FL Adjuster Claim Professional Exam: Homeowners Insurance

Introduction to Homeowners Insurance

Homeowners insurance is a package policy combining property and liability coverage. Developed by the Insurance Services Office (ISO), it includes six standard policy forms: HO 2, HO 3, HO 4, HO 5, HO 6, and HO 8. This page focuses on key concepts for the Florida Adjuster Claim Professional Exam, emphasizing the HO 3 policy, the most common form for owner-occupied residences.

Homeowners Policy Forms

Form	Coverage Provided
HO 2 (Broad Form)	Dwelling, other structures, and personal property on a named perils basis; loss of use, personal liability, medical payments.
HO 3 (Special Form)	Dwelling and other structures on an open perils basis; personal property on a named perils basis (16 perils); loss of use, personal liability, medical payments.
HO 4 (Contents Broad Form)	For tenants: personal property on a named perils basis, loss of use, personal liability, medical payments. No dwelling coverage except for building additions paid by the insured.
HO 5 (Comprehensive Form)	Dwelling, other structures, and personal property on an open perils basis; loss of use, personal liability, medical payments. Broadest coverage.
HO 6 (Unit Owners Form)	For condo/co-op owners: personal property on a named perils basis, limited dwelling coverage (improvements, betterments), loss of use, personal liability, medical payments.
HO 8 (Modified Form)	For older homes: dwelling and other structures based on repair/replacement with common materials; loss of use, personal liability, medical payments.

HO 3 Policy Structure

Key Definitions

• We, Us, Our: The insurance company.
• You, Your, Insured: Named insured, spouse, household residents, or students living away from home.
• Business: Full/part-time trade or occupation, or activities earning ≥$2,000/year.
• Residence Premises: Where the insured lives (single/multiple-family dwelling or listed building).
• Insured Location: Residence premises, plus other premises, vacant land, or temporary residences.
• Motor Vehicle: Self-propelled vehicles or trailers (e.g., cars, motorcycles, motorized wheelchairs).

Section I: Property Coverages (HO 3)

Coverage A – Dwelling

Covers the house, attached structures (e.g., garage), fixtures (e.g., air-conditioning, carpeting), and construction materials on-site.

Coverage B – Other Structures

Covers detached structures (e.g., gazebo, detached garage, fence). Excludes structures used for business or rented out (except as a private garage).

Coverage C – Personal Property

Covers personal items (e.g., furniture, clothing) worldwide, with a $1,000 limit for property at secondary residences/storage units. Exclusions: Items covered by other insurance, animals, motor vehicles, aircraft, tenant property, business data, credit cards.

Sublimits:

• Money: $200
• Securities/Deeds: $1,500
• Watercraft/Trailers: $1,500
• Jewelry/Furs: $1,500
• Firearms: $2,500
• Silverware: $2,500
• Business Property (on/off premises): $2,500/$1,500
• Portable Electronics: $1,500
• Antennas/CDs: $250

Coverage D – Loss of Use

Covers additional living expenses, fair rental value, or costs if a civil authority prohibits use (up to 2 weeks).

Additional Coverages

• Debris Removal: Covers removal costs after a covered peril; $500–$1,000 per tree.
• Reasonable Repairs: Covers expenses to prevent further damage.
• Trees/Shrubs: Up to 5% of dwelling limit ($500/item) for specific perils (e.g., fire, theft, not windstorm/hail).
• Fire Department Charges: Up to $500.
• Property Removed: Covers property during removal (up to 30 days).
• Credit Card/Forgery: Up to $500 for unauthorized use.
• Loss Assessment: Up to $1,000 for association assessments.
• Collapse: Covers building collapse from specific causes (e.g., hidden decay).
• Glass Breakage: Covers glass/safety glazing in buildings.
• Landlord’s Furnishings: Up to $2,500 in rented apartments.
• Ordinance or Law: Up to 10% of dwelling limit for code compliance costs.
• Grave Markers: Up to $5,000 for covered perils.

Covered Perils (HO 3)

Dwelling/Other Structures: Open perils (all risks except exclusions).

Personal Property: Named perils, including:

• Fire or Lightning
• Windstorm or Hail
• Explosion
• Riot or Civil Commotion
• Aircraft
• Vehicles
• Smoke
• Vandalism or Malicious Mischief
• Theft
• Volcanic Eruption
• Falling Objects
• Weight of Ice, Snow, or Sleet
• Accidental Discharge of Water/Steam
• Sudden Tearing of Heating Systems
• Freezing
• Electrical Damage

Exclusions (HO 3)

Property Coverages:

• Ordinance or Law
• Earth Movement (e.g., earthquake, landslide)
• Water Damage (e.g., flood, sewer backup)
• Power Failure (off-premises)
• Neglect
• War
• Nuclear Hazard
• Intentional Loss
• Governmental Action

Buildings/Other Structures:

• Collapse (except as covered)
• Freezing of Systems
• Freezing/Thawing of Fences, Pools, etc.
• Theft in Construction
• Vandalism (vacant >60 days)
• Mold/Fungus
• Wear and Tear, Pollution, Animals, etc.

Conditions

• Liberalization Clause: Coverage broadened without premium increase applies automatically.
• Cancellation/Nonrenewal: Governed by policy terms/state laws.
• Subrogation: Insurer may recover from third parties.
• Duties After Loss: Notify insurer, protect property, provide inventory, submit proof of loss.
• Loss Settlement: ACV for personal property; replacement cost for buildings if insured to 80% of ACV.

Example: A $500,000 ACV home requires $400,000 coverage for full replacement cost. If insured for $350,000, a $200,000 loss yields $174,000 after a $1,000 deductible.

• Appraisal: Resolves disputes over loss amount.
• Other Insurance: Proportional payment if other policies apply.

Selected Endorsements

• Watercraft: Extends coverage for boats beyond $1,500 sublimit.
• Personal Property Replacement Cost (HO 04 90): Settles personal property losses at replacement cost.
• Scheduled Personal Property (HO 04 60/61): Covers high-value items (e.g., jewelry, furs) on open perils.
• Earthquake (HO 04 54): Covers earthquake losses, excludes floods.
• Limited Fungi/Mold (HO 04 26/27): Limits mold coverage, adds back limited insurance.
• Identity Fraud (HO 04 55): Covers up to $15,000 in expenses (e.g., legal fees, lost income).

Key Exam Tips