “Renters insurance”, this insurance is used by tenants to cover their personal property. This is a named peril policy and covers your stuff for losses similar to that of an HO-02. Should you be forced out of your rental due to a covered loss, this policy may also reimburse you for additional costs of living while your rental unit is being repaired. How much coverage to get? With calculator in hand, walk around your home, room by room, and add up how much it would cost to replace everything you own and this is the minimum dollar amount of coverage you should have. Most policies will also give you up to 10% of your coverage for betterment’s and improvements. This would be any improvement you have done that is now part of the rental unit.
HO-05: This is like an HO-03, only better, as it provides all-risk coverage like the HO-03 for your Dwelling, but also provides all-risk coverage on personal belongings (other policies are named-peril only for personal belongings).
HO-06: This insurance is for the condominium owner and is similar to the HO-02 policy for covered perils. These policies typically offer coverage from the unfinished drywall, into the unit. This means paint, cabinets, finished floors, carpet, etc are covered as well as the dwelling owners personal possessions.
HO-08: This is like an HO-01, a basic fire policy, but provides around $1,000.00 for Theft and also only provides for “Actual Cash Value” or ACV. ACV means replacement value minus depreciation which results in insufficient funds to replace that which was lost. This is the last policy available for some buildings.
Most policies can be altered or amended to increase OR decrease coverage. When the policy is changed from its original intent, the part that changes it is called an Endorsement. There are many, many endorsements that can be purchased to custom-fit a policy to your individual needs.
Common Endorsements to Consider and Why:
Personal Property Replacement Cost: This endorsement will allow you to obtain your Depreciation/holdback for your damaged stuff in the event of Covered Loss.
Water Backup and Sump Discharge or Overflow: This endorsement is sometimes called a ‘Sump Pump’ endorsement. Ground water, defined as ‘water that hits ground outside and then finds its way into your house’ is not covered by any Homeowner’s policy, but by a Flood Policy. However, if you have this Endorsement and a sump pump, you will have some protection from ground water infiltration. More often than not, this Endorsement provides blocks of money for Coverage, such as $5k, $10k, $20k, etc. so if you think this Endorsement is for you, estimate the cost to replace your finished basement materials and personal property and chose accordingly. Your broker can help you determine the best value for you.
Scheduled Personal Property Endorsement: If you have expensive valuables such as jewelry, furs, firearms, etc., this coverage is good to have as all policies, as written, have minimum limits of liability for these items.
Home Business Insurance Endorsement: This is useful if you have a home office or run a business out of your home. The actual name may be different according to your specific needs.
Association’s Master Policy Deductible Endorsement: For condo owners HO-06 policy. Covers the Condo Association’s deductible in the event of a covered loss. This is very important as some master policy deductibles can be in excess of $50,000.00.
Special Perils or All Physical Risk Endorsement: For renters (HO-04) and condo owners (HO-06); changes coverage from Named Perils to Special Perils/All Physical Risk, providing much greater coverage.
Insurance Company-Specific Endorsements
Erie: Endorsement to match roofing & siding: Without this endorsement, Erie will only pay to replace the damaged elevation. For instance, a typical roof has two or more slopes, but if only one slope is damaged, Erie will only pay for that slope and if the exact shingle is not available, the previously matching slopes will no longer be the same. Applies to siding, as well – if only one side is damaged, only one side will be replaced. Too bad if it is not the same as the other three. If you’re insured with Erie, consider this endorsement, I have seen too many people get short-changed because they did not have it.
Allstate: Endorsement AS839 & AU277-2 (may have other designations): Changes your Special/All Physical Risk policy into a Basic named peril policy. This is bad and you don’t want it.
Allstate: Endorsement AP4544: heavy tropical storm deductible. Provides for a deductible of $5500.00 to $15,000.00. Bad endorsement for most people.
Typical Property Insurance Policy Coverage’s
Coverages in your insurance policy are labeled alphabetically. This is a partial list, generalized and may be different in your policy.
Coverage A: Dwelling – Covers home and structures attached to home listed on Declaration page. Land is not covered.
This number reflects the Actual Cash Value (ACV) of the residence.
The Co-Insurance Clause requires Coverage A to be at least 80% of Actual Cash Value or the insured will receive even less money on a covered claim.
Why you care: This represents the dollar amount you may receive in the event of a covered total loss to rebuild your home or investment property.
Coverage B: Other Structures: Structures on insured’s premises not attached to Dwelling. Land is not covered.
The Limit of Liability provided for in Coverage B, is typically 10% of Coverage A.
A privately rented garage has coverage; however, any Other Structure used in whole or in part for business is not covered.
Why you care: This represents the dollar amount you may receive in the event of a covered total loss to rebuild your detached garage, shed, etc.
Coverage C: Personal Property: This amount is generally equal to 50% of Coverage A. Provides for world-wide coverage of your personal property, normally at 10% of Coverage C. If you move, this Limit is often suspended for 30 days from when you start moving, but check to be sure. Theft and some other losses for certain listed items in your policy (money, scrip, firearms, etc) have much smaller Sub-Limits. Endorsements are often available to extend Personal Property Coverage to cover property of others, a guest or an employee while in the insured’s home.
Why you care: This represents the dollar amount you may receive in the event of a covered total loss to replace your personal possessions.
Coverage D: Loss of Use/Loss of Rent: Provides additional living expenses if a covered loss makes the home unfit to live in. Provides Loss of Rent if a rented portion of the dwelling is unavailable to live in because of a covered cause of loss.
Up to 20% of Coverage A, but can be limited by time and/or dollar amount.
Other limits may also apply.
Why you care: In the event a Covered Cause of Loss requires you to temporarily reside somewhere else, this coverage helps to minimize the outlay of cash from your pocket. Your insurance provider will pay the difference between normal expenses and Additional Living Expenses (ALE).
PA Public Adjuster, PA#646378
Advocate for the Insured