by K D Grey

Created on: August 07, 2008

What is most important to understand as a homeowner is what your homeowner's insurace policy does not cover. As a property insurance adjuster my experience has bee that this is more difficult to understand than most people care to realize.

The first step is understanding that an insurance policy is a contract. As such it is governed by contract law. Regardless of the fact that the sales agent assured you that you had "full coverage" the rights and responsibilities of the parties are spelled out explicitly in the four corners of the contract - i.e. the policy.

And, chances are, there are some rights and responsibilities in that contract that don't quite coincide with your idea of "full coverage."

There are different types of homeowner's insurance, different levels of coverage, and different "perks" offered for the premium policies with most insurers. For the most part, though, the basic policies are based on standard forms known as ISO policies.

There are two general categories of coverages under most homeowner's policies - property coverages and liability coverages, though some policies, referred to as "fire policies" do not provide liability coverage.

The liability coverage provides coverage under certain circumstances when the policyholder becomes legally liable to another party for some form of damages. For instance, if Fido bites the door-to-door salesman's leg, Fido's owner's homeowner's insurance may provide coverage for the lawsuit the salesman is likely to bring. (and Fido's owner will likely be dropped by the insurer - bad risk, biting dogs)

The property coverage is further divided a couple of different ways. First, there is the distinction between "real property" and "personal property." Real property is the building and permanent fixtures in the building(s) and on the land, whereas personal property is all that stuff you have that you would take with you when you move. Finer distinctions come into play in areas like window treatments - blinds are part of the real property, but draperies are personal property, etc.

Next, property coverages are distinguished as either "open peril" or "named peril" coverages. THIS IS A VERY IMPORTANT DISTINCTION.

Named peril coverage means that a loss is covered by the policy ONLY IF IT WAS CAUSED BY A PERIL LISTED in the policy. This is very limited coverage. The standard ISO HO-3 homeowner's policy has 17 named perils for personal property. Sewer back-up is not one of them, but vehicle damage is. This means that if water

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