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Common Home Insurance Exclusions and Conditions



Section 1 scope in HO-2 includes eight exclusions. Any of the eight exclusions excludes the insurer's responsibility for insured damage.

Homeowner's insurance policies can say:

We don't cover any of the following damages incurred directly or indirectly. Such loss is omitted regardless of any other cause or occurrence, leading to the failure in any series.

Ordinance of law

Means enforcement of any ordinance or law governing the construction, repair, or demolition of a building or other structure, as stated in this regulation.

Earth's movement

Meaning earthquake including earth shock waves or tremors before, during or after a volcanic eruption; landslide; mudflow; falling, rising or moving earth; or direct loss from:

  • Fire;
  • Explosion
  • Glass breakage or protection glazing part of a house, storm door or storm window

Harm from water.

  • Flood, surface water, waves, tidal water, overflow or spray from all of these, whether or not powered by wind;
  • Water backing into sewers or drains;
  • Water below ground level, including water exerting pressure or through a house, pavement, driveway, base, swimming pool, or some other structure;
  • Direct fire, explosion, or theft from water damage is covered.

Power failure

Meaning power failure or other utility services if the failure happens off the But if a Peril Insured Against happens, we can only compensate for the resulting loss.


The insured's neglect to use all appropriate means to save and protect property after a loss.


Including undeclared war, civil war, uprising, revolt, revolution, military or military personnel warlike act, destruction or capture or use for military purposes, and any result thereof. Discharge of a nuclear weapon is considered a militant action, even if unintended.

Atomic hazard

Meaning any nuclear reaction, radiation, or radioactive contamination. It includes whether controlled or uncontrolled and, however, caused or any consequence.

Deliberate failure.

Any loss resulting from any act performed by or in the insured's direction where they intended to cause failure.


The Basic Fire Policy (SFP) derived several HO-2 conditions.

Loss settlement

The loss settlement clause provides different ways to assess the amount of payment in case of loss to the insured.

Covered property damages are settled:

Buildings under coverage A or B without deduction for depreciation, subject to the following:

If at a time during coverage, the cost of loss in this policy on the damaged building is eighty percent or more of the total placement cost of the building, immediately before the loss, we will pay the cost of fixing or replacing it after deductible and without depreciation deduction, but not more than the following amounts:

  1. The building's liability cap under this policy;
  2. Replacement costs of that section of the building destroyed similar construction and usage on the same premises;
  3. The sum needed to fix or rebuild the damaged house.

If at the time of loss, the amount of insurance in this policy on the damaged building is less than eighty percent of the building's full repair cost immediately before the loss, we will pay the greater of the following sums, but not more than the maximum of the building's liability under this policy:

  1. The actual cash value of the damaged building part; or
  2. The proportion of repair or replacement costs after application

Deductible and without deduction for depreciation, the portion of the building that the total amount of insurance under this policy deticated to the damaged building pays eighty percent of the building's repair cost.

Replacement costs and value-added insurance

HO-2 's loss settlement clause includes a penalty clause that applies if the insured purchased less than 80% of replacement costs. The HO penalty clause parallels that typically found in commercial property insurance policies. The object of both the coinsurance clause and the HO loss settlement clause is to make the insured unattractive. Both provisions allow for the insured to pay the penalty depending on the insurance number.

Many property plans include a provision requiring the insured to buy minimum insurance if the insured requires maximum coverage on all damages. If the insured buys less than the minimum, only partial damage recovery can occur. The insurer's minimum insurance typically needs to be specified as a percentage of the insured property's replacement cost.

To determine if the insured fulfilled the dwelling coinsurance condition, -insurers use the following formula: insurance amount purchased amounts X of = insurance 80 percent of replacement cost loss proceeds.

If the first term is less than 1, the insured will bear part of the damage. If the fraction is equal to or greater than one, the insurer will pay the entire amount of the loss, limited to the face amount of insurance purchased.

Reasons for the reimbursement

What triggers the coinsurance requirement? Holding insurance rates equal exists.

If property owners, knowing most risks, are partial, bought insurance equal to only 50 percent of the insured property's value, they may assume the most considerable portion of the liability had been transferred. They'd have an advantageous deal without the coinsurance penalty. The coinsurance provision of property insurance plans prohibits the insured from using the insurers' average rate structure. If someone buys insurance equal to 50% of the property's value while the insurer needs 80% coverage, the insured will obtain an only partial recovery for a loss.

Hypothecary clause

The HO has provisions protecting creditors from making insured property loans. This defense is contained in mortgage proof of debt. When a property loan is made, it's the protection arrangement. A mortgage gives the lender (mortgagee) legal interest in mortgaged land. If the borrower (mortgage) defaults on the loan agreement, the mortgage will foreclose the mortgage and sell the property to the debt. The mortgage both has an insurable interest in the land.

Mortgagee requires trustee.

If a mortgage is named in this agreement, you and the mortgagee will collect any loss payable under Coverage A or B as interest occurs. If more than one mortgagee is called, the payment order will be the same as the mortgage order.

If we reject your application, it won't apply to a legitimate mortgage application if the mortgagee:

  1. Please notify us of any change in ownership, occupancy, or significant risk known to the mortgagee
  2. Pay any premium due under this agreement if you fail to pay the premium
  3. Submits a signed, sworn declaration of loss within 60 days of obtaining notification of your failure by us

Government conditions for assessment, suit against us, and a payment applies to the mortgagee. If we cancel or not renew the policy, the mortgagee will be informed at least IO days before the date of termination or non-renewal.

If we pay the mortgagee for any loss, refuse your payment:

  • We are subrogated to all mortgage rights given under property mortgage.
  • We will pay the entire principal on the mortgage, plus any accrued interest, at our option. We will obtain full assignment and transfer of the mortgage and all securities held as collateral to the mortgage debt.

Subrogation would not affect the mortgagee's right to recover the mortgagee's claim completely.

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