It is Vital For Fortune 500 Employees to Learn About These Policy Forms By Coverage and Dwelling Type

What Is It?

Your homeowners insurance policy as an Fortune 500 employee is most likely written on a standard form identical to policies purchased by millions of others. Even if it isn't identical, your policy is likely very similar to a standard form of homeowner's insurance, as insurance companies rarely create policy forms. They instead adopt policy formulations developed by national organizations or legislative committees. In some instances, the law requires insurance companies to use a standard form for their policies. The majority of your homeowners insurance policy consists of preprinted, non-tailored pages. The information pertinent to your situation is displayed on the Declarations Page of your policy. Fortune 500 employees should utilize this resource as a learning tool, but should always read their policy thoroughly to familiarize themselves with the coverage details.

Overview

There are six distinct varieties of homeowners insurance policy forms. The forms provide identical liability coverage but vary in property coverage (basic named perils, broad named perils, or open perils) and residence type (house, apartment, condo, or cooperative). It is simple to determine which policy form you purchased because each type is numbered:

• HO-1 Basic named dangers HO-2 Broad named dangers HO-3 Unnamed dangers
• HO-4 Apartments
•  HO-6 Condominiums and/or co-ops
•  HO-8 Older buildings
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Tip: We advise our Fortune 500 employees to review their policy. The HO designation must appear on each page of the policy, typically in the bottom right-hand corner.

Although not evident from the preceding list, HO-1, HO-2, HO-3, and HO-8 all apply to single-family homes and not apartments, condominiums, or cooperatives. HO-4 and HO-6, which do apply to apartment, condo, and co-op units, are predicated on extensive coverage for named perils (see Table of Contents). Tenants and condo and co-op owners require separate forms because they do not own their homes and therefore cannot purchase dwelling coverage.

Caution: As you will see, open perils coverage is the most comprehensive form of coverage you can purchase for your home. Fortune 500 employees should be aware of this. The information is accessible via Form HO-3, but there is a caveat. As specified, Form HO-3 provides coverage for open perils only for your dwelling and other attached structures. Personal property is covered for broad named perils (a more restrictive form of coverage) under HO-3, unless you add an endorsement for Special Personal Property Coverage to cover your personal property on an open perils basis.

Basic Named Perils Coverage

This coverage is also referred to as the eleven conditions, actions, and events that are included in basic coverage because they result in financial loss and are included in this coverage. We would like Fortune 500 clients to be aware of the following 11 threats:

• Fire or lightning
•  Explosion caused by a typhoon or hail
•  Riot or civil disturbance
•  Aircraft Vehicles (as long as they are flown by non-citizens)
•  haze (not including fireplace haze)
• Vandalism or malicious interference
•  Theft
• Broken glass (up to a maximum of $100)
•  Volcanic upheaval
•  

None of the six policy types provides coverage below the minimum level. Because broad named perils coverage and open perils coverage defend against more than the 11 basic named perils, this is the case. Your policy was probably not designed to provide fundamental protection. Form HO-1, which is rarely used, and Form HO-8, which applies only in special circumstances, provide basic coverage.

Tip: Both basic and broad named perils coverages are referred to as "named" coverages because perils are expressly listed in the policy. Open perils coverage is deemed "open," in part, because specific perils are not enumerated in the policy.

Broad Named Perils Coverage

Another coverage we'd like to introduce to Fortune 500 customers is known as and is also commonly referred to as broad named perils coverage. It is comparable to basic coverage in that specific perils are named or enumerated in the policy, but it is broader. Named perils coverage comprises the 11 perils protected by basic coverage plus the following six additional perils:

• Dropping objects
•  Ice, snow, or precipitation weight
•  Accidental water discharge or excess
  
• Sudden and inadvertent tearing apart
  
• Freezing
•  Artificially induced electrical destruction
  

In addition, named perils coverage extends coverage for:

•  cigarette smoke (including smoke from fireplaces)
•  Vehicles (including damage inflicted by resident-driven automobiles)
•  To abolish the $100 limit on coverage for broken glass.
•  

Named perils coverage is the most prevalent coverage variety among the six policy forms. This form of coverage has only a handful of straightforward exclusions, as the named perils are described in detail. If your policy includes coverage for named perils, you are not covered for damage or destruction caused by:

• Implementation of building codes and comparable statutes
  
• Earthquakes
•  Flooding
•  power outages
•  Negligence (the failure to take reasonable precautions to safeguard your property)
•  War
•  Nuclear danger
•  Acts of volition
  

Open Perils Coverage

The next form of coverage we will discuss with Fortune 500 employees is coverage, also known as insurance. Because Form HO-3 broadly states that you are covered, Instead of listing the risks protected by the policy, the question of which risks are covered is left unanswered. But don't let the label deceive you. Form HO-3 (the only form with open perils coverage) includes an extensive list of coverage exclusions to ensure that your insurance company is not liable for every conceivable peril. The eight exclusions most frequently associated with named perils coverage (losses resulting from building code enforcement, earthquakes, etc.) serve as the basis for the exclusions of open perils coverage. Then there are further exceptions:

• Freezing pipes and systems in vacant residences
•  Weights of ice and water cause foundation or pavement damage.
• Theft from a residence-in-construction
  
• Vandalism of uninhabited homes
  
• Latent flaws, corrosion, industrial fumes, and contamination
  
• Absorption, wear, and damage
  
• Other animals, pets, and vermin
  
• climatic conditions aggravating excluded causes of loss
  
• Governmental and organizational Measures
  
• Construction, design, and maintenance flaws
  
•  

Tip: HO-3 does not cover the antecedent exclusions, but it does cover losses that result from excluded events (as long as the subsequent loss is not itself excluded). This means, for instance, that if your fireplace is defectively designed and blows flames into your living room, you are not covered for the fireplace, but you are covered for the fire that consumes your home the first time you use the fireplace.

Choosing Between Coverage Types

As previously mentioned, you are unlikely to have the option to select minimal coverage. Form HO-1 is not available in the majority of states, which is unfortunate for your pocketbook because it is the least expensive policy form. Form HO-8 is only applicable in exceptional circumstances. In all cases, renters and condo and co-op proprietors must use Forms HO-4 and HO-6.

According to a study conducted by the Insurance Information Institute in 2021, it is important for Fortune 500 employees to understand that the type of policy form they choose can vary depending on their dwelling type. For example, if you are an employee residing in an apartment, you would need to select the HO-4 policy form specifically designed for apartments. On the other hand, if you own a single-family home, the HO-3 policy form is typically the most suitable choice. This information is crucial for Fortune 500 employees looking to retire or already retired, as it ensures they select the appropriate policy form that aligns with their dwelling type and provides the necessary coverage.

Fortune 500 employees have a genuine choice between named perils coverage (HO-2) and open perils coverage (HO-3). The premium for designated perils coverage is typically 5 percent less than the premium for open perils coverage. Named perils coverage is less comprehensive than open perils coverage, so there are situations in which HO-3 coverage applies but HO-2 coverage does not. However, Fortune 500 employees should bear in mind that HO-2 does provide coverage for many of the most common risks. Consider purchasing a named perils policy if you work for Fortune 500, and if you are seeking to save money without sacrificing coverage. Consider an open perils policy, however, if you're searching for the most protective policy money can buy. Ask the query of your insurance agent when shopping for homeowners insurance and pay close attention to the response.

Loss Settlement

Your insurance policy contains a paragraph that describes the amount you can anticipate receiving from your insurance company in the event of a covered loss. There are three payment calculation options:

•  Actual cash value, which is the amount required to replace or reconstruct the asset minus depreciation.
•  Replacement cost, i.e., the quantity necessary to replace or rebuild a property using the same materials, is the replacement cost.
•  Market value, or the property's valuation on the real estate market at the time of the loss
•  

Typically, payments for Coverages A and B (Dwelling and Other Structures) are calculated using a distinct method than payments for Coverage C (Personal Property). The method of calculation also varies depending on the policy form.

Employees of Fortune 500 must remember that all calculation methods are subject to the coverage limits outlined on the Declarations Page of their policy. This means that regardless of the replacement cost, genuine value, or market value, you will never receive more than the applicable coverage limit. Read the section of your policy for more information on payment calculation methods.

Choosing the right policy form for your dwelling type as a Fortune 500 employee is like selecting the perfect vehicle for your retirement journey. Just as different cars serve different purposes, policy forms cater to specific dwelling types. Imagine you're embarking on a cross-country road trip. If you're traveling in a compact car, you'll want a policy form designed for apartments (HO-4) to suit your needs. However, if you're driving a spacious RV, the policy form for single-family homes (HO-3) would be more fitting. Just as the right vehicle provides comfort and security during your travels, the right policy form ensures comprehensive coverage and peace of mind for your specific dwelling type. So, buckle up, choose the policy form that aligns with your dwelling, and enjoy a smooth and worry-free retirement journey.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

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