Insurance Community University Homeowners Insurance: The key issues you need to know. 1 The webinar will begin shortly. There is no audio at this time

Insurance Community University

Homeowners Insurance: The key issues you need to know.

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The webinar will begin shortly.

There is no audio at this time.

This presentation is being recorded for your viewing pleasure at a future date.

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Use the ‘chat’ window for questions on the content.

100% Participation in Polling Questions is required to receive credit for this class. Even if you do not intend to receive credit, please participate in the polls.


Welcome to your Insurance Community University

• All of you are currently on mute – Un-mute your own system– Telephone Option

• Select Telephone on your screen• Dial in the PIN number so that your number becomes active

– Microphone and/or Speaker Option• You can use this option if you have a headset that you use with

your computer

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Audio


Participation & Chat Window

• You will receive information from the monitor via the ‘Chat’ window. – Please locate window in the control panel

• Q & A is welcomed during the presentation and at the end of the presentation

• You will find the question box on your control panel– Write your question in that box and send it to the presenter/organizer

• The presenter will take those• questions in the order submitted

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DOI Requirements

• When you see a slide with the hand up symbol, touch the “hand” icon on your control panel– Click ONCE only

• If you do not raise your hand, the monitor will be in contact with you in the chat box

• If you are in a group, the designated proctor is responsible to make certain you are all in attendance at all times

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= Hand is down


Polling

• Throughout the class we will be conducting periodic polls

• We need 100% participation on the polls• The polls are intended to check

participation but also to create discussion topics throughout the presentation

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Forms To Complete for CE

• After class ends– Return attendance form– Proctors – return your form to email

address• Email address is in chat window or in

email sent to you today

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DOI Requirements

• We will file your hours with the DOI after the completion of this webinar and we have received the attendance form.

• You have 48 hours to return the form• You will be sent a Certificate of

Attendance/Completion by email. Please retain this for your records for five years.

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Homeowners InsuranceYour Instructor Today

Casey Roberts, CIC, AFIS, ACSRPresident, Laurus Insurance Consulting


Disclaimer

Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions;

and state jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations

provided by Insight do not modify or revise insurance policy language. The authors of these materials, Insight Insurance

Consultants is a division of Insight Consulting and Management Inc. In providing these materials, Insight assumes neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result

of the instructional materials provided. Copyright 2010 – 2012 All Rights Reserved

www.insurancecommunitycenter.comLaurie: 714.803.5830 [email protected]

Marjorie: 714.206.9583 [email protected]

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http://www.insurancecommunitycenter.com/

mailto:[email protected]

mailto:[email protected]

Insurance Community University10

Homeowners - The Five Key Issues You Must Know About Homeowners Insurance

Welcome University Members!We will be starting shortly.

www.insurancecommunityuniversity.com


Objectives

1. Who is the insured on the policy and how to name trusts

2. Seasonal, rental, vacancy3. Valuation / Building Ordinance

Insurance4. Loss Assessment and the HO

Association5. Key Homeowners Endorsements

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HO Program Eligible Properties

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Single Family Dwelling

Multiple Family Dwelling (1-4 units)

Townhouse Unit

Condominium

Renters


Who is the insured on the policy

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http://www.google.com/imgres?q=homeowners&start=76&hl=en&biw=1600&bih=780&gbv=2&tbm=isch&tbnid=W9WXHK74C09ofM:&imgrefurl=http://silverdollarcity50.com/category/unsecured-loans&docid=HqWrByqQ5Nt66M&imgurl=http://silverdollarcity50.com/wp-content/uploads/2012/03/homeowner-loan.jpg&w=425&h=282&ei=5NqMT-CAB-O1iwKM6J2eCA&zoom=1&iact=hc&vpx=731&vpy=231&dur=969&hovh=183&hovw=276&tx=151&ty=102&sig=105138948350241421704&page=3&tbnh=137&tbnw=194&ndsp=36&ved=1t:429,r:11,s:76,i:28


HO Ownership

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Individuals

Joint OwnersAlways Name

Both

Husband and wife

As Joint Tenants

As Community

Property

Trustees of Family Trust

Unmarried individuals


Homeowners Definition 05/11

• In this policy, “you” and “your refer to the “named insured” shown in the Declarations and the spouse if a resident of the same household.

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Polling Question #1

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Question

• Dick and Mary got married and Mary moved into a home Dick owned in his own name. Mary moved out and while golfing hit a fellow golfer in the head with her club resulting in BI. Is Mary covered on Dick’s homeowners policy?

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Solution to “wandering wife”

• Name the spouse as a Named Insured.• Add the spouse as an Additional Insured

using HO 04 41

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Definition of “Insured”

• You and residents of your household who are:1. Your relatives; or2. Other persons under the age of 21 and in

your care or the care of a resident of your household who is your relative

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Polling Question #2

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Question

• Your insured runs a day care center in her garage and has 15 children in her care. One of the children injures the other. Is there coverage on the Homeowners Policy?

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• A student enrolled in school full-time, as defined by the school, who was a resident of your household before moving out to attend school, provided the student is under the age of:1. 24 and your relative, or2. 21 and in your care or the care of a

resident of your household who is your relative.

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Who Else is Covered?

Resident relatives, including foster children

Children• At school under age 24

Relative in Care Facility• Property / Liability – endorsement

For Liability Only• Person or organization taking care of animals or

boats• Persons using covered motor vehicle on premises

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Polling Question #3

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Polling Question

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• Johnnie moved out of the house at 18 after high school with his friends. Finally at 20 he decided to enroll as a full time student and live in a dorm. He set his dorm room on fire, unintentionally—is there coverage on the parent’s Homeowners Policy?



• NOTE: There will be liability exclusions that related to “the insured” or “the named insured” as opposed to “an” insured.

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Definition of “Insured” • This category of insured are not “named

insured” but rather “an insured” under the policy. There are exclusions that apply to “an insured” such as the intentional acts exclusion. Therefore an intentional act of a child also excludes coverage for the parents. Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not apply to “bodily injury” or “property damage”:a. Which is expected or intended by “ an insured”;

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Including The Family Trust

Named Insured

• Individual• Husband and

Wife

Additional Insured

• H & W Family Trust

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Title of Property

• • Name of Husband and Name of Wife as Joint Tenants. For example: John Smith and Jennifer Smith as Joint Tenants.• Name of Husband and Name of Wife as Community Property. For example: John Smith and Jennifer Smith as Community Property• Name of Husband and Name of Wife, Trustees of the Family Trust. For example: John Smith and Jennifer Smith, Trustees of the Smith Family Trust

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The Family Trust

How should the Insurance Agent Issue the Homeowners Insurance?• The Named Insured should be: Name of

Husband and Name of Wife. For example: John Smith and Jennifer Smith

• The Insurance Agent must add the following Additional Insured: The Smith Family Trust

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The Family Trust

• HO 06 15 05 11• Trust Endorsement• Includes Trust Name; Trustee Names

and addresses

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Seasonal, Rental, VacancyProperty & Liability

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http://www.google.com/imgres?q=vacant+home&hl=en&gbv=2&biw=1600&bih=780&tbm=isch&tbnid=s9D65cD3QdTJFM:&imgrefurl=http://www.silive.com/news/index.ssf/2007/09/too_close_to_school_vacant_tra.html&docid=WCODBkeW9hZrpM&imgurl=http://blog.silive.com/latest_news/2007/09/0920seal.jpg&w=460&h=346&ei=--WMT5XhAaO0iwKjkNGwCA&zoom=1&iact=hc&vpx=182&vpy=147&dur=2241&hovh=195&hovw=259&tx=161&ty=67&sig=105138948350241421704&page=1&tbnh=135&tbnw=186&start=0&ndsp=28&ved=1t:429,r:0,s:0,i:67


Seasonal Rental to Others

Primary Residence Occasionally Rented

• Occupy home/condo but rent in season

Homeowners Coverage Applies—Liability for Renters• Extended Theft Coverage of Residence Premises

Occasionally Rented to Others HO 0541 10 00

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Seasonal / Rental Property

Dwelling is covered

Other structure is not covered

• Exception if it is a garage• Exclusion does not apply to liability

Personal Property usually located at another residence• 10% of Contents Limit / $1,000 whichever is greater• Theft restricted – only when in residence

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Polling Question #4

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Polling Question

• Your insured has a guest house that they rent out on an annual basis. They live in the home on the sane property. Is the rented guest house covered on the homeowners policy?

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Rental of Other Structures

We do not cover Other Structures rented or held for rental to any person not a tenant of the dwelling...

• Problem:– Rental Property OFF the premises in the

named insured ownership.– Rental Property ON the residence premise

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Rental of Other Structures

• Solution:– Add Dwelling Property Form to cover the

Other rental property and extend the Liability on this policy by use of HO 24 70 Additional Residence Rented To Others 1, 2, 3, or 4 Families.

– Add HO 04 40 Structures Rented To Others Residence Premises.

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Full Time Rental

• Does not qualify for Homeowners Policy

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While at School Property Coverage

Property of student away at school

• Theft covered as long as student has been at school within 90 days prior to loss

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Polling Question #5

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Polling Question

• Your insured has filed for bankruptcy and is in default on their home loan. The bank is going to foreclose on the home but has not yet. Your insured is still living there and will until they get kicked out. They want you to cancel their homeowners policy. Is this OK to do from your perspective?

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Vacancy, What Happened?It’s a Complex Question• Crisis for both the “homeowner” and business.

– Homeowners losing their homes– Homeowners filing personal bankruptcy– Businesses going bankrupt and foreclosing on

properties– Property owners supporting vacant buildings– Banks foreclosing and taking on liabilities or NOT

foreclosing

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Insurance Community University 44

Insurance

Don’t Pay for Coverage Cancel Coverage Bank Must Place Coverage

Homeowner Vacates HomeStrip Their Home Jingle Mail Cash for Keys

Homeowner Defaults Payments to the BankShort Sales or Bank

Forecloses or Not ForeclosesHomeowner may declare

BankruptcyMay vacate OR may stay

(Squat) OR may burn it down


New Realities• Cash for Keys

– Done by some banks for homeowners to receive cash in exchange for surrendering the keys and vacating with the stipulation that the home will be left in good condition and cleaned.

• Jingle Keys– Jingle mail is a phrase used to describe the envelopes

containing house keys, which are mailed by homeowners to mortgage lenders, without authorization from the lender. Home owners decide to mail the house keys to the lender because the owners believe their home is no longer worth keeping, and they want to give the home to the lender.

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Who is occupying the foreclosed homes?• Homeowners squatting in their own

home• Homeless moving into vacant homes• Renters whose landlords were

foreclosed on • Gang members, using empty houses as

crash pads and for drug stashes• New term: Rent Skimmers

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Renting becomes a reality

• The number of renters in America is on the rise as foreclosures continue to take out homeowners everyday.

• In fact, a staggering 37.1 million housing units were occupied by renters in the second quarter, up from 34.3 million units in 2006, per Census Bureau data.

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Vacancy - All Covered Property

If vacant, more than 60 days

• Glass breakage• Vandalism• Malicious Mischief• Any ensuing loss

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Homeowners Insurance and Vacancy or Un-Occupancy • Intended for an owner who is in

residence• Typically the coverage requires they

occupy within 30 days of the inception of the policy. If an insured does not occupy then coverage would be jeopardized.

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Homeowners Insurance and Vacancy or Un-Occupancy • CRUCIAL: If the home is NOT occupied

the insurance company must be made aware– Reluctance because company might cancel– Reluctance because policy might cost more– Reluctance because might lose the client– Reluctance because don’t have a market

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Solutions

• ISO has no endorsement for vacancy on a homeowners policy

• Insurance companies may have an endorsement such as State Farm– “However, by purchasing an endorsement,

homeowners "buy back" that exclusion for a cost for such an endorsement is usually under $100, and coverage lasts for the duration of the policy period” (State Farm Web Site)

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Vacancy - All Covered Property

• NOTE: Review Archived Community Webinar on Vacancy, Un-occupancy and Foreclosure

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Valuation / Building Ordinance Insurance

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Valuation

Replacement Cost

Dwelling / Other Structures that are buildings• 80% to value clause

applies

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Valuation

Actual Cash Value

• Personal Property• Awnings, carpeting, household

appliances, outdoor antennas and outdoor equipment, whether or not attached to buildings

• Other structures that are not buildings• Fences• Pools• Grave markers, including mausoleums

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Personal Property Replacement Cost• Can be added by endorsement• Some companies automatically include

Personal Property Replacement Cost• Check the coverage carefully for

limitations.

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Section I Conditions Form

• Problem:– HO 04 90 Personal Property Replacement

Cost adds replacement cost evaluation coverage for the personal property and outdoor items, but does not add replacement cost coverage to non building structures, such as fences, pools, etc.

• Solution:– No available amendatory endorsement.– Discuss thoroughly with insured.


Problem is Building Ordinance

• This is true for BOTH old and new construction

• Especially significant in a CAT loss• Not covered even with Extended RC or

Guaranteed RC

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Section I ExclusionsA. We do not insure for loss caused directly or indirectly by any of the following (a) Ordinance or Law, meaning enforcement of any ordinance or law regulating the construction, repair or demolition of a building or other construction, unless specifically provided under this policy.


Section I Exclusions• Problems:

– Municipalities have building ordinances that can affect a dwelling of any age.

– Should the insured sustain a loss that triggers the enactment of building ordinances they can face the following costs:

• Demolition of the undamaged portion of the dwelling or other structure.

• Debris Removal of that portion.• Increased Costs of Construction to comply with

ordinance that have changed since the dwelling or other structure was originally constructed.


Section I Exclusions

• Solution:– HO 04 77 Ordinance or Law. – This endorsement allows the policy to respond to

the construction costs, repair or demolition if the loss that triggers the enactment of the building ordinance is a covered peril.

– Increase the coverage limit for the dwelling and/or the other structure to allow for the increase in construction costs caused by the building ordinance.


Building Ordinance

• Differs from Company to Company– Some companies absolutely exclude– Some companies give sub limits– Some companies include

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Loss Assessment and the Association

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Polling Question #6

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Polling Question #6

• Your insured is in a homeowners community with an association. There is a malfunction to the pump in the main swimming pool and it has to be drained, pump replaced, and the pool refilled. Each homeowner is being assessed $2500.00 for the repairs. Would this be covered under Loss Assessment Coverage?

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Loss Assessment

• Applies to Homeowners, Condominiums, Coops, Townhouses, Mobile Home/Motor Home Parks

• Normal assessment—paid monthly• Loss assessment in this context refers to

assessments by the community due to damage to common areas.

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Loss Assessment

• Could be due to a “covered” situation– Loss Assessment is available

• Could be due to a “special” situation like Earthquake– Available by endorsement

• Could be due to the deductible on the association policy– Policies will respond with a cap

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Loss Assessment

• Could be caused by an “uncovered” loss.– No coverage for the “unit/homeowner” on

their loss assessment coverage as it is peril driven.

– For example, wear and tear; flood; boiler explosion

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Loss Assessment – Property Loss

• $1,000 Additional Limit– Original loss does not have to occur during

the policy period• Applies to all covered causes of loss

except– Earthquake– Earth movement

• Loss Assessment Endorsements are available

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Loss Assessment - Liability

• $1,000 maximum for the policy period– Assessment arising out of

• Covered Bodily Injury• Covered Property Damage• Acts as director or officer

– Loss does not have to occur during the policy period

– The limit is the maximum paid for any one accident

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Key Endorsements

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Additional Interest / Trust

• Two endorsements• Additional Interest endorsement

broader in scope than the Trust Endorsement

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Assisted Living Facility

• Relative is no longer a resident of the insured’s household

• Coverage is extended to include this location for personal property as well as liability coverage– Scheduled limit for personal property

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Increased Personal Property

• Used to increase 10% limit for property usually located at another residence

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Extended Theft

• Provides coverage for theft of personal property in a residence occasionally rented to others

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Structures Rented to Others

• Endorsement provides coverage for damage to an Other Structure rented to others

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Ordinance or Law Endorsement

• Used to increase the 10% automatic coverage to a different percentage

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Supplemental Loss Assessment

• Provides an increased loss assessment limit applies to both– Property– Liability

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Summary

• Writing coverage correctly for your personal lines client is fairly complex

• It requires persistence and a lot of information

• Renewing year after year without speaking to the insured could result in an E & O claim

• Reduce that potential and build a relationship with your clients

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Thank you!

• Upcoming FREE Community Webinar– New Commercial Property Forms

• Announcing New Producer Sales Series– 12 part series with Diagnostic Tool– 6 part series– Individual Classes– Diagnostic taken separately

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Insurance Community University Homeowners Insurance: The key issues you need to know. 1 The webinar will begin shortly. There is no audio at this time