The American Association of Insurance Services (AAIS) homeowners program underwent form revisions in 1996. The prior revision was in 1988. The current forms are distinguished in that they are referred to, for example, as form 3, edition 2; the prior edition was referred to as form 3 edition 7/88. The current edition includes booklet-style forms that replace the expanded forms in the 7/88 edition. Additionally, the modular-style forms used in the 7/88 program are not available. Endorsements, discussed elsewhere (seeCommon Endorsements—AAIS Program). are numbered with the prefix ML- followed by a number.

The AAIS forms may be used to cover a one- to four-family dwelling that is owner-occupied. The premises cannot be occupied by more than four families; each family may house no more than two roomers or boarders. Homeowners forms may be used to insure co-owners of a two- to four-family dwelling, provided that the policy is issued in the name of only one owner. Each owner must occupy a separate apartment within the building. The other owner's interest may be protected through use of endorsement ML-41, additional insured. (This endorsement provides coverage as the co-owner's interest may appear with regard to the described premises. Liability and medical payments coverage is limited to loss arising out of the described premises; for this reason, a co-owner must carry his or her own tenant homeowners insurance.)

A homeowners policy may also be issued to the occupant of a dwelling who is purchasing the dwelling under a long-term contract, the occupant of a dwelling under a life estate arrangement, or the owner and intended occupant of a dwelling under construction. A homeowners policy may also be issued to the owner of a seasonal dwelling that meets all eligibility requirements.

Certain incidental business activities of the insured are permitted on the residence premises, subject to insurer guidelines. For the insured with a home-based business, AAIS has developed a home-based business coverage option, which may be attached to an AAIS homeowners, farmowners, or mobile homeowners policy. For a brief discussion of this form, see Common Endorsements—AAIS Program.

The AAIS manual contains program information, submission and rating instructions, loss costs, and explanations of available coverage options. Generally, the rating approach is similar to ISO homeowners rating. There are some differences to note, however. The ISO manual may be used countrywide, with state exception pages included for a particular state. AAIS provides a separate manual for each state.

The AAIS program uses a simplified fire protection classification. Instead of the usual ten classes, AAIS uses three. These are “protected,” “partially protected,” and “unprotected.” “Protected” buildings are those located within five miles of a responding fire department, and within 1,000 feet of a fire hydrant. Alternatively, the building may be within 1,000 feet of a year-round water source of at least 3,500 gallons, and the responding fire department must have pumper truck capabilities; or, the responding fire department must have a pumper/tanker truck capable of carrying at least 3,500 gallons. “Partially protected” buildings are those located within five road miles of a responding fire department; however, the water source requirements are not met. “Unprotected” buildings are those not meeting any of the above requirements (similar to class 10 in the usual classification system). Of course, this classification system does not mean that dwellings located in any of these areas are automatically eligible for coverage; the underwriting guidelines of each company should be consulted.

The rating procedures are different for ISO and AAIS. (Note, however, that neither program furnishes rates. Both programs include loss costs, which then must be multiplied by the individual company's multiplier to obtain a final rate.) The ISO rating procedure consists of finding a key premium based on territory; multiplying this by a form factor; multiplying the result by the protection-construction factor; and, finally, multiplying this figure by the key factor. (The company multiplier is then applied.) In the AAIS procedure, the precalculated loss cost, which reflects the territory, form, construction and fire protection class, is multiplied by the amount of insurance. In both rating procedures any additional premium for optional coverages must be added separately.

The AAIS homeowners program includes seven forms, as opposed to ISO's six. Forms 1, 2, 3, 5, and 8 provide property coverages consisting of coverage for the residence, related personal property, additional living costs, and loss of rent. Form 4, the tenant homeowners form, covers personal property, additional living costs, and loss of rent. Form 6, the unit-owners form, covers personal property, additional living costs and loss of rent, as well as fixtures, additions and alterations, and structures owned by the insured. All of the forms define “residence” as “a one- to four-family house, a townhouse, a row house, or a one- or two-family mobile home used mainly for family residential purposes,” so the forms may be used to insure the mobile homeowner (but see Mobile Homeowners Program, below). The ISO form defines “residence premises” as the “one family dwelling, other structures, and grounds, or that part of any other building where you reside and which is shown as the 'residence premises' in the declarations.” Endorsements may be used to amend this definition to include a three or four family dwelling, or a mobile home. Forms 1 and 8 are intended for situations where the insured either does not desire, or does not qualify for, the broad or special form coverages. Form 5, the special building and contents form, provides open perils coverage for building and personal property.

Forms 1, 2, 4, 6, and 8 cover loss caused by fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, sudden and accidental smoke damage, sinkhole collapse, and volcanic action. Vandalism is optional for form 8; the remainder automatically include the coverage. Form 1, 2, 4, and 6 cover theft. Forms 2, 4, and 6 cover loss caused by the previous perils, as well as falling objects, weight of ice, snow, or sleet, sudden and accidental tearing apart, cracking, burning or bulging, accidental discharge or overflow of liquids or steam, freezing, and sudden and accidental damage from artificially generated electrical currents. Form 3 provides “open peril” coverage for the dwelling; the perils enumerated above apply to personal property. Form 5, the special building and contents form, provides “open peril” coverage for the dwelling and personal property. For a more complete discussion of the coverages and the pertinent exclusions, see Property Coverages—AAIS Homeowners Program.

There are thirteen incidental coverages (called additional coverages in the ISO forms); however, not all forms contain all the coverages. All of the forms include coverage for loss to covered property removed from the insured premises to prevent damage from a peril insured against; debris removal; ordinance or law; fire department service charge; credit card, forgery, and counterfeit money; trees, plants, shrubs, or lawns; grave markers; glass breakage; refrigerated food spoilage; and loss assessment. Forms 2, 3, 4, 5, and 6 cover collapse. Form 4 includes coverage for tenants improvements. Form 5 adds lock and garage door transmitter coverage. While ISO includes costs incurred for necessary measures to protect covered property from further damage in event of a covered loss as an additional coverage, AAIS, in the loss conditions, states that the insurer “will pay the reasonable costs incurred by [the named insured] for necessary repairs or emergency measures performed solely to protect covered property from further damage by a peril insured against if a peril insured against has already caused a loss to covered property.”

As a comparison, the ISO additional coverages are:  debris removal; reasonable repairs, trees, shrubs and other plants; fire department service charge; property removed; credit card, fund transfer card, forgery and counterfeit money; loss assessment; collapse; glass or safety glazing material; landlord's furnishings; and ordinance or law. Not all the ISO homeowners forms contain all the additional coverages. For a discussion, see ISO Homeowners Section I.

The AAIS forms provide liability coverage for the amount, up to the limit of insurance, that an insured may become legally obligated to pay as a result of bodily injury or property damage caused by a covered occurrence. Medical payments to others coverage pays necessary medical expenses for injury to a person on the insured's premises with the insured's permission, or for injury to a person away from the insured's premises if the bodily injury arises from a condition on the insured premises or from an activity of the insured. Medical payments also applies to an injury caused by a domestic employee of the insured while performing his or her duties, or to an injury sustained by a domestic employee that arises from performance of those duties.

There are eight incidental liability coverages. These are: damage to property of others; contracts and agreements; claims and defense cost; first aid expense; motorized vehicles; watercraft; business; and loss assessment. The ISO form contains four additional section II coverages; however, coverage for certain contracts and agreements, motorized vehicles (such as those used to service the insured premises), watercraft (those under a certain length and horsepower), and business (such as the rental of an insured location on an occasional basis) is included in the main body of section II. For a more complete discussion, see Liability Coverages—AAIS Homeowners.

As noted above, the definition of “residence” makes the forms suitable for insuring the mobile homeowner. Of course, form 6, the unit-owner form, while including this definition, would be an unlikely candidate for this coverage, and the use of form 5 is not permitted. Forms 1, 2, 3, or 8 may be used to insure the owner-occupant of a mobile home used only for private residential purposes (some incidental business activities are permitted) and occupied by no more than two families and no more than two boarders or roomers per family. These same forms may be used to insure a co-owned mobile home provided each co-owner occupies separate premises within the mobile home; however, as noted above, the policy may be issued in only one name, with the other owner protected through use of an additional insured endorsement. A form 4 policy may be issued to the other co-owner, or may be used to insure the tenant of a mobile home.

A mobile home used as a seasonal home may be covered under form 1, 2, 3, 4, or 8. Mobile homes used as farm dwellings may only be insured if the insurer agrees. Coverages are as outlined above.