Minnesota Homeowners Insurance

Minnesota's harsh winter climate and extreme temperature fluctuations create distinctive property insurance considerations compared to other states.

Minnesota Climate and Geography Risks

Cold Climate Characteristics

Extreme Winter Temperatures:

• Winter temperatures regularly drop below 0°F (reaching -40°F or colder)
• Average January temperatures: -15°F to 10°F
• Extended periods of sub-zero weather common
• Wind chill factors increase cold exposure
• Spring and fall freeze-thaw cycles

Precipitation Patterns:

• Heavy snowfall: 30-80+ inches annually (more in northern regions)
• Spring and summer thunderstorms
• Occasional tornadoes (particularly southern Minnesota)
• Spring flooding from snowmelt and rain
• Hail storms in summer months

Seasonal Variations:

• Dramatic temperature swings (100°F+ range annually)
• Summer temperatures can exceed 100°F
• Freeze-thaw cycles damage structures
• Ice formation in gutters and on roofs
• Seasonal storm patterns

Exam Tip: Minnesota's major weather perils are frozen pipes, ice dams, roof collapse from snow, and spring flooding—NOT hurricanes or earthquakes. This differs from coastal states and affects coverage needs.

Regional Risk Variations

Standard Homeowners Policies in Minnesota

HO-3 Special Form (Most Common)

The HO-3 policy is the most popular homeowners policy in Minnesota:

Coverage Structure:

Coverage A - Dwelling: OPEN PERILS (special form)

• Covers dwelling structure
• All perils except those specifically excluded
• Includes attached structures (garage, deck, porch)

Coverage B - Other Structures: OPEN PERILS

• Detached structures (shed, detached garage, fence)
• Typically 10% of Coverage A limit
• Same open perils as Coverage A

Coverage C - Personal Property: NAMED PERILS (broad form)

• Personal belongings and contents
• Covers 16 named perils only
• Typically 50-70% of Coverage A limit
• Can upgrade to open perils with HO-5 or endorsement

Coverage D - Loss of Use: ACTUAL LOSS SUSTAINED

• Additional living expenses if home uninhabitable
• Typically 20-30% of Coverage A limit
• Covers hotel, meals, temporary housing

Coverage E - Personal Liability: PER OCCURRENCE

• Standard limit: $100,000 or $300,000
• Higher limits available
• No deductible applies

Coverage F - Medical Payments: PER PERSON

• Standard: $1,000 to $5,000 per person
• No fault payment for injuries on property
• No deductible applies

Exam Tip: Know that HO-3 provides OPEN PERILS (all risks) on dwelling/other structures but NAMED PERILS on personal property. This is the most commonly tested homeowners policy format.

Named Perils Covered (Coverage C)

Personal property under HO-3 is covered for these 16 named perils:

1. Fire or lightning
2. Windstorm or hail
3. Explosion
4. Riot or civil commotion
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism or malicious mischief
9. Theft
10. Volcanic eruption
11. Falling objects
12. Weight of ice, snow, or sleet
13. Accidental discharge of water or steam
14. Sudden and accidental tearing apart
15. Freezing of plumbing, heating, AC
16. Sudden and accidental damage from artificially generated electrical current

Standard Exclusions

Excluded Perils (not covered even on open perils):

Earth Movement:

• Earthquake
• Landslide, mudslide
• Sinkhole, subsidence, settling
• Minnesota Issue: Low earthquake risk but settlement from freeze-thaw

Flood:

• Surface water, overflow of body of water
• Water backing up through sewers/drains
• Minnesota Issue: Spring flooding from snowmelt and rain
• Solution: Separate flood insurance through NFIP or private insurers

Maintenance-Related:

• Wear and tear, deterioration
• Mechanical breakdown
• Rust, corrosion, mold, rot
• Minnesota Issue: Freeze-thaw cycles accelerate deterioration

Water Damage:

• Sewer backup (unless endorsed)
• Sump pump overflow (unless endorsed)
• Water below surface (seepage)

Power Failure:

• Off-premises power failure (unless on-premises peril caused it)

War and Nuclear Hazard:

• War, civil war, nuclear reaction

Intentional Loss:

• Intentional acts by insured

Exam Tip: Flood and earthquake are ALWAYS excluded from standard homeowners policies. These require separate policies. Water backup from sewers/drains requires an endorsement.

Minnesota-Specific Property Considerations

Cold Climate Impact on Coverage

Frozen Pipes:

• Pipes freeze when temperatures drop below 20°F for extended periods
• Burst pipes cause extensive water damage
• Coverage: Covered under "freezing of plumbing" peril IF:
  • Heat maintained in building, OR
  • Water supply shut off and pipes drained
• Exclusion: Pipes in unheated areas unless precautions taken

Ice Dams:

• Snow melts on warm roof, refreezes at cold eaves
• Ice blocks proper drainage
• Water backs up under shingles causing interior damage
• Coverage: Generally covered under open perils on dwelling
• Prevention: Adequate attic insulation and ventilation

Roof Collapse from Snow Load:

• Heavy, wet snow accumulation
• Especially dangerous on flat or low-slope roofs
• Ice accumulation adds weight
• Coverage: Covered under "weight of ice, snow, or sleet" peril
• Building codes: Minnesota codes specify snow load requirements

Freeze-Thaw Damage:

• Repeated freezing and thawing damages foundations, driveways, sidewalks
• Cracks allow water infiltration
• Coverage: Generally excluded as maintenance/deterioration
• Foundation damage: May be covered if sudden and accidental

Heating System Failure:

• Critical in Minnesota winters
• Failure can lead to frozen pipes, hypothermia risk
• Coverage: Mechanical breakdown generally excluded
• Solution: Equipment breakdown endorsement

Exam Tip: Frozen pipe damage is covered ONLY if the insured maintained heat or properly drained the system. If the insured left the house unheated without draining pipes, coverage may be denied.

Spring Flooding Risk

Snowmelt Flooding:

• Rapid spring thaw releases large volumes of water
• Frozen ground prevents absorption
• Overwhelms drainage systems
• Coverage: NOT covered under standard homeowners—requires flood insurance

River Flooding:

• Minnesota and Mississippi Rivers flood regularly
• Red River Valley flooding (northern Minnesota)
• 100-year and 500-year flood plains
• Coverage: Requires NFIP or private flood insurance

Basement Seepage:

• Spring water table rises
• Water seeps through foundation
• Coverage: Generally excluded (water below surface)
• Solution: Endorsements for specific situations

Minnesota FAIR Plan

Purpose and Availability

The Minnesota FAIR Plan (Fair Access to Insurance Requirements) provides property insurance for properties unable to obtain coverage in the standard market.

Established:

• Created under Minnesota Statutes Section 65A.35
• Insurer of last resort
• All property insurers in Minnesota must participate

Eligibility:

• Property owners who have been:
  • Denied coverage by standard market
  • Offered coverage only with exclusions
  • Unable to obtain adequate limits
• Must provide evidence of rejection from standard market

Coverage Provided:

• Dwelling coverage: Coverage A
• Other structures: Coverage B
• Personal property: Coverage C
• Fire department service charge
• NO liability coverage (Coverage E and F not included)

Limits:

• Maximum dwelling coverage: $500,000
• Lower limits available
• Higher limits may require participation by applicant

Perils Covered:

• Fire and lightning
• Windstorm and hail
• Explosion
• Riot and civil commotion
• Aircraft and vehicles
• Smoke
• Vandalism and malicious mischief
• More limited than standard HO-3

Premium:

• Higher than standard market
• Rates approved by Commissioner
• Reflects higher risk

Exam Tip: The Minnesota FAIR Plan provides property coverage ONLY—no liability coverage. It's for insureds who cannot obtain standard market coverage. Maximum dwelling coverage is $500,000.

Policy Provisions and Endorsements

Important Minnesota Endorsements

Equipment Breakdown (Mechanical Breakdown):

• Covers sudden mechanical failure of home systems
• HVAC systems, water heaters, appliances
• Critical in Minnesota due to heating system importance
• Excludes normal wear and tear
• Covers sudden, accidental breakdown

Water Backup and Sump Pump:

• Covers water backup from sewers or drains
• Sump pump overflow coverage
• Excluded under standard policy
• Critical in Minnesota: Spring flooding, heavy rain, snowmelt
• Typical limits: $5,000-$25,000

Service Line Coverage:

• Covers underground utility lines (water, sewer, electric, gas)
• Breaks in lines from home to street connection
• Freeze-thaw cycles can damage lines
• Covers excavation and repair costs

Increased Replacement Cost:

• Extends replacement cost beyond policy limit (120-150%)
• Important given construction cost increases
• Protects against underinsurance
• May be called "extended replacement cost"

Scheduled Personal Property (Personal Articles Floater):

• Covers high-value items (jewelry, art, collectibles, furs)
• Broader coverage than base policy
• Specific items listed with agreed values
• No deductible applies

Identity Theft Coverage:

• Reimburses costs related to identity theft
• Covers legal fees, credit monitoring, lost wages
• Typically $15,000-$25,000 coverage

Ordinance or Law Coverage:

• Covers increased costs due to building code changes
• When rebuilding after loss, must meet current codes
• Can be 25-50% of Coverage A limit
• Important for older homes

Exam Tip: Water backup endorsement is particularly valuable in Minnesota due to spring flooding, snowmelt, and sewer backup risks. Standard policies exclude this coverage—it must be added by endorsement.

Minnesota-Specific Policy Requirements

Policy Cancellation and Non-Renewal:

Minnesota law restricts when insurers can cancel or non-renew homeowners policies:

Prohibited Mid-Term Cancellation:

• Cannot cancel mid-term except for:
  • Non-payment of premium
  • Fraud or material misrepresentation on application
  • Substantial increase in hazard
  • Loss of reinsurance (with Commissioner approval)
  • Physical changes making property uninsurable

Non-Renewal Restrictions:

• Cannot non-renew based solely on:
  • Age of insured
  • Geographic location alone
  • One claim in policy period (with exceptions for catastrophic losses)

Notice Requirements:

• Cancellation: 30 days' written notice
  • 10 days for non-payment
• Non-Renewal: 60 days' written notice before expiration
• Notice must:
  • State specific reason
  • Be mailed to named insured
  • Inform of right to request Commissioner review

Right to Appeal:

• Insured can request Commissioner review
• Commissioner can order insurer to continue coverage
• Insurer must provide justification

Exam Tip: Minnesota requires 60 days' notice for policy non-renewal at expiration. Mid-term cancellation is much more restricted and requires 30 days' notice (10 days for non-payment).

Dwelling Fire Policies (DP Forms)

For properties not qualifying for homeowners policies:

DP-3 Special Form

Best Dwelling Policy:

• Open perils on dwelling and other structures
• Named perils on personal property (if covered)
• Often used for rental properties
• No liability coverage (can be added)

When Used:

• Rental/investment properties
• Vacant properties (with limitations)
• Properties not owner-occupied
• Properties that don't meet HO underwriting standards

DP-2 Broad Form

Mid-Level Coverage:

• Named perils on dwelling (broader than DP-1)
• Similar perils as HO-3 personal property
• More affordable than DP-3
• Limited market use (DP-3 preferred when qualifying)

DP-1 Basic Form

Minimum Coverage:

• Named perils only (fire, lightning, internal explosion)
• Very limited coverage
• Least expensive
• Rarely used (most choose DP-3)

Exam Tip: Dwelling fire policies do NOT include liability coverage automatically. This must be added by endorsement. Homeowners policies (HO forms) include liability as standard Coverage E and F.

Minnesota Flood Insurance

Flood Risk

Despite not being coastal, Minnesota has significant flood risk:

Spring Flooding:

• Snowmelt flooding widespread
• Rain on snow creates severe flooding
• Frozen ground prevents water absorption
• Rivers overflow banks regularly

Major Rivers:

• Mississippi River
• Minnesota River
• Red River of the North
• St. Croix River

FEMA Flood Maps:

• Special Flood Hazard Areas (SFHA) identified
• Zones A and V require flood insurance if federally-backed mortgage
• Zone X (moderate-low risk) voluntary but recommended
• Many Minnesota properties near rivers in flood zones

National Flood Insurance Program (NFIP)

Coverage:

• Building coverage: up to $250,000
• Contents coverage: up to $100,000
• 30-day waiting period (except at purchase/refinance)
• Replacement cost on dwelling, ACV on contents

Required When:

• Property in SFHA (Special Flood Hazard Area)
• Federal or federally-backed mortgage
• Lender requirement

Private Flood Insurance:

• Alternative to NFIP
• May offer higher limits or broader coverage
• May be less expensive
• Must meet federal minimum requirements if for mortgage

Exam Tip: Standard homeowners and dwelling policies NEVER cover flood. Flood insurance requires separate NFIP or private flood policy. This is true even for snowmelt flooding.

Commercial Property Considerations

Commercial Building Coverage

Common Commercial Properties in Minnesota:

• Retail stores and shopping centers
• Office buildings
• Warehouses and distribution centers
• Manufacturing facilities
• Agricultural buildings

Coverage Needs:

• Higher limits than residential
• Business interruption coverage
• Equipment breakdown (critical for heating systems)
• Enhanced property coverage

Business Owners Policy (BOP)

Combines:

• Property coverage
• Liability coverage
• Business interruption
• Package policy for small businesses

Eligibility:

• Small to medium businesses
• Low-hazard occupancies
• Retail, office, light manufacturing

Advantages:

• Cost savings vs. separate policies
• Simplified underwriting
• Comprehensive coverage

Minnesota Property Insurance Market

Market Characteristics

Major Writers:

• State Farm
• American Family
• Allstate
• Farmers
• Progressive
• USAA (military members)

Market Conditions:

• Competitive market
• Generally affordable rates
• Cold climate claims affect pricing
• Storm frequency impacts rates

Rating Factors:

• Location (urban vs. rural, proximity to fire department)
• Construction type (frame, masonry, brick)
• Age of home
• Roof type and age
• Claims history
• Credit-based insurance score
• Protective devices (fire alarms, sprinklers, security)

Exam Tip: Minnesota uses credit-based insurance scores in homeowners underwriting and rating. This is legal and commonly tested on state exams.