Agribusiness Library

LESSON L060085: PROPERTY INSURANCE

Objectives1. Explain the functions and benefits of property insurance.

2. Describe the types of property insurance.

Terms•Earthquake insurance•Flood insurance•Guest medical coverage•Homeowners insurance•Identity theft insurance•Peril•Personal liability coverage•Personal property coverage•Renters insurance

Property insurance functions and benefits

A. Homeowners and/or property insurance protects a homeowner against covered perils. A peril is the cause of a possible

accident or loss.

B. Homeowners insurance is designed to cover all aspects of the home— its structure and contents— as well as liability for certain types of accidents or injuries that may occur on or off the site. Insuring a home for at least 80 percent of its full

replacement cost is important. 1. Homeowners insurance covers the damage to a

home from a disaster caused by natural forces or human actions.

2. Homeowners insurance provides benefits of additional coverage, such as personal liability coverage and personal property coverage. a. Personal liability coverage protects against

the financial uncertainty from injury or property damage that the homeowner or a family member may cause to another person (on or off the property).

b. Personal property coverage protects personal possessions from the same perils that can cause damage to the home’s structure. It is important to keep a personal inventory that includes the

serial numbers, dates of purchase, and costs of major items, such as jewelry, electronics, artwork, and appliances.

There are several types of property insurance: homeowners, building/contents, earthquake, fire, renters, older home, and condominium. Homeowners insurance provides a wide range of

protection. The common types of homeowners (HO)

policies are listed below. A. HO–1 is considered basic coverage.

This type of coverage is designed to protect the home, detached structures, and personal property from the following disasters and perils: fire/lightning, wind/hail, explosion, riot or civil conflict, aircraft, vehicles, volcanic eruptions, smoke, theft, vandalism and malicious mischief, and self-damaging instances.

B. HO–2 is considered a broad coverage. This type of coverage includes the damage that may occur

from the events listed in HO–1, but it adds more specific disasters.

For example, this policy includes snow; falling objects; freezing of, or accidental discharge of, water from plumbing, from heating, from air-conditioning, or from within a household appliance; and electrical surge damage.

C. HO–3 is designed to protect the home or unattached structures from damage or loss that may be caused by any peril except specifics such as flood, earthquake, war, and nuclear accidents. This is the most commonly purchased type of homeowners

insurance.

D. HO–4 is known as renters insurance. Renters insurance covers and protects the

policyholder’s belongings against perils such as fire, theft, windstorm, hail, vandalism, and others. It also provides personal liability coverage for damage to

others that may be caused by the insured or the insured’s dependents.

E. HO–6 is similar to a renters policy; however, it offers broad coverage and liability protection for an insured condominium unit. Condominium coverage was created to protect unit

owners who need to insure items not covered by the association policy.

F. HO–8 is designed for older homes with historic value.

G. Earthquake insurance covers damage caused by shaking or trembling of the earth. This form of property insurance is typically not included

in a standard homeowners policy. A homeowner who lives in an earthquake area may

consider adding this coverage to his or her policy. H. Guest medical coverage pays for medical

expenses that may be due to accidents at the insured home that are not covered by liability protection.

I. Flood insurance is typically not included in a standard homeowners policy.

Flood insurance is designed to protect the home/property from damage caused by an overwhelming amount of water. If a sump pump fails or sewers/drains back up,

the homeowner would need additional water backup insurance for coverage.

The same is true of water damage due to a broken pipe. A standard homeowners policy may pay for the damage

but will not cover the cost of pipe repair. Understanding water damage specifics in a policy is

important.

J. Identity theft insurance can cover expenses that may be incurred because of someone stealing personal information. This may be optional coverage

within a homeowners policy.

REVIEW•What are the functions and benefits of property insurance?

•What are the types of property insurance?