Choosing a Policy
Monoline vs. Package
When insurance policies are sold they are issued on either a monoline basis or as a package policy.
Monoline
A monoline policy contains only one type of coverage, such as liability insurance, while a package policy includes several different types of coverage, such as property insurance and liability insurance. A package policy is generally less expensive than insurance coverage purchased separately.
Package
Standard homeowner and tenant policies are package policies that typically include property, liability, theft, and medical payments coverage.
Several types of homeowners and tenants policies are currently sold in New York State. The policies range from basic packages to more comprehensive packages which are more expensive, but provide greater coverage against more perils for both your home and possessions.
It is critical for consumers to be aware of the different perils, or causes of loss, that are insured against in each type of policy. Sometimes coverage excluded under a particular policy, such as earthquake damage and power interruption, can be purchased for an additional premium, and some coverage listed under a policy, such as off-premises theft, can be excluded, resulting in a reduction in premium. However, some coverage, such as coverage for flood insurance, are generally always excluded from homeowners and tenants policies: the only way to purchase this coverage is through Federal insurance programs.
Several types of homeowners policies, covering varying perils, are available for purchase by consumers who own and live in a one or two family house. Policies are also available for tenants, cooperative, and condominium owners. Again, it is up to you to determine whether you need the most extensive type of coverage or whether your insurance needs can be met with a basic policy.
In order to give you an idea of the differences among policies, set forth below is a comparison of the coverage typically offered under standard policies.
Basic Homeowners Policy (HO-1)
This policy generally insures your home and contents against only the following listed perils:
- fire, lightning and smoke damage
- windstorm and hail
- burglary and theft
- explosion
- glass breakage
- vehicle or aircraft damage
- riot and civil commotion
- vandalism and malicious mischief
- bodily injury
- damage to property of others
- civil judgments
- medical payments
- personal property (at home)
- personal property (away)
- additional living expense (if forced to live away from home temporarily
Very few insurers sell this type of policy; most offer more comprehensive policies, such as the Broad Form Policy.
Broad Form Policy (HO-2)
This policy generally insures your home and contents against (1) the perils in the Basic Policy and (2) other additional perils such as:
- falling objects
- weight of ice, snow and sleet
- damage resulting from an accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire sprinkler system
- freezing of plumbing systems
- electrical damage to appliances
Special Form Policy (HO-3)
This policy is the most widely used policy by homeowners insurers. It covers your home for all risks of physical loss, except those that are specifically excluded in the policy, such as flood, earthquake, war, nuclear accident, etc. If you want to take out a mortgage on your home, your lending institution may require you to purchase this type of policy.
Comprehensive Form Policy (HO-5)
This policy generally protects your home against the same perils as the Special Form Policy protects against, described immediately above. In addition, under the Comprehensive Form Policy, your personal possessions typically would also be covered for all risks of physical loss, except those risks that are specifically excluded. (This extra protection may also be provided by purchasing a Special Form Policy with the ”Special Personal Property” endorsement.)
Market Value Policy
This policy is a modified version of the Basic Policy. It generally provides replacement cost coverage, but coverage may not exceed the amount necessary to repair or replace the dwelling using materials of like kind and quality, not exact kind. This policy form is generally used when the replacement value of the property exceeds its market value, as in the case of older homes (sometimes referred to as ”white elephants”).
Tenants and Cooperative Policies (HO-4)
Tenants and cooperative policies are available that insure against damage to the contents of a unit and for personal liability of the insured when people are injured or sustain property damage arising from the insured unit. It is generally not necessary for a tenant to insure the building in which he or she lives, since that is typically the building owner’s responsibility. Condominium Policies (HO-6)
Condominium owners policies generally provide contents and property coverage for any alterations, appliances, fixtures, improvements and interior walls within the insured unit; condominium buildings and their common areas are typically insured through policies issued to the condominium owners’ associations.
Make sure you check your existing policy, or a policy you are thinking about buying, for a complete listing of covered and excluded perils. In addition, make sure you understand whether contents damaged by a covered peril are covered. If they are not, you may want to consider purchasing additional coverage.