Insurance 101 – Homeowners Insurance Declarations Page

Reading and understanding your declarations pages

The declarations pages (dec) of your homeowners insurance policy are a very important part of your insurance contract. Your dec pages summarize your coverages and “declare” the basic points of your insurance contract. Understanding your dec pages can help you identify ways you may want to enhance your policy to your specific needs. You will also understand the amount of out-of-pocket expenses should you have a loss.

Upon receipt of your policy, you should review your dec pages immediately to make sure there are no errors or misunderstandings that may have occurred during your homeowners insurance application process. Your policy’s declarations pages outline the most important information about your contract with your homeowners carrier.

A typical homeowners insurance declarations page

While declarations pages vary slightly from insurance carrier to insurance carrier, here is the basic information on your dec pages.

  • Policy number
  • Policy period – This starts and ends at 12:01 a.m. on the dates listed on your policy.
  • Your name – Be sure your name is correct. If you hold your property in trust, your carrier must name that trust as an additional interest on your policy. Call your agent immediately if you believe the name on your policy is incorrect.
  • Location – Pay close attention to the listed location, especially if you are a seasonal resident and your mail carrier delivers your policy to an address different from the home insured by that policy. The address listed in the location on your policy covers the specific location insured, not an alternate mailing address.

 

SECTION I – Property Coverages

  • Dwelling (Coverage A) – This lists the amount your homeowners insurance carrier will pay to cover damages to the dwelling. Remember that this amount has nothing to do with the market value or purchase price of your home. Dwelling Coverage A should be the replacement cost value of your home – the amount required to rebuild your home after a total loss. By asking you a series of questions about your home, your agent should be able to calculate the estimated replacement cost of your home.
  • Other Structures (Coverage B) – This amount reflects the maximum amount that your homeowners insurance carrier will pay to cover damages to structures on your premises, other than your home. Other structures can include fences, a detached garage, sheds and any other structures not attached to your home. The standard homeowners insurance policy (HO3) automatically provides a limit equal to 10 percent of your Dwelling Coverage A amount. However, it is important you let your agent know if this amount is insufficient. This amount pays in addition to your Dwelling limit in the event of a serious loss.
  • Personal Property (Coverage C) – This amount reflects the maximum amount that your homeowners carrier will pay to cover damage to, or destruction of, your personal property. This includes your personal belongings (contents) inside the home and away from the premises. The standard homeowners insurance policy (HO3) automatically provides a limit equal to 50 percent of the dwelling amount. Bear in mind that valuable personal belongings such as high-value jewelry may need to be scheduled (listed) on the policy and an additional premium may apply.
  • Loss of Use (Coverage D) – This amount reflects the maximum amount your homeowners carrier will pay to cover additional living expenses incurred because of a covered loss. Let’s imagine you suffer a kitchen fire and must relocate for a few months. Loss of Use coverage pays for a temporary residence of similar quality to your home until repairs are complete. The standard homeowners insurance policy (HO3) automatically provides a limit equal to 20 percent of the dwelling amount. This limit is payable in addition to the Dwelling limit.
  • Deductibles – A deductible is the amount of the loss you agree to pay out of pocket after a loss. In Florida and South Carolina, there are two separate deductibles: one for hurricane losses and one for “all other perils” (AOP). AOP means all covered losses other than hurricane. Most carriers offer the AOP deductible in amounts ranging from $500 to $10,000, or higher, but common choices are $1,000 or $2,500. Your hurricane deductible typically shows as a percentage. The percentage is based on the amount of your Dwelling coverage. Most Florida and South Carolina homeowners policies have a 2% hurricane deductible. For example, a home insured at $400,000 Dwelling Coverage with a 2% hurricane deductible would mean you would be responsible for the first $8,000 of the damages caused by a hurricane.

 

SECTION II – Liability Coverages

  • Personal Liability (Coverage E) – This amount reflects the maximum amount your homeowners carrier will pay for bodily injury or property damages for which you or any insured is legally liable. Most carriers offer limits of $100,000 and $300,000.
  • Medical Payments to others (Coverage F) – This amount reflects the maximum amount your homeowners carrier will pay for medical expenses to assist injured individuals, other than you as the named insured and other household residents. The injury must occur at the insured location and coverage applies regardless of fault. This is goodwill coverage if one of your guests is injured.

 

Optional Coverages

  • Most carriers have exclusions to their policies that can be “bought back” for an additional premium. Some examples of optional coverages available are the following: screen enclosure coverage for hurricane damage, mold coverage, water-backup coverage, ordinance or law coverage and a few other specialized coverages.

 

Policy Credits and Surcharges

  • You will find listed here any pertinent credits applied to your policy. For example, protective device credits and wind-loss reduction credits (also known as “wind mitigation credits”) show here. You will also see any state specific surcharges and fees in the section. Your state determines these fees.

 

Premium

Here you will find

  • the gross premium charged for the coverages indicated on your declarations pages,
  • the premium charged for optional coverages added to the policy,
  • the premium credits applied to your policy, and
  • your total annual premium.

 

Additional Interests

  • Listed here is any party with an insurable interest in your home. If you have a mortgage on your home, you will find your mortgage company listed here.

 

Rating Information

  • Policy Form – This lists the specific policy form that applies to your home. Most homeowners policies in Florida are written on the HO3 policy form, which offers all-perils coverage with named exclusions. Avoid other policy forms that substantially limit the coverage.
  • Protection Class – This is typically determined automatically based on your home’s address. Protection class relates to the fire department response times in your area and distance to fire hydrants.
  • Construction Type – Be sure your policy lists the accurate construction of your home, for example frame versus masonry. The construction materials will affect your premium.
  • Number of families – Whether your residence is a single-family home, a duplex or a row house, the rating of your policy and underwriting rules are different. Verify this is listed correctly on your policy. Contact your agent immediately if your home is not a “single family home” yet your dec pages list it that way.
  • Territory – This is determined automatically based on the address of your home. It allows carriers to track premiums based on loss costs in a specified area.
  • BCEG – This stands for Building Code Effectiveness Grading, which is determined by the building codes in place in your specific area and is based on the year your Florida or South Carolina home was built.
  • Year Built – The year of your home’s construction plays a very important role in premium calculations. It is important that you verify this date’s accuracy. If your home was substantially “rebuilt,” most carriers will acknowledge the year the substantial updates were done if you can provide adequate proof of the remodel. Your agent will typically need to provide your carrier with the documentation of updates and request an exception to alter the year built. This process can take a few days, so plan for some extra time to go through this process prior to buying your insurance policy or renewing your insurance policy.
  • Occupancy – This field answers the question: Who lives in your home? If you live in it year round, your carrier considers it owner-occupied. If anyone other than you lives in your home, your carrier does not consider your house owner-occupied. If your home is seasonal to you, but you rent it out to someone else while you are away, you must inform your agent because this could make your risk ineligible for a standard homeowners policy. You must consider other policy types that tailor coverage to rental properties.
  • Usage – This specifies to what extent you occupy your home. Is the home your primary residence? Do you only visit the home occasionally for vacation purposes? If so, your house must be rated as secondary, not primary. Many Florida and South Carolina homes are seasonal. It is important that you fully disclose to your agent your home’s usage. Incorrect disclosure or a usage misunderstanding can lead to claim denials.
  • Protective Device Credit – This lists any credits for burglar alarms, fire sprinklers, etc. Keep in mind that carriers offer credits only for monitored alarm systems and fire alarms. You do not get a credit for smoke detectors. However, many carriers require the home to have smoke detectors as part of the underwriting guidelines.

 

Forms and Endorsements

  • This section lists all the policy forms that apply specifically to your policy. The policy should contain a copy of each form. You should review the forms and endorsements thoroughly to better understand what is covered and what exclusions may apply.

Every policy has certain limitations, exclusions and restrictions. Fully understanding them can make all the difference in the world if you have a claim. You can start to understand your homeowners policy better by reading your declarations page as soon as your policy arrives and contacting your agent with any questions.

Please remember that the comments contained in this blog are general in nature and that coverage under any specific policy of insurance will depend upon the terms and conditions of such policy.