Author: Chris Boggs

Although every independent agent knows insurance is not a commodity, many treat the homeowners' (HO) policy like a commodity focusing only on price rather than protection. Consider this, the price is ALWAYS too high if that is where the focus lies. But explain coverage, and price objections wane.

Moving away from the commoditization of the HO policy also allows the opportunity to customize protection. Remember, the HO policy is written for the average" home owners; the problem is, no insured is average." Every insured is unique. 

To encapsulate these concepts more bluntly, you become a better agent when you begin treating the HO policy and your client with the proper respect. And being a better agent" requires searching for, finding and attaching the necessary customizing endorsements.

In the HO-2000 world," ISO has promulgated over 145 homeowners' endorsements. Some of these endorsements take protection away (we want to stay away from those), some apply to specific exposures (such as home sharing) and others even clarify what the policy already says. But among this long list are great endorsements that are greatly underutilized by many agents. Let's review three.

HO 04 43 - Replacement Cost Loss Settlement For Certain Non-Building Structures on The Residence Premises: Although Coverage B (Other Structures) provides replacement cost protection to most other structures," Coverage B in the unendorsed HO policy does NOT provide replacement cost to non-building structures.

Paragraph D.1.c. under loss settlement limits non-building valuation as follows:

 D. Loss Settlement

 1. Property of the following types:

  c. Structures that are not buildings;

at actual cash value at the time of loss but not more than the amount required to repair or replace.

Attachment of the HO 04 43 alters this loss settlement limitation for specific types of non-building structures. The endorsement extends replacement cost valuation to:

• Reinforced masonry walls;
• Metal or fiberglass fences;
• Fences made of plastic/resin materials such as polyvinylchloride;
• Patios, walks (not made of wood or wood products);
• Driveways; and
• Inground or semi-inground:
• Swimming pools;
• Therapeutic baths; or
• Hot tubs;

            with walls and floors made of reinforced masonry, cement, metal or fiberglass.
            However, this does not include their accessories or equipment.

Beyond picking up replacement cost for the listed property, the HO 04 43 does something interesting, it highlights the fact that patios, walks and driveways are includes as other structures." The unendorsed HO does not exclude these types of property, but adjusters have been known to deny coverage for them. Even if this endorsement is not attached, it can be used to prove coverage exists for patios, walks and driveways.

Rule 409 states that the HO 04 43 increases the base premium between two and five percent based on the property included. The water-related other structures add five percent to the base premium. All other types of property increase the base premium two percent.   

HO 04 59 - Assisted Living Care Coverage: According to various sources, approximately 5 percent of the nation's 47 million seniors live in nursing homes, assisted care living facilities and other like facilities or arrangements. This means approximately 2,350,000 seniors currently occupy these types of facilities. Further, the number of senior" adults is expected to balloon to 100 million by 2060. If the same percentage holds true, there will be approximately 5,000,000 residents of these facilities.

Depending on the type of facility/living arrangement, the senior may not have any insurance protection or the protection available to them may be rather expensive. And even if the senior doesn't have much in the way of personal possessions (from a value perspective), he/she still has a liability exposure.

ISO created the HO 04 59 to address the needs of individuals residing in assisted living, nursing homes and other like facilities, but as an endorsement on a relative's homeowners' policy. Rather than the senior purchasing his/her own policy, a child, grandchild or other relative can purchase the needed personal property coverage (Coverage C) and personal liability coverage (Coverage E) by attaching this endorsement.

To qualify for this endorsement, certain conditions must be met: 

• The individual named must be related to the named insured by blood, marriage or adoption;
• The individual is not a member of the insured's household and regularly resides in the named facility (meaning this endorsement is for a permanent living arrangement, not one that is temporary);
• The facility must be scheduled; and
• The facility must provide assisted living services such as dining, therapy, medical supervision, housekeeping and social activities.

A Coverage C and Coverage E limit is chosen by the insured and placed in the endorsement schedule. If no limit is chosen, the basic limits are $10,000 for Coverage C and $100,000 for Coverage E.

Like Coverage C in the HO policy, there is a special limits section applicable to specific property such as hearing aids, eyeglasses, contact lenses, false teeth or dentures, medi-alert devices, walking aids and devices such as walkers or canes, and wheelchairs.

There is also an Additional Living Expense" provision in this endorsement. The policy will pay up to $500 per month for 12 months for any additional expenses because a covered loss makes the facility untenable requiring the person to move to another location.

One last key facet of this policy not discussed above, the use of this endorsement is not limited to seniors. Any relative in a care facility can be covered by this endorsement provided the conditions are met. For instance, if the insured has sibling that requires care, this endorsement can be used.

HO 06 14 - Increased Amount of Insurance For Personal Property Located in a Self-Storage Facility: Approximately 10 percent of American households rent space in a self-storage facility. This is one reason 90 percent of self-storage space is currently rented and why there are 50,000 self-storage facilities in the US.

If it's reasonable to assume that 10 percent of an agency's clients use a self-storage facility, then it's reasonable to ask this question, do those client's have enough coverage for the property stored in these facilities?

ISO limited the amount of coverage available for property in a self-storage facility in the 05/11 edition of the HO form as follows:

 b. Self-storage Facilities

Our limit of liability for personal property owned or used by an "insured" and located in a self-storage facility is 10% of the limit of liability for Coverage C, or $1,000, whichever is greater. However, this limitation does not apply to personal property:

 (1) Moved from the "residence premises" because it is:

 (a) Being repaired, renovated or rebuilt; and

 (b) Not fit to live in or store property in; or

 (2) Usually located in an "insured's" residence, other than the "residence premises".

Depending on the Coverage C limit, the insured may not have enough coverage for the stuff" (a technical term) kept in the self-storage facility. For example, if the insured has $300,000 in Coverage C, there is $30,000 available for the personal property in the self-storage facility. However, if the insured has a Coverage C limit of $30,000, the $3,000 extended to property in the facility may not be adequate.

The need for this endorsement revolves wholly around the Coverage C limit and whether 10 percent of Coverage C is sufficient or not. Ask the insured if property is stored in a facility and the value of that property.

Conclusion

These are but three of the nearly 150 endorsements available to HO customers; but these three are not used as often as needed. Consider these and the many other enhancement endorsements when meeting with your HO clients. 

Last Updated:  April 12, 2019