Property Insurance Coverages in Rhode Island

Rhode Island property insurance follows national standards while addressing state-specific risks and regulatory requirements.

Homeowners Insurance Policies

Standard Homeowners Forms

Rhode Island uses ISO (Insurance Services Office) homeowners forms with state-specific endorsements:

Common Homeowners Policies:

HO-3 Most Common: The HO-3 (Special Form) is the most common homeowners policy in Rhode Island for owner-occupied single-family homes.

HO-3 Coverage Structure

Section I - Property Coverages:

Coverage A - Dwelling:

• Covers the house structure itself
• Insured on replacement cost basis (rebuild to same kind and quality)
• Includes attached structures (garage, deck)
• Rhode Island coastal homes: Higher replacement costs due to construction standards

Coverage B - Other Structures:

• Covers detached structures on property
• Typically 10% of Coverage A
• Examples: Detached garage, shed, fence, gazebo
• Separate deductible may apply

Coverage C - Personal Property:

• Covers belongings and contents
• Typically 50% of Coverage A (can be increased)
• Named peril coverage (fire, theft, windstorm, etc.)
• Special limits apply to certain items (jewelry, cash, firearms)

Coverage D - Loss of Use:

• Pays additional living expenses if home is uninhabitable
• Typically 20% of Coverage A
• Covers hotel, meals, temporary housing during repairs
• Fair rental value if property is rented out

Section II - Liability Coverages:

Coverage E - Personal Liability:

• Covers bodily injury and property damage liability
• Typically $100,000 to $500,000 limits
• Pays damages for which insured is legally liable
• Covers legal defense costs

Coverage F - Medical Payments to Others:

• Pays medical expenses for injuries to others on insured's property
• Typically $1,000 to $5,000
• No-fault coverage (insured not required to be negligent)
• Covers reasonable medical expenses

Exam Tip: Standard HO-3 Coverage A (Dwelling) is typically the basis for other coverages: Coverage B is 10% of A, Coverage C is 50% of A, and Coverage D is 20% of A.

Rhode Island Property Insurance Endorsements

Wind/Hurricane Exclusions and Buy-Backs

Wind Exclusion Endorsement: Many coastal Rhode Island policies include a wind exclusion endorsement:

How It Works:

• Primary HO-3 Policy: Covers all perils EXCEPT wind and hail
• Separate Wind Policy: Purchase RIJRA or separate wind coverage
• Combined Protection: Two policies provide complete coverage

Buy-Back Endorsement: If wind is excluded, property owners may purchase a wind buy-back endorsement:

• Adds wind coverage back to primary policy
• Typically has higher deductible for wind claims (2-5%)
• More expensive premium
• Alternative to RIJRA for properties that qualify

Water Backup Coverage

Sewer and Drain Backup: Standard homeowners policies exclude damage from water or sewage backing up through drains.

Endorsement Coverage: The Water Backup Endorsement adds coverage for:

• Sewer backup into home
• Sump pump failure
• Drain blockages
• Flooding from backup

Limits:

• Typically $5,000 to $25,000 sublimit
• Separate from dwelling coverage
• Recommended for all properties, especially older homes

Equipment Breakdown (Mechanical Breakdown)

Coverage: Adds coverage for sudden mechanical or electrical breakdown of:

• HVAC systems
• Water heaters
• Appliances
• Electrical systems

Why Important: Standard homeowners policies exclude mechanical breakdown and wear and tear. This endorsement fills that gap.

Ordinance or Law Coverage

Critical for Historic Properties: Ordinance or Law Coverage pays for additional costs when rebuilding must comply with current building codes:

Three Coverage Parts:

Rhode Island Application:

• Historic districts: Must comply with preservation ordinances
• Coastal properties: Must meet elevated building standards
• Older homes: Significant code upgrades required

Exam Tip: Ordinance or Law Coverage is essential for historic properties in Rhode Island (Newport, Providence) where rebuilding must comply with both building codes and historic preservation requirements.

Historic Property Insurance

Newport and Providence Historic Properties

Rhode Island has extensive historic properties requiring specialized insurance:

Historic Property Concentrations:

• Newport: Gilded Age mansions, historic waterfront
• Providence: Federal Hill, College Hill, historic neighborhoods
• Bristol: Colonial-era homes
• Statewide: National Register properties

Historic Property Insurance Challenges

Replacement Cost Issues:

Standard replacement cost coverage may be inadequate for historic properties:

Challenges:

1. Historic Materials: Unavailable or extremely expensive (slate roofs, ornamental plaster)
2. Specialized Craftsmen: Period-appropriate restoration requires skilled artisans
3. Building Restrictions: Historic preservation rules increase costs
4. Undervaluation: Standard estimators don't account for historic restoration costs

Solutions:

1. Agreed Value Coverage:

• Insurer and owner agree on value before loss
• No depreciation or coinsurance penalty
• Guaranteed payout up to agreed amount
• Requires professional appraisal

2. Stated Amount Coverage:

• Owner states value, insurer insures up to that amount
• May still apply coinsurance if underinsured
• Less protection than agreed value

3. Guaranteed Replacement Cost:

• No coverage limit - pays whatever it costs to rebuild
• Most expensive option
• Rare for historic properties due to cost uncertainty

Historic Property Appraisals

Professional Appraisals Required: Historic properties should have specialized appraisals:

Appraisal Should Include:

• Current replacement cost with period materials
• Labor costs for specialized craftsmen
• Compliance costs for historic preservation rules
• Building code upgrade costs (ordinance or law)
• Architectural and engineering fees

Update Frequency:

• Every 3-5 years: Real estate values and construction costs change
• After renovations: Increase coverage when improvements made
• Market changes: Significant inflation or deflation

Historic Property Maintenance and Risk Management

Preventive Maintenance: Historic properties require meticulous maintenance to remain insurable:

Insurer Requirements:

• Regular roof inspections and maintenance
• Electrical and plumbing updates (where allowed)
• Fire detection and suppression systems
• Security systems
• Documentation of condition

Risk Reduction:

• Professional inspections annually
• Address deferred maintenance promptly
• Upgrade systems (wiring, plumbing) while maintaining historic character
• Install monitored smoke and fire alarms

Condominium Insurance

HO-6 Condominium Unit Owner Policy

Condominium Ownership: Condominium owners need HO-6 policies to cover their unit and personal property.

What HO-6 Covers:

1. Unit Improvements (Coverage A):

• Walls-in coverage for unit improvements
• Fixtures, cabinets, flooring installed by owner
• Anything not covered by condo association master policy

2. Personal Property (Coverage C):

• Furniture, clothing, electronics
• Typically 50% of Coverage A
• Named peril coverage (can upgrade to open peril)

3. Loss Assessment Coverage:

• Pays for assessments by condo association
• Covers owner's share of association deductible or uninsured loss
• Typically $1,000 minimum (can increase to $50,000+)

4. Loss of Use (Coverage D):

• Additional living expenses if unit is uninhabitable
• Fair rental value if unit is rented

5. Liability (Coverage E & F):

• Personal liability and medical payments
• Covers injuries in unit or caused by unit owner

Condo Association Master Policy

Two Types of Master Policies:

Bare Walls-In:

• Association covers building structure and common areas only
• Unit owners responsible for everything inside their unit
• Unit owners need higher HO-6 limits

All-In (Single Entity):

• Association covers structure, common areas, and original unit fixtures
• Unit owners responsible for personal property and improvements only
• Unit owners need lower HO-6 limits

Exam Tip: Condo unit owners must know whether their association has a "bare walls-in" or "all-in" master policy to purchase appropriate HO-6 coverage. Loss assessment coverage is critical for all condo owners.

Dwelling Fire Policies

DP-1, DP-2, and DP-3

Rhode Island uses dwelling fire policies for non-owner-occupied properties:

When Used:

• Rental properties (landlord coverage)
• Vacation homes
• Properties under renovation
• Properties that don't qualify for homeowners insurance

Dwelling Policy Forms

DP-3 Most Common: Most rental properties in Rhode Island use DP-3 for broadest dwelling coverage.

Rental Property Considerations

Landlord Needs:

1. Dwelling Coverage: Replace building if destroyed
2. Fair Rental Value: Lost rent if property uninhabitable
3. Liability Coverage: Landlord liability (separate policy or endorsement)
4. Loss of Rents: Covers rent loss during repairs

Tenant Needs: Tenants should purchase HO-4 (renters insurance) to cover personal property and liability.

Cancellation and Non-Renewal Laws

Rhode Island Consumer Protections

Rhode Island has strict laws governing policy cancellation and non-renewal.

Policy Cancellation

30-Day Notice Required: Insurers must provide 30 days' written notice before canceling a property insurance policy (except for non-payment or fraud).

Grounds for Cancellation:

Allowed Cancellation Reasons:

1. Non-payment of premium: 10-day notice allowed
2. Fraud or material misrepresentation: 10-day notice
3. Substantial change in risk: 30-day notice
4. Loss of reinsurance: 30-day notice (with Superintendent approval)

Prohibited Cancellation Reasons:

• Single claim filing (cannot cancel after first claim)
• Property location (cannot cancel because of neighborhood)
• Age of insured
• Credit score (alone, without other factors)

Non-Renewal

60-Day Notice Required: Insurers must provide 60 days' written notice before non-renewing a property insurance policy.

Non-Renewal Restrictions:

When Non-Renewal is Prohibited:

• Property insurance policy in force for 3+ years (cannot non-renew except for specific reasons)
• After single claim (unless fraud)
• Solely because of credit score

Allowed Non-Renewal Reasons:

• Substantial change in risk
• Withdrawal from Rhode Island market (with Superintendent approval)
• Loss of reinsurance
• Non-cooperation with inspections or underwriting requirements

Exam Tip: Rhode Island requires 30 days' notice for cancellation and 60 days' notice for non-renewal of property insurance policies. Non-payment and fraud allow shorter notice (10 days).

Rhode Island Property Insurance Market

Market Dynamics

Coastal Property Market:

• Limited carriers: Fewer insurers write coastal properties
• Higher premiums: Coastal properties pay significantly more
• Stricter underwriting: More inspections, higher standards
• RIJRA reliance: Many coastal properties use RIJRA

Inland Property Market:

• Competitive pricing: More carrier options
• Standard coverage: Easier to obtain coverage
• Lower deductibles: Wind coverage with standard deductibles

Producer Responsibilities

Agent/Broker Duties:

1. Assess client needs: Determine appropriate coverage levels
2. Explain exclusions: Especially wind, flood, and maintenance exclusions
3. Recommend endorsements: Ordinance or law, equipment breakdown, water backup
4. Review annually: Ensure coverage keeps pace with property values
5. Educate on mitigation: Recommend loss prevention measures

E&O Risk Management:

• Document coverage discussions in client file
• Provide written summaries of coverage options
• Recommend flood insurance for coastal properties
• Explain RIJRA if voluntary market unavailable
• Send annual coverage review letters

Exam Tip: Producers have a duty to educate clients about coverage gaps (especially flood and wind exclusions) and recommend appropriate endorsements. Failure to properly advise clients can result in E&O claims.