Personal Lines Training

1) Homeowners Insurance
Homeowners insurance is mandatory when a loan is taken out (mortgage) to buy a home. It is always a
12-month policy. When the homeowner has a mortgage, the bank will be asked to be listed on the
policy as an additional insured. Most banks want this to be listed in very specific ways. Please always list
it exactly as they want it. The homeowner has the choice of either paying their policy in full, or the bank
can pay the premium (this is called escrow bill) and they will add it to the monthly loan payments. Either
way is acceptable by insurance companies. When working with home policies, its important that you
know the codes that refer to the type of policy they have.

HO2 – Very basic form of coverage. This policy is not common as there are limitations to what it covers.
For example, theft is usually not included. This can be used for older, low value home.

HO3 – This is the most common form of homeowners insurance. Coverage on this policy is under special
forms, meaning there are less exclusions. They are usually stated. This always has the home at
replacement cost.

HO4 – This is renters’ insurance. When you do not own your residence but pay monthly rent to the
owner. This policy is usually very cheap. It does not cover the property but just personal property and
liability.

HO5 – This is the deluxe form of HO3. HO5 policies are for high value homes and they provide higher
coverage levels. The main difference is that HO3 personal property is at actual cash value whereas on an
HO5 policy it is at replacement cost.

HO6 - Condo insurance. This is when the insured owns the unit and not the entire building. Coverage will
be for walls out coverage, personal property and liability. This is usually cheaper based on the coverage
A

DP3– This is also referred to as Dwelling fire or landlord policy. This is when a homeowner owners a
property but they rent it out to tenants. This policy is commonly mistaken with HO4. This policy covers
the property for the insured, Liability, contents if added and loss of rent.

Deductible – This is the amount of money the insured will be responsible in the event of a claim. The
most common deductible is $1,000 but it can go as low as $250 and as high as $5,000 depending on each
insurance company. In areas where there are high hail and wind occurrences, you can be given the
option to have a separate deductible for wind/hail. This is done in % for. It can be 1%, 2% up to 10%. This
is important to know that the percentage is from the value of the home. Lets say the replacement cost is
$400,000 with a 1% wind/hail deductible, that would mean in the even of a wind/hail claim the
deductible would be $4,000.
 ACTUAL CASH VALUE vs REPLACEMENT COST vs MARKET VALUE
Replacement cost – the cost the insurance company will pay in the event of a claim. This is the cost it
will take to replace/rebuild the home to its current value/state. This is the best coverage for the
property.

Actual Cash Value – this is the replacement cost – minus depreciation. This is difficult as rate of
depreciation is not a set rate. Personal property is usually at ACV. If you buy an Iphone for $2,000 today
and it is stolen after 2 years. The insurance company will pay you the value of the phone in todays
market, let’s say $800 instead of the original $2,000. Most insurance companies give you the option to
change personal property to RCV.

Market Value – this is the amount that a property can be bought for. This has nothing to do with
replacement cost as this number fluctuates depending on the area the property is in and the market
conditions. Its very possible to have the market value being much high or even lower than the
replacement cost.

What risks does a homeowners policy cover?

Your homeowners policy protects you against different risks, or perils. Risks and perils are things
that could damage your house or property. This table shows common risks that most policies do
and don’t cover. Coverages vary by company.
Construction material
Its important to know the types of material that homes can be made of. This affects the replacement
cost and premium of the policy.

Frame – this is wood. Its cheaper to build a home this way, however its more risk in the event of a fire or
storm.

Mixed Masonry – this is when the home is mixed with frame as well as some brick. Most insurance
companies will classify this as Frame.
Masonry Construction – this is when the home is made from 100% brick or concrete block. The
replacement cost will be higher as bricks are more expensive than wood.

Masonry Non Combustible – masonry construction when the building materials are fire resistant.

Fire Resistant – this is material such as metal.

Roof types
Types of Roof Materials
Asphalt Shingles/ architectural - most common residential roofing material used in the United States,
asphalt shingles are popular because they are economical and easy to install.

Flat roof – most insurance companies do not like flat roofs as they have a certain amount of risk. Snow
and water can accumulate on the roof and cause it to fall in.
 Payment Information
Personal lines carriers are direct bill. This means that payment is made directly to the insurance carrier.
Please do not pull payment like we do for commercial policies. Remember payment may be:
1) Monthly payments
2) Paid in full by the insured – this option usually has discounts. Progressive gives a good discount for
policies that are paid in full.
3) Escrow bill – the mortgage company will sed a check to the insurance company and the policy will be
paid in full. You should set a task 30 days after the policy renews to confirm that the insurance
company received payments. Especially now with Covid, the postal service has been really.

Once you have issued a home policy

When a policy has been issued, please remember we have 2 important tasks to do afterwards.
1) Send the cancellation/non-renewal signed letter to the insured prior insurance carrier. Please always
make sure that the insured signs this letter. Its ok if they decline for you to do this. Sometimes they
prefer to cancel their prior policy in person.
2) If there is a mortgage, you will need to fax or email the updated policy information to the bank.
Please also call and do this as well, just to make sure that the bank receives the updated information.
Once they receive this document, they will make payment so it’s really important.

2)Personal Auto Insurance

Personal auto is mandatory for all vehicles in America. Auto insurance can either be a 6 month or a 12-
month policy. Auto insurance takes into consideration many factors of the drivers such as age of the driver,
marital status, prior accidents/violations and credit scores. Younger drivers are more of a liability and
usually increase the premium.

Coverage levels
• Liability - It protects other drivers if you cause damage to them in the form of bodily injuries or
property damages. While coverage limits vary from state to state based on minimum
requirements.

• Medical Payments - Medical payments coverage covers the medical costs of the policyholder and
anyone in their vehicle at the time of the accident. We normally have medical payments at $5,000
but some carriers can go up to $10,000.

• Uninsured/underinsured Motorist – this is coverage when you have an accident with a person who
has insufficient insurance to cover your damages, or if they don’t have insurance (which is illegal)
or in the even of a hit and run.
 • Collision - This covers damages to your vehicle related to a collision with another vehicle or object.
• Comprehensive/ non collision - This includes damages to your vehicle not related to a collision,
such as flooding or wind damage.

When we take qualifiers for a client, we ask then of they want full coverage or just liability. Full coverage is
usually for vehicles newer than 10/15 years. Vehicles older than this a normally insured at just liability.