1. Forms
2. HO
3. HO-04-92

What the form is

The HO 04 92, titled "Specific Structures Away From The Residence Premises – Actual Cash Value Loss Settlement," is an endorsement to a standard homeowners insurance policy. Its primary purpose is to provide scheduled insurance coverage for specific structures that are owned by the insured and located away from the primary "residence premises" but are still used in connection with that residence. A key feature of this endorsement is that loss settlements for these scheduled structures are made on an Actual Cash Value (ACV) basis, meaning the value of the property at the time of loss, considering depreciation. Each structure covered by this endorsement must be specifically listed (scheduled) in the policy, along with a dedicated limit of liability for that particular structure.

Classes of business it applies to

This endorsement is typically used with various homeowners insurance forms, such as HO 00 02, HO 00 03, HO 00 05, HO 00 06, and HO 00 08. It is designed for personal insurance clients who own structures that are not on their main residential lot but serve a purpose related to their home. Common real-world examples include:

• A detached garage or shed located on an adjacent, separately deeded lot but used by the homeowner for storage or hobbies related to their primary residence.
• A boathouse situated on a nearby lakefront property, used in conjunction with the insured's home.
• Other outbuildings that are physically separate from the residence premises but functionally connected to its use.

It's important to note that this endorsement explicitly excludes coverage for structures that are:

• Used as a dwelling or capable of being used as a dwelling.
• Used for any "business" purposes, including storing business property.
• Rented or held for rental to any person who is not a tenant of the main dwelling on the "residence premises".

Special considerations

There are several important considerations when using the HO 04 92 endorsement:

• Scheduled Coverage: Each structure must be individually listed with its description, location, and a specific limit of liability. This differs from the blanket coverage typically provided under Coverage B for structures on the residence premises.
• Actual Cash Value (ACV) Settlement: Losses are settled at ACV, not Replacement Cost Value (RCV). This means the payout will reflect the depreciated value of the structure at the time of loss, which could be significantly less than the cost to rebuild it new.
• Usage Restrictions: The structure must be used in connection with the "residence premises" and cannot be used for business, as a dwelling, or rented out (with limited exceptions for tenants of the main dwelling).
• Underwriting Requirements: Insurers may require detailed information, including photographs of all sides of the structure and its roof, and the specific location address during the application process.
• Land Exclusion: The coverage does not apply to the land on which the structure is located.

Key information for agents and underwriters

Agents and underwriters should be mindful of the following when dealing with the HO 04 92:

• Appropriate Use: This endorsement is suitable when an insured has valuable structures away from their primary residence that need specific coverage. It helps avoid diluting the standard Coverage B limit, which is intended for structures on the residence premises. For example, if an insured has a detached workshop on a separate parcel of land used for personal hobbies related to their home, this endorsement would be appropriate.
• Valuation: Clearly explain the ACV loss settlement basis to the insured to manage expectations at the time of a claim. If a structure is a building and the insured desires replacement cost coverage, the HO 06 92 (Specific Structures Away From The Residence Premises – Replacement Cost Loss Settlement for Buildings) might be a more suitable option to discuss.
• Risk Assessment: Underwriters need to carefully assess the nature, condition, and use of the scheduled structure. Confirm that it is not being used for ineligible purposes like a business or as a separate dwelling. The requirement for photos and specific location details aids in this assessment.
• Coverage Gaps: Ensure there are no coverage gaps. If a structure is used for business, other forms of commercial insurance would be necessary. If it's rented to someone not a tenant of the dwelling, it may require a separate landlord policy or endorsement.
• Comparison to HO 04 91: The HO 04 91 (Coverage B – Other Structures Away From The Residence Premises – Actual Cash Value Loss Settlement) provides blanket coverage for other structures away from the residence premises up to the Coverage B limit, while HO 04 92 provides scheduled coverage for specific structures, each with its own limit. The choice depends on whether specific, scheduled limits are more appropriate for the insured's needs.