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The Basics of an Insurance ContractThere are four basic parts to an insurance contract:
It is important to understand that multi-peril policies may have specific exclusions and conditions for each type of coverage, such as collision coverage, medical payment coverage, liability coverage, and so on. You will need to make sure that you read the language for the specific coverage that applies to your loss. The Declaration PageThis page is usually the first part of an insurance policy. It identifies who is the insured, what risks or property are covered, the policy limits, and the policy period (i.e. time the policy is in force). For example, the Declarations Page of an automobile policy will include the description of the vehicle covered (e.g. make/model, VIN number), the name of the person covered, the premium amount, and the deductible (the amount you will have to pay for a claim before an insurer pays its portion of a covered claim). Similarly, the Declarations Page of a life insurance policy will include the name of the person insured and the face amount of the life insurance policy (e.g. $25,000, $50,000, etc.). The Insuring AgreementThis is a summary of the major promises of the insurance company and states what is covered. In the Insuring Agreement, the insurer agrees to do certain things such as paying losses for covered perils, providing certain services, or agreeing to defend the insured in a liability lawsuit. There are two basic forms of an insuring agreement:
The ExclusionsExclusions take coverage away from the Insuring Agreement. The three major types of Exclusions are:
Typical examples of excluded perils under a homeowners policy are flood, earthquake, and nuclear radiation. A typical example of an excluded loss under an automobile policy is damage due to wear and tear. Examples of excluded property under a homeowners policy are personal property such as an automobile, a pet, or an airplane. The ConditionsConditions are provisions inserted in the policy that qualify or place limitations on the insurer’s promise to pay or perform. If the policy conditions are not met, the insurer can deny the claim. Common conditions in a policy include the requirement to file a proof of loss with the company, to protect property after a loss, and to cooperate during the company’s investigation or defense of a liability lawsuit. DefinitionsMost policies have a Definitions section, which defines specific terms used in the policy. It may be a stand-alone section or part of another section. In order to understand the terms used in the policy, it is important to read this section. Endorsements and RidersAn insurer may change the language or coverage of a policy at the time of the policy renewal. Endorsements and Riders are written provisions that add to, delete, or modify the provisions in the original insurance contract. In most states, the insurer is required to send you a copy of the changes to your policy. It is important that you read all Endorsements or Riders so you understand how your policy has changed and if the policy is still adequate to meet your needs. Want to Review Your Policy?To obtain a copy of your insurance policy, please contact your insurance agent or company. When it comes to insuring your home—which is often the largest single financial investment you’ll make—you’ll want to make sure you have the right coverage for your home. If you’re in the midst of shopping around for homeowners insurance, the term hazard insurance may come up as part of the coverage discussions. But how are homeowners insurance and hazard insurance related, and are they the same thing? If this question has been on your mind, the good news is that the distinction is fairly simple between the two coverage types. Is homeowners insurance the same as hazard insurance?No, hazard insurance is not the same thing as homeowners insurance, but it is part of your homeowners insurance policy. To put it simply, hazard insurance is not a separate policy you need to purchase; it is a component of your homeowners insurance policy. As such, it’s not an interchangeable term with homeowners insurance. If anything, hazard insurance is interchangeable with dwelling coverage because it refers to a list of perils that your homeowners policy insures your home against. As such, you might hear lenders using the term “hazard insurance” during your discussions about homeowners insurance policies, as these types of perils are the lender’s main concern. Homeowners insuranceHomeowners insurance consists of a collection of coverage types that work to insure different aspects of your home. In addition to dwelling coverage, your homeowners insurance can cover detached structures, like a swimming pool or a detached garage, your personal property and more. Common coverages that are included in standard homeowners insurance policies include:
Hazard insuranceHazard insurance is not a separate policy from your homeowners insurance. It is simply the perils your homeowners insurance protects against. When it comes to this aspect of your policy, there are two types you have to choose from: named perils and open perils. A named perils policy protects your home against 16 specific home insurance perils. Those perils are:
Any peril not listed above is not covered in a standard named peril policy. However, this is a pretty extensive list and works for many homeowners. An open peril policy protects against every peril you can think of, except for these common exclusions:
Though it may seem like an open perils policy has more exclusions than inclusions, it actually protects against far more items than a named policy. It is for this reason that an open perils policy typically costs more. There are eight categories of homeowners insurance policies offered by most providers to choose from, and each either has a named perils approach or an open perils approach. HO-1 (though it only protects against 10 named perils), HO-2, HO-4, HO-6, HO-7, and HO-8 all adopt the named perils approach to hazard insurance, while HO-3 and HO-5 are the only ones that use open perils. The most common type of homeowners insurance sold in the United States is an HO-3 policy. It covers your home, medical payments, personal property, liability, as well as additional living expenses. Follow Fortune Recommends on Facebook and Twitter. Which of the following is not excluded covered under Section II liability of the Ho policy?Section II provides coverage for "bodily injury" and "property damage," but not coverage for "personal injury," which includes acts such as libel, slander and false arrest among others. You can add an endorsement, Personal Injury (HO 24 82 10 00) to the Homeowners Policy to add coverage for personal injury claims.
Which coverage pays for injuries and damages to others only?Liability insurance actually consists of two types of auto coverage: Bodily injury liability protection applies to the medical expenses of the other party if you are found at fault in the accident. In some circumstances, it may even cover lost wages and/or legal fees if the injured party files a lawsuit.
Which of the following are coverages provided by Section II of the homeowner's policy?Under Section II of a standard homeowners policy, your insurance company will cover your liability to third-persons for certain bodily injury or property damage claims.
What is homeowners insurance and what does it cover?A standard homeowners insurance policy provides coverage to repair or replace your home and its contents in the event of damage. That usually includes damage resulting from fire, smoke, theft or vandalism, or damage caused by a weather event such as lightning, wind, or hail.
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This policy is not often recommended because its list of covered perils is relatively limited
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