The homeowners forms (HO-2, HO-3, HO-4, HO-5, HO-6, HO-8), Coverages A through F and the standard conditions and exclusions are covered in the national Homeowners guide. This guide covers the New Jersey rules that apply to homeowners policies: how and when an insurer may cancel or nonrenew, hurricane and wind deductibles, the FAIR Plan, the flood notice, and a few other state requirements. Citations are to the New Jersey Statutes (N.J.S.A.) and Administrative Code (N.J.A.C.).

Cancellation and nonrenewal (N.J.A.C. 11:1-20)

These rules cover all homeowners policies and most commercial policies. Workers' compensation, fidelity and surety bonds, ocean marine, aviation, accident and health, and surplus lines policies are excluded (N.J.A.C. 11:1-20.1).

Notice periods (N.J.A.C. 11:1-20.2):

What the notice must contain. A cancellation or nonrenewal isn't valid unless the notice states the reason and the factual basis in detail. It must tell the insured they may complain in writing to the Department's Office of Consumer Protection Services. It goes by certified mail, or first-class mail with a date-stamped proof of mailing (N.J.A.C. 11:1-20.2(g)-(i)).

If the insurer doesn't send proper notice, the insured may keep the expiring policy at the same terms and premium until a proper notice is sent (N.J.A.C. 11:1-20.2(j)). No notice is needed if the insured replaced the coverage or asked to end it.

Moral hazard includes the risk that the insured will destroy the property, or let it be destroyed, to collect the insurance (N.J.A.C. 11:1-20.2(f)).

Underwriting guidelines can't be arbitrary

• Every policy must state that it won't be cancelled or nonrenewed for arbitrary, capricious or unfairly discriminatory reasons, and that the insurer's guidelines are available on written request. This statement doesn't apply to a new (non-renewal) policy in effect for less than 60 days (N.J.A.C. 11:1-20.3).
• Approved reasons include nonpayment, moral hazard, material misrepresentation or nondisclosure when the policy was accepted, and an increased hazard or material change in the risk (N.J.A.C. 11:1-20.4).
• Guidelines based on adverse loss experience can be used only to nonrenew, not to cancel midterm (N.J.A.C. 11:1-20.4(e)).
• Agency termination is an approved reason only if the insurer documents replacement coverage at comparable rates and terms, or the insured agrees in writing after being told of the right to continue (N.J.A.C. 11:1-20.4(b)13).

Claims that can't be held against the insured

• An insurer may not cancel or nonrenew an owner-occupied one-to-four family dwelling solely because of claims from weather-related damage or from a criminal act by a third party who isn't a resident. It may offer different terms if the insured doesn't take reasonable steps to reduce the risk (N.J.S.A. 17:36-5.20a).
• A call asking whether a loss would be covered may not be counted as a claim when judging the insured's claims experience (N.J.S.A. 17:29B-4.1).

Hurricane and windstorm deductibles

New Jersey regulates hurricane deductibles by rule (N.J.A.C. 11:2-42):

• A hurricane deductible applies only to losses during an event the National Weather Service has declared a hurricane, and only if sustained winds of 74 mph were measured somewhere in New Jersey.
• Hurricane deductibles are usually a percentage of Coverage A. With a $200,000 Coverage A and a 2% deductible, the deductible is $4,000.
• An optional windstorm or hail deductible may be a flat dollar amount or a percentage of Coverage A up to 10%.
• Insurers and the FAIR Plan must use the Department's uniform hurricane deductible language, or substantially similar language (N.J.A.C. 11:2-42.7).
• An insurer may use an expedited filing process for homeowners rate changes that are overall increases of no more than 5%, decreases, or revenue-neutral changes (N.J.A.C. 11:2-42.2).

The FAIR Plan: New Jersey Insurance Underwriting Association

• New Jersey's FAIR Plan is the New Jersey Insurance Underwriting Association, created by N.J.S.A. 17:37A-3. Every insurer writing property insurance directly in the state must be a member, sharing in proportion to its premiums (N.J.S.A. 17:37A-3, -6).
• It provides basic property coverage (fire and extended coverage, including mine subsidence) for real property at fixed locations and its contents. Auto and farm risks aren't eligible, and insurable value is capped at $1,500,000 (N.J.S.A. 17:37A-1, -2(e)). The policy doesn't include personal liability. Theft coverage has been available by endorsement since 2009.
• The applicant must show they couldn't get coverage in the normal market. Any licensed agent or broker may apply on their behalf, and owners may apply directly (N.J.S.A. 17:37A-8a).
• Insurability can't be judged by neighborhood, location, environmental hazards beyond the applicant's control, or ownership (N.J.S.A. 17:37A-2(e)).
• Policies run 1 year. A policy isn't issued while the applicant owes unpaid, uncontested premium for prior insurance on the property (N.J.S.A. 17:37A-8b). A denied applicant may appeal to the Commissioner (N.J.S.A. 17:37A-8c).

Flood notice

Insurers writing homeowners insurance must give a flood notice at new business and at least annually after that. It states that homeowners policies don't cover flood, defines flood, and says separate flood coverage may be available for an extra premium (N.J.A.C. 11:1-5.5). Producers who write flood insurance take a 3-credit flood/NFIP course in their first license term (N.J.A.C. 11:17-3.6(a)1).

Household employees

Homeowners and comprehensive personal liability policies in New Jersey must cover the policyholder's workers' compensation obligations to domestic or household employees (N.J.S.A. 17:36-5.29).

Common exam traps

• Notice windows run 30 to 120 days for nonrenewal and non-nonpayment cancellations, but only 10 days for nonpayment or moral hazard.
• Every notice needs the reason and its factual basis. Without proper notice, the insured can keep the old policy at the same terms.
• Loss experience may justify a nonrenewal, never a midterm cancellation.
• Weather losses and outside criminal acts alone can't be the basis for dropping an owner-occupied home.
• Hurricane deductible trigger: an NWS hurricane and 74 mph sustained winds measured in New Jersey.
• The FAIR Plan has no liability coverage, and theft is available only by endorsement.