Insurance can be confusing. Especially when it comes to homeowners policies!
One area which we find a great deal of misconception is in the area of covering a residential property. We find many individuals consider anything covering a residential property a homeowners policy… but that isn’t really the case. They are actually considered hazard policies covering a residential dwelling and/or contents based upon the type of occupancy.
I know what you’re probably thinking… that’s quite a mouthful! With that in mind, we wanted to break down what all of this actually means, so you’re ready when it’s time to consider what policy is best for you.
Essentially, insurance is a contract. Insurance companies price the premiums on those contracts by many factors. Among these factors are…
- The type of coverage provided
- The type of occupancy
- Inherent risks within those occupancies
Different Types of Coverage
Coverage is generally provided under two different coverage options. The first option is considered named peril coverage, and the second is called broad form coverage.
Named Peril Coverage covers you for exactly as described / whatever is named in your policy, hence the term, “named peril”. For example, if your policy states that you are covered for damage caused by fire, windstorm, hail, or vandalism, then you are covered only for damage caused by those things. However, some forms offer more named perils or additional perils that you can include within your policy for a fee by what is called an endorsement.
Broad Form Coverage is subject to exclusion. Basically, it’s the exact opposite of name peril coverage. Unlike the named peril form, which covers the named losses ONLY, the broad form covers losses UNLESS they are specifically excluded. Generally, these forms offer more coverage than named peril forms and for that reason are often more expensive.
Type of Occupancy
All homeowners policies are not designed for every exposure, so it’s very important to talk with an agent about the details of the property being insured. By having this conversation, you can be certain that you have the right policy form for coverage to help eliminate a potential unfriendly claims experience.
Risks Based on Occupancies
Remember that insurance is a contract, and one of the ways insurance companies price policies is by inherent risk. For example, there is a difference between a home that a property owner occupies full time, and a home that an owner rents to someone. The risks are different and require different types of insurance policies. There is also a different exposure when considering a primary home and a home that is occupied by the owner as a second home or seasonal home (like a lake or beach house that is not rented). Along those same lines, a structure that is rented to others on a full-time basis has a different exposure than a weekend rental.
There are many different variables to consider when deciding which coverage option is best for you. When looking into homeowners policies alone, it can seem overwhelming. Not to mention, insurance lingo is a different language in itself! At Priest Insurance Agency, our goal is to walk through the different coverage options with our clients, and help them choose the best coverage for their circumstances. If you’re looking to change your coverage, or just hear more information, Get in touch with one of our insurance professionals for a consultation!