Dwelling, Homeowners, Commercial & Specialty Coverage
Now that you have studied general insurance concepts, you are ready to learn about the different types of property insurance policies.
You will begin with Personal Lines insurance, which includes Dwelling and Homeowners policies. Next, you will learn about Commercial Lines policies, such as Commercial Property and Commercial Package policies. You will also read about Inland Marine insurance and other types of property coverage.
Personal Lines
Dwelling & Homeowners
Commercial Lines
Commercial Property & BOP
Specialty
Inland Marine & More
Study Tip
As you read about each policy, try to determine its suitability for different situations. This will make it easier for you to distinguish between the policies covered in this section.
Master these definitions before diving into the policy types. They'll appear throughout the chapter!
The relinquishing of insured property into the hands of another, or into the possession of no one in particular.
Example: After a total loss, an insured cannot simply "abandon" their damaged car to the insurance company and demand full payment. The insurer decides if property is a total loss.
A person who lives with someone else for an agreed upon price, usually for a considerable amount of time.
Example: A college student renting a room in a family's home and paying $600/month is a boarder. Dwelling policies allow up to 5 boarders.
Breaking or failing to observe a law or agreement.
Example: If your policy requires maintaining a working fire alarm, disconnecting it is a breach that could void coverage.
Fraudulent imitation, forgery.
Example: A business unknowingly accepts counterfeit $100 bills. This is a crime loss, not typically covered under property policies.
Remains of anything broken down or destroyed.
Example: After a fire, the charred remains of furniture, broken glass, and damaged building materials are all debris. Debris removal is often covered.
Physical damage to property that results in the inability to use the damaged property.
Example: A tree falls on your roof, creating a hole. The damaged roof is direct damage. The hotel stay while repairs are made is indirect/consequential damage.
Something occurring as a minor accompaniment to something else.
Example: A homeowner who occasionally sells homemade crafts online conducts "incidental" business - it's minor compared to the home's primary residential use.
Minor uses that are accessory to or support the predominant occupancy.
Example: A piano teacher giving lessons in her home, a barber cutting hair in a basement shop - these are incidental occupancies allowed under dwelling policies.
Internal cause of property loss or damage due to the very nature of the insured property.
Example: Metal rusts, produce spoils, leather cracks over time. These are inherent vice - the property's nature causes the damage, not an external peril. Usually NOT covered.
Relating to trade or commerce; commercial.
Example: A retail store is a mercantile operation. Mercantile risks typically need commercial property policies, not dwelling policies.
A policy that covers one type of insurance.
Example: A standalone workers compensation policy or a commercial auto-only policy. Contrast with "package" policies that bundle multiple coverages.
A law that must be complied with.
Example: A city ordinance requires all rebuilt homes to have updated electrical. After a fire, you must comply even if the old wiring was fine. "Ordinance or Law" coverage helps pay for this.
When a property's insurance coverage exceeds its cash value.
Example: Insuring a $200,000 home for $500,000. You're paying premiums for coverage you can never collect - insurance only pays actual loss, not profit.
Privately owned items normally worn or carried on the person.
Example: Your watch, wallet, phone, jewelry, glasses, and purse are personal effects. Coverage may apply when these items are away from home.
Movable property of the insured, such as autos, furniture, electronics, and any other personal items.
Example: Your TV, couch, clothes, laptop, and bicycle are personal property. Contrast with "real property" (the building itself).
Nonmovable property, such as land, houses, and other structures.
Example: Your house, garage, fence, and the land they sit on are real property. Coverage A (Dwelling) protects real property.
A policy designed to fit the general needs of a business; insured usually cannot elect to exclude coverage that is automatically provided in the package.
Example: A Businessowners Policy (BOP) is prepackaged - it includes property and liability coverage together. You can't remove the liability part.
Intentional destruction or damage to property.
Example: Someone spray-paints graffiti on your garage door or smashes your mailbox. This is vandalism - a covered peril in most property policies (but watch the 60-day vacancy rule!).
Covered by: Coverage C
Covered by: Coverage A & B
DP-1, DP-2, DP-3 Forms, Coverages A-E, Named vs Open Perils
Split into 3 digestible parts for easier learning
Coverage for mobile property and goods in transit
Flood and earthquake coverage (not in standard policies)
Complete summary of all policy types - Dwelling, Homeowners, Commercial, Inland Marine, Flood & Earthquake
Personal vs Real Property
Personal = movable (Coverage C). Real = nonmovable structures (Coverage A & B).
Direct vs Indirect Damage
Direct = physical damage. Indirect = consequences (loss of rent, extra living expenses).
Inherent Vice
Damage from the property's own nature (rust, spoilage). Usually NOT covered!
Incidental Occupancy
Minor business use allowed in dwelling policies (max 2 workers, no major retail).
Dwelling Policies
DP-1, DP-2, DP-3 forms and when to use each
Homeowners Policies
HO-2 through HO-8, renters, condos, and more
Commercial Property
BPP, building coverage, business income
Named vs Open Perils
Understanding coverage triggers
Coverage Types A-E
Dwelling, structures, personal property, loss of use
Specialty Coverage
Inland marine, flood, and package policies