Transcript Slide 1

Homeowners Insurance: The key issues you need to know.
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Insurance
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Polling
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participation but also to create
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presentation
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Forms To Complete for CE
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DOI Requirements
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Homeowners Insurance
Your Instructor Today
Casey Roberts, CIC, AFIS, ACSR
President, Laurus Insurance Consulting
Insurance Community University
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.com
Laurie: 714.803.5830 [email protected]
Marjorie: 714.206.9583
[email protected]
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Homeowners - The Five Key Issues You Must
Know About Homeowners Insurance
Welcome University Members!
We will be starting shortly.
www.insurancecommunityuniversity.com
10
Insurance Community University
Objectives
1. Who is the insured on the policy and
how to name trusts
2. Seasonal, rental, vacancy
3. Valuation / Building Ordinance
Insurance
4. Loss Assessment and the HO
Association
5. Key Homeowners Endorsements
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HO Program Eligible Properties
Single Family Dwelling
Multiple Family Dwelling (1-4
units)
Townhouse Unit
Condominium
Renters
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Who is the insured on the policy
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HO Ownership
As Joint
Tenants
Individuals
Joint Owners
Always Name
Both
Husband and
wife
As
Community
Property
Unmarried
individuals
Trustees of
Family Trust
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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; or
2. 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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Definition of “Insured”
• 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, or
2. 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
• 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?
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Definition of “Insured”
• 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
Additional
Insured
• Individual
• Husband and
Wife
• 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, Vacancy
Property & Liability
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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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Homeowner Defaults Payments to the Bank
Short Sales or Bank
Forecloses or Not Forecloses
Homeowner may declare
Bankruptcy
May vacate OR may stay
(Squat) OR may burn it down
Homeowner Vacates Home
Strip Their Home
Jingle Mail
Cash for Keys
Insurance
Don’t Pay for Coverage
Cancel Coverage
Insurance Community University
Bank Must Place Coverage
44
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.
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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 Exclusions
A. 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.
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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.
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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.
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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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CA- 252487
CO- 50255
FL- 77032IA- 81830
ID- 3185037
IL- 64988
IN- 23275LA- 20649
MA- C95434
ME- 20373
MO- PC11000661
NC- C95434
NE- SA18624
NY- 227557
NV- 16694
OR- 38923
PA- 11724
TN- 23127
TX- 83606
UT- 26263
WI- 33136
WY- 19824
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