1. Forms
2. HO
3. HO-04-11

What the Form Is

The HO 04 11, titled "Additional Limits Of Liability For Coverages A, B, C, And D," is an endorsement to a homeowners insurance policy. Its primary purpose is to provide an increased amount of insurance for the dwelling (Coverage A), other structures (Coverage B), personal property (Coverage C), and loss of use (Coverage D) beyond the limits stated on the policy's declarations page. This endorsement effectively amends the policy's Loss Settlement provision to allow for replacement cost coverage even if the actual cost to repair or replace exceeds the primary policy limit for these coverages, provided certain conditions are met.

Classes of Business It Applies To

This endorsement is used with standard homeowners insurance policies (e.g., HO 00 02, HO 00 03, HO 00 05). It is designed for homeowners who want to ensure they have adequate financial protection to fully rebuild their home and replace their belongings, especially in situations where construction costs might unexpectedly escalate, such as after a widespread natural disaster leading to increased demand for labor and materials. For example, if a home insured for $300,000 (Coverage A) is destroyed and the current cost to rebuild is $350,000 due to a surge in local construction prices, this endorsement could cover the additional $50,000, assuming all conditions are met.

Special Considerations

• Agreement to Insure to Value: A key condition for this endorsement to apply is that the insured must agree to insure the dwelling for its full replacement cost as calculated or recommended by the insurer.
• Notification of Improvements: The insured is typically required to notify the insurance company, often within 30 days of completion, of any improvements, alterations, or additions to the dwelling that increase its replacement cost by a certain percentage (e.g., 5% or more).
• Rebuilding at a Different Location: If the insured decides to rebuild the dwelling at a new premises, the replacement cost payout under this endorsement is generally limited to what it would have cost to rebuild the dwelling on the original premises.
• Historical Variations: It's important to note that older versions of this form existed, and there have been instances where it was withdrawn in specific states (e.g., Arkansas and California around August 1, 1997, for a particular edition). However, it has been part of subsequent ISO homeowners program revisions.
• State-Specific Requirements: Some states may have specific requirements or versions. For instance, in Rhode Island, it has been noted that Coverage A must be at least 100% of the Estimated Replacement Cost for this endorsement.

Key Information for Agents and Underwriters

• Accurate Replacement Cost Valuation: It is crucial for agents to work with insureds to ensure the Coverage A limit accurately reflects the full replacement cost of the dwelling according to the insurer's guidelines. Underwriters must be confident in these valuations. This endorsement's effectiveness hinges on this initial valuation.
• Mitigating Underinsurance: The HO 04 11 is a valuable tool to help protect clients from being underinsured for Coverages A, B, C, and D, offering peace of mind against unforeseen cost increases.
• Client Education: Agents should clearly explain the insured's responsibilities under this endorsement, particularly the requirement to maintain insurance to value and to report significant improvements or alterations.
• Pricing: The premium for this endorsement is typically calculated as a factor or percentage of the base premium, reflecting the additional coverage provided.
• Compliance: Agents and underwriters should ensure that the use of this endorsement complies with all applicable ISO rules and carrier guidelines. Artificially suppressing replacement cost estimates to lower premiums while adding this endorsement can lead to violations of policy terms and inadequate coverage at the time of loss.
• Comparison with Similar Endorsements: This form differs from endorsements like the HO 04 20 (Specified Additional Amount Of Insurance For Coverage A – Dwelling), which typically provides a fixed percentage increase for Coverage A only and may not affect Coverages B, C, and D in the same way.