Homeowners insurance is a category of property insurance which covers damage to an individual’s home, its contents, and the individuals who reside within. Almost every homeowner has this type of insurance because every bank requires some form of property insurance before they will finance a mortgage.
Although it is not legally required for an individual to have homeowners insurance, it is necessary for any individual who cannot purchase their home or property in one lump sum, which applies to the majority of purchasers.
What Are the Different Types of Homeowners Insurance?
There are several different types of homeowners insurance policies available. The amount of coverage which is purchased will vary depending on the location and the cost of the home.
Homeowners insurance policies are always capped, which means they will not pay damages past a certain amount. This cap may be adjustable by the consumer, or purchaser of the policy.
There are 8 standard categories of homeowners insurance policies, which are designated HO-1 to HO-8. HO-1 is the most basic category of insurance and typically requires the policy holder to name precisely what is covered.
Because of this, HO-1 policies are often used for certain objects instead of an entire home. HO-1 covers 11 categories of damage to a limited amount, including:
- Fire;
- Lightning;
- Windstorms;
- Explosion;
- Riot;
- Theft;
- Vandalism;
- Smoke; and
- Volcanic eruption.
HO-2 has slightly broader coverage than HO-1 but still only covers specific portions of a house. This category adds additional perils to those noted above, including:
- Damage from falling objects;
- Weight of snow and ice;
- Freezing of plumbing and damage caused by faulty electrical and heating systems.
HO-3 is the standard category of policy that the vast majority of homeowners possess. In contrast to the two discussed above, this category does not name the perils it protects against.
Instead, this category provides exclusions for the things that will not be covered. HO-3 is designed to cover all aspects of a home, structure, and the contents.
This category also covers liability which may arise from daily use as well as any visitors who may have an accident or injury on the premises, usually up to $100,000, usually. Certain perils are never covered, including:
- Earthquake;
- Flood protection;
- War; and
- Nuclear explosions.
HO-4 is commonly known as renter’s insurance. This category is similar to HO-2 and covers the same perils but does not protect the house.
HO-5 is a more expensive category than HO-3. It provides greater liability coverage as well as broader protections.
If an individual owns a co-op or condominium, they will obtain HO-6 insurance which covers personal property and provides liability coverage. Similar to a renter’s insurance policy, this category does not cover the structure because it will have its own policy.
HO-7 is basic mobile home protection. It is important to note that this category does not typically provide any liability coverage.
HO-8 is referred to as older home insurance because it is designed for historical homes. This category allows a homeowner to have a higher replacement cost than the market value and to be insured at the lower market value rate.
Why Do I Need an Attorney for Homeowners Insurance?
In general, because the majority of banks require an individual to purchase HO-3 insurance when their mortgage begins, it is not necessary to have an attorney when choosing an insurance plan. An attorney may become helpful, however, if an individual has to file a claim.
In many cases, insurance companies will automatically and, in some situations, legally, refuse to pay a claim the first time it is submitted. This practice is used in hopes of deterring individuals from making false claims.
This means that an individual may file a perfectly legitimate claim for payment and will still be refused or required to provide overly-extensive evidence. If an individual believes that their policy does cover the damages they incurred and their claim is contested or refused, they should consult with an attorney for advice regarding suing the company for falsely denying the claim.
What Should I Do if My Insurance Company Denies My Claim or Acts in Bad Faith?
There are numerous reasons why an insurance company may deny a claim, including, but not limited to:
- Incorrect patient or claimant identification information;
- Coverage is terminated;
- Services are not covered;
- Member failing to update insurance with other insurance information;
- Timely filing or statute of limitations;
- Coverage or policy exclusions;
- Pre-existing conditions; and
- Fraud or misrepresentation.
By law, an insurance company is required to deny or approve a claim in good faith. It is common, however, for insurance companies to deny claims in bad faith.
Bad faith is a legal concept which may result in a civil lawsuit against the insurance company. Insurance companies have been held liable for bad faith for:
- Delaying handling claims;
- Lack of investigation;
- Refusal to defend a lawsuit;
- Refusal to make a reasonable settlement offer; and
- The irrational interpretation of the insurance policy.
Can I Sue My Insurance Company?
There are many reasons why an individual may have to sue their own insurance company. In order to understand the process, it is helpful to have a basic knowledge of the legal relationship between the individual who purchases insurance, or the insured, and their insurance company.
An insurance policy is essentially a contract where one party agrees to pay a premium in exchange for the other party to provide coverage. The purchaser of the policy is referred to as the insured and the insurance company is referred to as the insurer.
If a loss occurs which results from an event that was covered by the insurance policy, an insurance company will protect the insured party from:
- Losses;
- Damages; or
- Liability.
Legal claims often arise when an insurance company does not indemnify, or protect, the individual who is insured from an event that was covered under the policy or when an insurance company does not uphold their end of the contract in some other way, for example, by wrongfully denying the insurance claim.
What Are Some Remedies Available in an Insurance Claim Lawsuit?
If an individual determines that it is necessary to file a civil claim against their insurance company and that claim is successful, they may be awarded damages. The most common legal theory under which insurance companies are sued is breach of contract.
If an individual prevails in their breach of contract claim, they are entitled to actual damages, or the coverage which they were supposed to receive under the contract. In certain jurisdictions, they may also recover for out-of-pocket expenses, such as attorney’s fees.
In serious cases, punitive damages may also be awarded. For example, if an insurance company wrongfully denied a claim and delayed in rendering payment, the insured party may be entitled to:
- The value of the property claim;
- The attorney’s fees associated with pursuing the claim; and
- Possible punitive damages.
Should I Contact a Lawyer?
The laws governing insurance and what is defined as bad faith varies by state. If you believe your insurance claim has been wrongfully denied or you suspect your insurance company is acting in bad faith, it may be helpful to consult with an insurance attorney as soon as possible.
Your attorney can review your claim, determine if your claim was denied in bad faith according to the laws of your state, and represent you when you file a lawsuit against your insurance company.
