Generally, buyers know they need insurance coverage — even they aren't entirely sure what their risks are. Here are five of the most common endorsements (and explanations) that agents and brokers can share with clients.
1. Additional Insured Residence Premises HO 04 41
This form is designed for those who aren't residents of the property, but have an interest in the property. If parents financially assist a child to purchase a home and want to be sure their interest is protected in case of loss, this form allows them to be listed on the policy.
The person or organization must be scheduled, as well as the nature of the interest, which could be for the amount of the down payment, for example, or the amount of the mortgage on the dwelling.
2. Other Members of Your Household HO 04 58
With more people cohabiting, many don't realize that, although the insured considers them household members, the insurance policy doesn't consider them insureds.
This endorsement corrects that situation. The person to be insured must be listed on the endorsement by name; however, those listed on the endorsement can't be insureds, guests, residence employees, tenants, roomers or boarders.
3. Other Structures Increased Limits HO 04 48
Other structures are covered at 10% of the coverage A limit. Remember that “other structures” are not just buildings like garages or sheds. They can include gazebos, patios, barbeque pits, swing sets and many other items put into backyards. For these structures, 10% of the coverage A limit may leave the owner significantly underinsured. Therefore, an increase in the other structures limit is necessary.
4. Mechanical Breakdown HO 06 33
This is a newer, unusual endorsement that was issued in 2014. It provides coverage for mechanical breakdown of household appliances, something that is normally excluded. The basic limit is $5,000 but coverage may be increased to $10,000, $15,000, $20,000, $25,000 or $50,000. The limit, which is an aggregate, must be shown on the schedule.
Loss settlement is typically the lesser of the cost to repair the property, the cost to replace with like kind and quality, the amount actually spent to repair or replace the damaged appliance, or the limit shown in the schedule.
5. Limited Water Back-Up & Sump Discharge or Overflow Coverage HO 04 95, DP 04 95
Homeowners and Dwelling policies generally include coverage for discharge or overflow from plumbing, heating, air conditioning or automatic sprinkler systems or a household appliance, but a sump, sump pump, or related equipment is not part of the plumbing system or a household appliance. This endorsement provides limited back-up coverage for sump pumps and related equipment.
Water or waterborne material that originates from within the dwelling and backs up through sewers or drains, or overflows or is discharged from a sump, sump pump, or related equipment is covered, even if the overflow or discharge is due to mechanical breakdown or power failure.
However, coverage doesn't apply to direct loss of the sump pump or related equipment caused by the breakdown or power failure.
Therefore, if the motor to the sump pump quits working and water is then discharged through the basement, the cleanup of the water is covered, but the cost to repair the pump is not.
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Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.
