Binder Restrictions... UR-2 Binder Rules... UR-3 Builder s Risk Theft... RP-5 Business Property... F-4

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1 HOMEOWNERS POLICY PROGRAM Table of Contents Page Accidental Discharge... F-3 ACV Roofing Coverage... F-6 Additional Living Costs and Loss of Rent... F-5 Amount of Insurance... UR-3 Annual Premium Schedule... R-9 Automatic Adjustment of Limits... F-1 Binder Restrictions... UR-2 Binder Rules... UR-3 Builder s Risk Theft... RP-5 Business Property... F-4 Cancellation or Reductions in Limits of Liability of Coverage... GR-4 Computers... RP-5 Construction Definitions... UR-7 Contractual Premium Credits Form... F-7 Coverage Increases... UR-5 Deductibles... GR-4 and UR-9 Description of Coverage... GR-2 Dwelling Roof Replacement... RP-2 Dwellings Under Construction... UR-5, F-2 Earthquake Coverage... RP-2, F-2 Eligibility... GR-2 Electronic Devices... F-4 Exceptions to General Rules... GR-4 Expanded Debris Removal Coverage... F-1 Expanded Replacement Cost... F-6 Farm Type Structures and Farm Personal Property... RP-3 Fire Department Service Charge... F-5 Form 2 Frame Homeowners Rates... R-3 Brick Homeowners Rates... R-4 Form 3 Homeowners Rates... R-5 Brick Homeowners Rates... R-6 Forms Available... UR-3 General Underwriting Information (Inland Marine)... IM-2 Golf Carts... F-5 Guidelines to Acceptability... UR-4 Guns... F-4

2 Home Security Brick Rates... R-2 Home Security Frame Rates... R-1 Inflation Guard Form-3 and Preferred Homeowners... UR-8 Inland Marine Manuel General Underwriting Information... IM-2 Inland Marine Manuel Index... IM-3 Inland Marine Quick Reference Rating Sheet... IM-1 Limits of Liability and Coverage Relationships... GR-1 Mandatory Coverage... GR-3 Manual Premium Revision... GR-4 Money and Securities... F-3 Mortgage Information and Requirements... UR-5 Optional Coverage... GR-4 Other Structures... RP-1 Other Structures Increased Limits Endorsement ML UR-6 Outdoor Radio and Television Equipment... UR-6 Permitted Incidental Occupancies... UR-6 Permitted Incidental Occupancies Residence Premises... RP-1 Personal Property... RP-1 Coverage C Replacement Cost Coverage... UR-8 Coverage C Scheduled... RP-1, RP-2 Increased Limit... F-3 Reduced Limit... F-3 Photograph Requirements... UR-4 Policy Period... GR-4 Preferred Homeowners Policy Program... UR-9 Preferred Homeowners Rates... R-7 Preferred Homeowners Brick... R-8 Premium Credits for Protective Devices... RP-4 Private Structures... F-2 Increased Limit... F-2 With Incidental Occupancies... F-2 Care Provided for Others... F-2 Away Form Premises Coverage B extension... F-2 Prohibited Risk List... UR-1 Property Coverage Amendatory Endorsement Form FMHO UR-6 Protected Property Plan... UR-7 Protection Class Information... UR-5 Protective Devices... F-1 Reduced Limit... Refrigerated Food Spoilage... F-5 Replacement Value-Personal Property... F-1 Service Line Coverage...RP-5 Single Building Definition... UR-8

3 Subscription Fire Districts... UR-6 Territory Definition... UR-6 Underwriting and Risk Selection... UR-1 Unscheduled Jewelry, Watches, and Furs... F-3 Waiver of Premium... RP-2 Water Damage Sewers, Drains and Sumps... RP-2, F-5 Whole Dollar Premium Rule... GENERAL RULES... GR UNERWRITING RULES...UR RATES... R OTHER RATING PROVISIONS... RP AMERICAN ASSOCIATION OF INSURANCE SERVICES FORMS... F INLAND MARINE... IM

4 GENERAL RULES The Homeowners Policy Program provides property and liability coverage, using the forms and endorsements specified in this manual. This manual contains the rules and classifications governing the writing of the Homeowners Policy. The rules, rates, forms and endorsements of the Company for each coverage shall govern in all cases not specifically provided for in this manual. All applications will be subject to credit reports and clue reports. FORMS AVAILABILITY 1. LIMITS OF LIABILITY AND COVERAGE RELATIONSHIPS a. The Limits of Liability required under the Homeowners Policy are as follows: Property Section Property Damage Coverage Form 2 or Form 3 Form 2 w/ml-15 (ACV) Form 4 A Dwelling Minimum Limit $80,000 $80,000 B Other Structures 10% of A 10% of A -- C Personal Property 50% of A 50% of A $10,000 D Loss of Use 20% of A 20% of A (Home Security) 20 % of C Liability Section All Forms Coverage L Personal Property $100,000 Each Occurrence Coverage M Medical Payments to Others $ 1,000 Each Person $ 25,000 Each Accidents b. ALL FORMS The limit of liability for Coverage C or D of the Property Section and L or M of the Liability Section may be increased. c. FORM 2 or FORM 3 Under Coverage B of the Property Section, an additional amount of insurance may be written on a specific structure. d. FORM 2 ML-15 (Home Security) Under Coverage C of the Property Section, it is permissible to reduce the limit of liability to an amount not less than 40% of the limit on the dwelling. GR-1 01/01/2014 FHIC

5 GENERAL RULES 2. DESCRIPTION OF COVERAGES a. Property Coverage-Property Damage The following is a general description of the coverage provided by the individual Homeowners Policy Forms. The policy shall be consulted for exact contract conditions. (Form 2 HO or Home Security) FORM 2 FORM 3 FORM 4 ML-15 Fire or Lightning Yes Yes Yes Windstorm or Hail, Explosion, Riot or civil commotion, Aircraft, Vehicles or Smoke Yes Yes Yes Vandalism or malicious mischief Yes Yes Yes Theft Yes Yes Yes Breakage of glass or safety glazing material Yes Yes Yes Volcanic eruption Yes Yes Yes Falling objects, Weight of ice, snow or sleet, Accidental discharge of water or steam, Sudden and accidental tearing apart of a heating system or appliance, Freezing, Sudden and accidental damage from electrical current. Additional risks with certain exceptions (Special Coverage). Yes Yes Yes No Yes Except Cov. C No b. Liability Coverage All Forms Coverage L Personal Liability Coverage M Medical Payments to Others (1) Personal Liability Covers payment on behalf of any insured of all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage arising out of an insured s premises or personal activities. (2) Medical Payments to Others Covers medical expenses incurred by persons, other than the insured, who sustain bodily injury caused by an accident arising out of an insured s premises or personal activities. 3. ELIGIBILITY a. FORM 2 and FORM 3 A Homeowners Policy may be issued: (1) To the owner-occupant(s) of a dwelling which is used exclusively for private residential purposes and contains no more than 2 families and with not more than 2 boarders or roomers per family; or GR-2 01/01/2014 FHIC

6 GENERAL RULES To qualify for a Form 2 or Form 3, the Coverage A amount must be at least 80% of the dwellings replacement cost. The ML-15 (Home Security) amends the loss settlement provisions from replacement cost to Actual Cash Value. (2) Properties purchased on a contract for deed is eligible for Home Security providing all other requirements are met. Endorsement ML-41 Additional Insured; is added. The Home Security is ideally suited for older, well-maintained homes that otherwise would not qualify for homeowner s coverage. The Home Security policy is written to at least 80% of the replacement cost. Under Home Security, policy losses are paid on an actual cash value basis. Roof replacement can be added with approval of the home office. Contents replacement can also be added. (3) To the occupant of a dwelling under a life estate arrangement. The owner s interest in the building and premises liability may be covered using Endorsement ML-41 Additional Insured; or (4) To cover dwellings in course of construction provided the policy is issued only in the name of the intended owner-occupant(s) of the dwelling. (5) All Dwellings over 40 years of age MUST have an Over 40 Form completed. b. FORM 4 A Homeowners Policy may be issued only to: (1) The tenant(s) (non-owner) of a dwelling or an apartment situated in any building; or (2) The owner-occupant(s) of a dwelling or of a building containing an apartment not otherwise eligible for a Homeowners Policy under General Rule 3.a. above. Provided the residence premises occupied by the insured is used exclusively for residential purposes and is not occupied by more than one additional family or more than two boarders or roomers. c. When a 2 family dwelling is occupied by co-owners, each occupying distinct living quarters with separate entrances, a Homeowners Policy providing building coverage may be issued to only one of the co-owner occupants of the dwelling. The policy may be endorsed to cover the interest of the other co-owner(s) in the building and for premises liability. A separate Homeowners Policy FORM 4 may be issued to co-owner(s) occupying the other apartment in the dwelling. It is permissible to extend the Homeowners Policy, without additional premium charge, to cover the interest of a non-occupant joint owner in the building and for premises liability. Use Endorsement ML-41 Additional Insured 4. MANDATORY COVERAGES a. It is mandatory that insurance be written for all coverage provided under both the Property and Liability Sections of the Homeowners Policy. b. The Liability Section of the policy requires coverage for the following exposures. When such exposures exist, refer to the Rate Pages. All additional insured locations where the named insured or spouse maintains a residence other than business or farm properties; All residence employees of the named insured or spouse not covered or not required to be covered by workers compensation insurance; and GR-3 01/01/2014 FHIC

7 GENERAL RULES Permitted incidental occupancies by the insured on residential premises of the named insured are acceptable provided: 1) the premises are occupied principally for dwelling purposes; and 2) there is no other business conducted on the premises. Refer to the Rate Pages for policy writing instructions. There is a $30 base premium on all liability written. 5. DEDUCTIBLES Deductible options are shown in the Rate Pages. 6. OPTIONAL COVERAGES For optional Property and Liability Coverage, refer to the Premium Section of this manual. 7. POLCY PERIOD The Homeowners Policy may be written for a period of: One year and may be extended for successive policy periods by extension certificate based upon the premiums, forms and endorsements then in effect for the Company. 8. CANCELLATION OR REDUCTIONS IN LIMITS OF LIABILITY OR COVERAGES It shall not be permissible to cancel any of the mandatory coverage in the policy unless the entire policy is canceled and signature must be attained. If insurance is canceled or reduced at the request of either the insured or insurer, the earned premium shall be computed on a pro rata basis. 9. MANUAL PREMIUM REVISION A manual premium revision, meaning any revision of premium applicable to the Homeowners Program, shall be made in accordance with the following procedures: a. The effective date of such revision shall be as announced. b. The revision shall apply to any policy or endorsement in the manner outlined in the announcement of the revision. c. When an existing Homeowners Policy is endorsed to take advantage of a reduction in premium, the adjustment shall be made on a pro rata basis. d. Unless otherwise provided at the time the premium revision becomes effective, the premium revision does not affect in-force policy forms and endorsements until the policy is renewed. 10. EXCEPTIONS TO GENERAL RULES Forms 2, 3 and 4 are the only available forms. GR-4 01/01/2014 FHIC

8 UNDERWRITING RULES Farmers Home Insurance Company of Ray County 1. UNDERWRITING AND RISK SELECTION HOMEOWNERS POLICY PROGRAM The primary underwriting responsibility of an agent is to select risks. In this respect, your knowledge of applicants and community conditions can be invaluable. Your inspection of the property and complete reporting of the facts concerning it and the applicant are particularly important when binding this policy because of its broad multiple line coverage and package discount. Since this policy embodies risks of both the individual and his property, applications should be solicited only from persons of good moral and financial reputation. If the property is heavily mortgaged, additional emphasis must be placed on the applicant s financial solvency and personal integrity. DWELLINGS TO BE INSURED UNDER THE HOMEOWNERS POLICY MUST BE OCCUPIED BY THE OWNER AS HIS OR HER HOME, BE IN GOOD PHYSICAL CONDITION, WELL MAINTAINED AND SHOW PRIDE OF OWNERSHIP. 2. PROHIBITED RISK LIST Applications For The Following Are Not To Be Submitted: a. PERSONS (1) Alcoholics, drug or narcotic users and/or addicts. (2) Persons engaged in illicit business of any kind or whose morals are such as to lead to falsifying a claim or purposely destroying own property. (3) Persons who are mentally incapable of making sound judgments. (4) Persons whose habits or living conditions show a lack of responsibility for property or respect for the rights of others. (5) Persons with poor credit or financial reputation, such as a history of bad checks, or who habitually default on accounts. Credit and Clue reports will be obtained. (6) Persons who conduct any type of paid baby-sitting or paid childcare in their home for more than four children. Endorsements available up to Four Children (7) Applicant, spouse or any resident who has three or more losses of $1,000 or more in the last three years. Total losses not acceptable. (8) Insured & or spouse with bankruptcy in last 5 years. (Some exceptions medical ETC). Must be approved by Home Office. (9) Applicant, spouse or resident who has a trained guard dog or a Staffordshire Terrier (Pit bull, American Bull or Yankee Terrier), a Rottweiler, Doberman, a wolf hybrid (Tundra Shepherd), an Akita, a Chow or Presco Canario, any dog who has bitten someone or any animal with vicious tendencies. b. PROPERTY (1) Property, which has business occupancy other than as provided for under the rule for Permitted Incidental Occupancies. (2) Dwellings under construction must be approved by Home Office. UR-1

9 UNDERWRITING RULES (3) Dwellings, which have composition, roll roofing and/or shake shingles. Metal roofs must be a minimum thickness of 29 gage. (4) Vacant or unoccupied dwellings. (5) Homes constructed of logs. (6) Property located in a Subscription Fire District but which is not eligible for fire protection service. All risks must have a responding fire department. (7) Property, which is isolated or not accessible. (8) Property, which a fire department will not respond. Must be member of fire protection district. (9) Property that doesn't have year round accessibility. (10) Property for sale. (11) Property with more than two mortgages. (12) Property with Trampolines must have fenced yard or a safety enclosure. (13) Property with unfenced in ground or above ground pools or pools with diving board. Pools without a diving board must have at least a four foot high fence. (14) An E-2 replacement cost guide must accompany each application. (15) Two layers of shingles must be ACV (HG 322); three layers exclude roof. (16) Dwellings with primary heating Systems other than forced air and heat, pump must be approved by home office. (17) Will not accept Exterior Insulation Finish System siding. (EFIS) (18) No more than 30 days lapse in insurance. 3. BINDER RESTRICTIONS Do Not Bind The Following: a. When the applicant or a member of his/her household has had 3 or more previous losses of $1000 or more within the last 3 years under either a Homeowners or Fire Policy. b. Persons who have had a previous total fire loss. c. When the applicant or a member of his/her household has been arrested for a felony or convicted of any crime other than traffic violations. d. Applications for amounts of insurance in excess of limits authorized by the Company. e. Homes of unusual construction without first obtaining permission from Home Office. f. Swimming pools or trampolines on the property, which are not completely enclosed by a fence of at least four (4) feet. g. Persons with bankruptcy in the last 5 years. UR-2

10 UNDERWRITING RULES 4. BINDER RULES a. A binder may not be backdated. b. The property is to be inspected by the agent and the application completed in full before binding. Any application submitted which is missing key underwriting information including, but not limited to, all applicable supplemental forms, all required application information, required photographs, or applicant s social security number will be rejected. c. Mail bound applications to the Company within 24 hours of the effective hour of the binder. d. Unbound Applications The non-binder section of the application must be signed by the applicant to run reports. e. If there is any question concerning the acceptability of application; do not bind. 5. AAIS only FORMS AVAILABLE Form 2, Form 3 and Form 4 are the only forms available under this program. 6. AMOUNTS OF INSURANCE a. The Coverage A amount of insurance for Form 2, Form 2 with the ML-15 (ACV) and Form 3 should be 80% of current replacement cost. We will not consider providing coverage for Homeowners if the Coverage A requested amount of insurance is less than 80% of current replacement cost determined in accordance with appraisal methods prescribed by the Company. Preferred Homeowners must be written to 100% of replacement Cost. b. When the difference between replacement cost and current market value is greater than 25%, an application for fire and extended coverage may be submitted. c. MINIMUM POLICY AMOUNTS: The minimum dwelling amount of insurance for Preferred Homeowners $100,000, Form 2 and Form 3 is $80,000. Form 2 with the ML- 15 (usually Home Security) has a minimum coverage amount of $80,000. The minimum for Form 4 is $10,000. d. MAXIMUM LIMITS: Unless authority has been withdrawn or denied, the agent is authorized to bind property insurance for limits not to exceed those specified below except on classes of business prohibited by the Company or where restricted by other instructions. Maximum Limits Per Dwelling Coverage A Protection Class All Protection Classes $200,000 class 9 & 10 $250,000 class 8 or better * If desired coverage is above the limits, call the Home Office for authorization. UR-3

11 UNDERWRITING RULES 7. PHOTOGRAPH REQUIREMENTS Photographs of the dwelling showing the complete dwelling and all other structures insured under the Homeowners Policy are required for all policy forms including Form 4 written on personal property in 1-4 family dwelling units. Take at least one photograph of each building from a diagonal corner so two sides of the building will be shown. 8. GUIDELINES TO ACCEPTABILITY The following will help you determine what to look for in the Homeowners risk. All conditions must be met for the risk to qualify. Property that does not qualify for Homeowners may qualify for Standard Fire and Extended Coverage. a. Roof Covering The roof must be of: (New Business) Composition or asbestos shingles in good condition and not over 10 years old if composition. We will not provide roof replacement for over roofs over 10 years of age. b. Siding The siding must be: Masonry, brick, veneer, stone, concrete, concrete block, tile, frame, aluminum, vinyl or steel. c. Foundation The dwelling must have a continuous masonry foundation. Stone or block prohibited. d. Heating Unit The dwelling must have a permanently installed central heating system with thermostatic controls and the heating system must not be over 25 years of age. A wood, coal, oil, or kerosene space heater or stove is unacceptable. Wood stoves cannot be primary source of heat, but are acceptable as a secondary heat source, as long as they have an approved system. It must have a tile lined chimney built from the ground, or a UL-approved metal chimney that has been professionally installed. A Wood Stove Questionnaire must be completed. A $50 charge applies to wood burning stoves. e. Wiring The dwelling must have a minimum of one circuit per room with the exception of the kitchen. The kitchen must have a minimum of two circuits, plus heavyduty circuits as required for electric stoves, electric air conditioners and electric water heaters. Wiring must meet local building codes. Must have circuit breakers. Fuse boxes not acceptable. Dwelling must have a minimum of a 100 Amp. Breaker Box. Dwellings of 40 years of age must have a wiring upgrade within the last 20 years. f. Other Structures A photograph and complete underwriting information is required for each structure insured under the Homeowners Policy. Farm type and commercial use buildings are not eligible for coverage. Use form ML-48 for other structure. g. Age of Dwelling Age limit of dwelling forty years - Dwelling over forty years old may be written if they are EXCEPTIONALLY well maintained and if roof, wiring, heating and plumbing systems have been modernized and or meet today s electrical and building codes. Contact home office for authorization. An Over 40 Form must be completed. Do not confuse redecoration or room addition with updating of basic dwelling conditions. Risks will be periodically evaluated. e. Acreage A Homeowners Policy may be issued where the business of farming is conducted on the premises. Incidental Farming Personal Liability coverage may be provided by attachment of endorsement form ML-320 when farming on the residence premises is only incidental, farming is not the business of the insured, and the acreage does not exceed forty (40) acres. Over 40 acres must have Farm Liability. UR-4

12 UNDERWRITING RULES 9. DWELLINGS UNDER CONSTRUCTION a. A Homeowners Policy may be written on dwellings, other than shell type homes, under construction, if the dwelling is both: (1) Being built for the insured by an independent contractor; and (2) To be completed and occupied within 180 days. b. The amount of insurance must be not less than 100% of the projected replacement cost. 10. MODULAR HOMES Modular homes may be put on a Home Owners Form 2 or Home Security Form 2. They WILL NOT be accepted on a Form 3 or Preferred Homeowners. Modular homes over TWENTY years of age must be submitted to the home office for approval. 11. COVERAGE INCREASES In instances where there is a request to increase coverage, complete an application for change setting out the reasons for the increase. When there has been a material change in the dwelling, please submit new photographs. Increases of over $5,000 must have new cost estimator. 12. MORTGAGEE INFORMATION AND REQUIREMENTS During the past several years, the Company has been in close contact with mortgages regarding the issuance of property insurance policies. We have noted their special requirements and the types of endorsements they require prior to their acceptance of the policy. Listed below are several areas, which we would like to call to your attention so the application can be correctly completed. a. Insured s Name The mortgagee requires that the insured s name on the policy be exactly as shown on the deed. Many endorsements are issued to add the husband s middle initial and the wife s complete name. Most property is jointly owned by the husband and wife and both should be shown on the policy. b. Property Location The mortgagee requires a complete property location similar to that, which is also shown on the deed. Some mortgages require a legal description in addition to the number and street name or section, township and range. Zip codes should be included in the mailing address of the insured and mortgage. c. Mortgage s Name The mortgagee or servicing agency is very particular about how their name is shown on the policy. Many servicing agencies service policies for the mortgage. If at all possible, it would be well to check with the mortgage to determine the correct name and address of the mortgage and whether the policy is to be serviced by a servicing agency. d. Loan Numbers Most mortgagees require a loan number to be shown on the policy. e. Escrow Accounts Most mortgagees maintain an escrow account for insurance premiums and will pay the renewal premium on the policy. UR-5

13 f. Distribution of Policies UNDERWRITING RULES In most cases, the mortgagee requires the original policy. The original copy should be signed in ink and forwarded to the mortgage. The memorandum is to be signed and given to the Insured. 13. SUBSCRIPTION FIRE DISTRICTS Property located in a Subscription Fire District should not be considered for coverage unless the property owner subscribes to fire protection service. In addition to certifying as to current subscription, the applicant must agree to continuously maintain the subscription for fire protection service along with telephone service. 14. PROPERTY COVERAGE AMENDATORY ENDORSEMENT FORM FHIC 410 and FHIC 420. FHIC 410 restricts outbuildings. FHIC 420 restricts personal property. Use MHO-FMHO/FMHS-AS (Application Supplement), signed by the applicant/insured and the agent, is required on (1) all Form 2 and Form 3 policies written on farm property with or without existing farm buildings and (2) any other Form 2 or Form 3 policy written on nonfarm property where there are existing farm type or commercial use buildings on the premises. Form HO-410 restricts Other Structures coverage to a detached private garage and also excludes coverage for personal property used or intended for use in the business of farming. Altered FMO-FMHO/FMHS-AS (Application Supplement) forms will not be accepted. 15. OTHER STRUCTURES-INCREASED LIMITS ENDORSEMENT FORM ML-48 Endorsement form ML-48 may be used for writing a specific amount of coverage on a detached private garage or a small utility or storage building, except when form FMHO-30 is required. When form MHO-FMHO/FMHS-AS is required, form ML-48 may be used only to increase coverage on a detached private garage. 16. OUTDOOR RADIO AND TELEVISION EQUIPMENT a. Outdoor radio and television antennas, including disc antennas, are covered as personal property under the Homeowners Policy. The policy deductible applies and may not be waived. b. Outdoor radio and television towers are considered to be structures. They are not covered under the Homeowners Policy without an FHIC-420 form attached. When form FHIC-420 is attached, towers must be insured on a separate policy if coverage is desired. 17. PERMITTED INCIDENTAL OCCUPANCIES A Homeowners Policy may be endorsed to permit incidental office, professional, private school or studio occupancy provided: a. The premises are occupied principally for dwelling or, when also permitted, farming purposes; b. There is no other business, except farming, conducted on the premises; and c. There is no increase in the applicable fire rate for such occupancy. 18. TERRITORY DEFINITION Territory 1 Entire State UR-6

14 19. PROTECTION CLASS INFORMATION UNDERWRITING RULES The ISO Protection Class listings also apply to risks insured under Homeowners policies. (1) The Protection Class indicated applies in a municipality or classified area where a single class of fire protection is available throughout (e.g. 8, 7, 6, etc.). (2) In a classified area where two or more classifications are shown (e.g. 6/9), the classification is determined as follows: DISTANCE TO FIRE STATION (3) Subscription type fire department: Class 10 applies to properties which are located over 5 miles from the nearest recognized fire station of the listed fire department. (4) All other properties are Class PROTECTED PROPERTY PLAN A dwelling, which is located in a developed, or developing subdivision shall be afforded the same protection class as the responding Class 8 or better fire department provided the following conditions exist: A. The dwelling is located within 5 miles travel distance, on all weather and passable road, of an ISO recognized fire department that will respond. Note that the name of the responding fire department, protection class and fire department travel distance must be indicated on the application, and; B. The dwelling is located within 1,000 feet of a year-round water source that can supply a minimum of 1,500 gallons of water. A year-round water source may be any of the following: 1. Lake, pond, pool, reservoir (all must be an accessible water source in all seasons) or 2. A tanker/pumper truck supplied by the responding fire department. Dwellings located in a developed residential area, a part of which is within five miles of the primary responding fire department, will be considered to be within the five-mile limit. 21. CONSTRUCTION DEFINITIONS a) Frame exterior wall of wood or other combustible construction, including wood-iron clad, stucco on wood or plaster on combustible supports. Aluminum or plastic siding over frame. CLASS a. 5 road miles or less First Protection Class b. Over 5 road miles. 10 (e.g. 6/9 use Class 6) b) Masonry Veneer exterior walls of combustible construction veneered with brick or stone. UR-7

15 UNDERWRITING RULES c) Masonry exterior walls constructed of masonry materials such as adobe, brick, concrete, gypsum block, hollow concrete block, stone, tile or similar materials and floors and roof of combustible construction (Disregarding floors resting directly on the ground). NOTE: Mixed (Masonry/Frame) a combination of both frame and masonry construction shall be classed and coded as frame when the exterior walls of frame construction (including gables) exceed 33% of the total exterior wall area; otherwise class and code as masonry. 22. SINGLE BUILDING DEFINITION All buildings or sections of buildings, which communicate through unprotected openings, shall be considered as a single building. Buildings, which are separated by space, shall be considered separate buildings. Buildings or sections of buildings, which are separated by an 8-inch masonry party wall which pierces or rises to the underside of the roof and which pierces or extends to the innerside of the exterior wall, shall be considered separate buildings. Communication between buildings with independent walls or through masonry party walls described above shall be protected by at least a Class A Fire Door installed in a masonry wall section. 23. PERSONAL PROPERTY (COVERAGE C) REPLACEMENT COST COVERAGE To extend the limit of liability for Coverage C to include Replacement Cost Coverage, the premium shall be developed by applying the following factors to the BASE PREMIUM including any premium adjustment for Coverage C limits. All Forms 15% of base premium Form Replacement Cost Coverage also applies to articles or classes of property separately described and specifically insured in this policy. Minimum premium on HO4 is $ Use Endorsement ML INFLATION GUARD ALL FORMS EXCEPT HO-4 a. The policy may be endorsed to provide automatic annual increases of the Property Section Limits of Liability. Apply a factor to the BASE PREMIUM as follows: Amount of Annual Increase Factor 1% % % % % % 1.04 Indicate selected amount of annual increase on endorsement. b. The additional premium for policy changes occurring during the current policy term shall be computed pro rata of the annual premium. Use Endorsement ML-184. UR-8

16 UNDERWRITING RULES 25. DEDUCTIBLES All Homeowners Policies are subject to a deductible applicable to loss from all Property Section perils covered under the policy on an occurrence basis. Enter the selected deductible amount in the Deductible Declaration of the policy. When a separate deductible amount applies to a certain peril such as windstorm or theft, also enter that deductible amount and peril in the Deductible Declaration of the policy. A minimum of $1,000 Wind & Hail deductible applies to all: Home Security, Homeowner 2, Homeowner 3, and Preferred Homeowner s policies. a. Base Deductible $500 b. Fixed Dollar Amount Deductibles All Forms The premium for applying the factors shall develop this provision listed below to the BASE PREMIUM. **$100 deductible NOT available for Homeowners Policies Deductible Amount Coverage A Limit ,500 5,000 10, FORM 4 Coverage C Limit ,000 2,500 5,000 10,000 $10,000 to 125,000* * Refer to Company for credits for higher limits of liability. 26. PAYMENT OPTIONS Three payment options are offered: Annual No Fee *EFT fee in parentheses Semi-Annually $16/year ($8/yr) Quarterly $32/year ($16/yr) *Payments received after the cancellation date, are subject to reinstatement, and once reinstated, a $50 reissue fee will be applied. PREFERRED HOMEOWNERS POLICY PROGRAM The Preferred Farm Mutual Homeowners Policy is designed for the better than average home evidencing pride of ownership. 1. COVERAGE The Preferred Farm Mutual Homeowners Policy is based on Form 3 and includes the following additional provisions. a. Guaranteed Replacement Cost Protection on Coverage A-Dwelling. (Up to 120% of RC) b. Replacement Cost Coverage on Coverage C-Personal Property. c. $1,000 Arson Reward. d. $1,000 Damage to Property of Others Coverage. e. Liability Section: Personal Injury Coverage. UR-9

17 UNDERWRITING RULES 2. ELIGIBILITY A dwelling is eligible for the Preferred Farm Mutual Homeowners Policy if: a. It was built within the last 15 years, and is not a log or earth home; b. It is a primary, one family, owner-occupied dwelling (seasonal and secondary dwellings are not eligible); c. It is a Fire Protection Class 8 or better risk; or a risk qualifying for Class 8 or better under the Class 10 Exception Rule; d. The amount of the dwelling insurance written is 100% of replacement cost; e. There are smoke or fire detectors located on each floor; f. There are no wood burning stoves or free-standing fireplaces on the premises (permanently installed fireplaces must be vented to a tile-lined masonry chimney built from the ground or to a U. L. listed metalbestos pipe); g. There is no more than one mortgage; h. There has been no more than one Homeowners loss in the past three years, EXCLUDING A TOTAL FIRE LOSS. (Applicants with previous total fire losses will not be considered.) All other basic Homeowners eligibility requirements also apply. Eligible existing business will be rewritten by the agent for the Preferred Farm Mutual Homeowners. 3. LIMITS OF LIABILITY Coverage A-Residence - $100,000 minimum Coverage B-Related Private Structures 10% of Coverage A Coverage C-Personal Property 60% of Coverage A Coverage D-Additional Living Costs 30% of Coverage A Coverage L-Personal Liability - $100,000 minimum Coverage M-Medical Payments - $1,000 per person; $25,000 each accident 4. RATING Secure the applicable $500 Deductible Form 3 premium from page R-14. Apply applicable Construction, Protection Device and optional higher deductible credits, followed by optional property and liability coverage endorsements. Credits and charges are shown in the Farm Mutual Homeowners manual. 5. POLICY ISSUANCE Attach ML-145 Preferred Homeowners Endorsement. UR-10