2.1 Tennessee Homeowners Insurance
Key Takeaways
- Tennessee uses standard ISO homeowners forms: HO-2 (broad), HO-3 (special, most common), HO-4 (renters), HO-5 (comprehensive), HO-6 (condo), HO-8 (modified/older homes on ACV)
- HO-3 insures the dwelling on open perils and personal property on named perils; HO-5 extends open perils to contents too
- Tennessee non-renewal requires 60 days written notice to both the named insured and agent (Tenn. Code Ann. 56-7-1303); a new policy may be canceled for any reason within its first 60 days
- Coverage B is typically 10% of Coverage A, Coverage C is 50-70% of Coverage A, and Coverage D (loss of use) is often 20-30% of Coverage A
- Flood is excluded from every homeowners form and must be written through the NFIP or a private flood policy
Homeowners Policy Forms
Tennessee adopts ISO Homeowners (HO) program forms. The Tennessee Property & Casualty exam (administered by Pearson VUE for the Tennessee Department of Commerce and Insurance, or TDCI) tests both the generic form content and Tennessee's statutory overlay, so candidates must distinguish the forms precisely.
| Form | Name | Dwelling (Cov A) | Personal Property (Cov C) | Typical Insured |
|---|---|---|---|---|
| HO-2 | Broad Form | Named perils | Named perils | Owner-occupant, modest risk |
| HO-3 | Special Form | Open perils | Named perils | Standard owner-occupant |
| HO-4 | Contents/Renters | None | Named perils | Tenant |
| HO-5 | Comprehensive | Open perils | Open perils | High-value owner-occupant |
| HO-6 | Unit-Owners (Condo) | $5,000+ (walls-in) | Named perils | Condo owner |
| HO-8 | Modified | Named perils (ACV) | Named perils | Older home, market value < replacement cost |
Under an open perils (formerly "all-risk") form, a loss is covered unless specifically excluded, and the burden falls on the insurer to prove an exclusion applies. Under a named perils form the insured must prove the loss arose from a listed peril. That burden-of-proof distinction is a frequent exam item.
Exam Tip: HO-3 is by far the most common Tennessee homeowners policy. The HO-8 exists for older homes whose replacement cost far exceeds market value; it settles dwelling losses on actual cash value (ACV), not replacement cost, to prevent over-insurance.
The Six Coverage Parts
Every HO policy is built from the same lettered structure. Section I is property; Section II is liability.
- Coverage A - Dwelling: the residence and attached structures (attached garage, deck).
- Coverage B - Other Structures: detached garages, sheds, fences; default limit 10% of Coverage A.
- Coverage C - Personal Property: contents, usually 50-70% of Coverage A (higher percentages available by endorsement). Off-premises property is covered up to 10% of Coverage C.
- Coverage D - Loss of Use: additional living expense and fair rental value when the home is uninhabitable; commonly 20-30% of Coverage A.
- Coverage E - Personal Liability: bodily injury and property damage the insured is legally liable for; base limit often $100,000.
- Coverage F - Medical Payments to Others: no-fault medical for guests, typically $1,000-$5,000 per person.
Worked example: A Nashville home is insured under HO-3 with Coverage A = $300,000. Default limits become Coverage B = $30,000 (10%), Coverage C = $150,000 (50%), and Coverage D = $90,000 (30%). A tornado destroys a detached pole barn worth $42,000. The insurer pays only the $30,000 Coverage B limit, illustrating why producers raise Coverage B when outbuildings are valuable.
Tennessee Catastrophe Exposure and Exclusions
Tennessee sits in "Dixie Alley" and averages roughly 25-30 tornadoes per year, peaking March through May. Wind and hail are covered perils under HO-2/HO-3/HO-5, but insurers commonly attach a separate, higher wind/hail deductible (often 1%-2% of Coverage A) rather than the flat all-other-perils deductible.
| Peril | HO-3 Status | How It Is Covered |
|---|---|---|
| Tornado / windstorm | Covered | May carry percentage wind deductible |
| Hail | Covered | Roof losses may settle ACV by endorsement |
| Flood / surface water | Excluded | NFIP or private flood policy |
| Earth movement / earthquake | Excluded | New Madrid endorsement (West TN exposure) |
| Mold | Limited / excluded | Sub-limit, often $10,000 |
Exam Tip: The New Madrid Seismic Zone crosses West Tennessee (Memphis), so earthquake is a real exam topic even though it is excluded from the base form. Both flood and earthquake require separate coverage.
Tennessee Cancellation and Non-Renewal Rules
Tennessee's consumer protections come from Title 56 of the Tennessee Code. Producers must memorize the timelines because they appear on nearly every state-law section of the exam.
Cancellation (mid-term termination)
Under Tenn. Code Ann. 56-7-1303, an insurer may cancel a new homeowners or fire policy for any reason during its first 60 days. Once a policy has been in force more than 60 days (or has been renewed), the insurer may cancel only for statutorily enumerated reasons:
| Reason for Cancellation | Permitted After 60 Days? |
|---|---|
| Non-payment of premium | Yes |
| Material misrepresentation / fraud on the application | Yes |
| Substantial change in the risk insured | Yes |
| Determination that continuing violates the insurance code | Yes |
| Mere dislike of the insured / arbitrary reason | No |
For non-payment, Tennessee insurers typically provide a short notice (commonly 10 days); for other permitted cancellations a longer notice applies. Cancellation must be in writing and mailed to the named insured, and unearned premium is refunded pro-rata.
Non-Renewal
Non-renewal is the insurer's choice not to continue at the end of the term. Tennessee requires 60 days' advance written notice of non-renewal, OR a premium increase / coverage reduction of more than a set threshold. If the 60-day notice is not given, the policy must be extended until 60 days after notice is finally given. The notice must go to both the named insured and the producing agent.
Exam Tip: A classic trap pairs "30 days" with non-renewal. The correct Tennessee non-renewal figure is 60 days, and notice goes to the agent as well as the insured.
Weather-Claim Protection
Tennessee restricts insurers from non-renewing solely because of one weather-related claim within a defined period. A single tornado or hail claim cannot, by itself, justify non-renewal, though a pattern of claims plus deterioration of the risk can.
The Tennessee FAIR Plan
The Tennessee FAIR Plan (Fair Access to Insurance Requirements) is the residual market for property owners rejected by the voluntary market. It is a last-resort mechanism, not a discount program.
| Feature | Detail |
|---|---|
| Coverage | Basic fire and allied lines; windstorm, vandalism, riot |
| Eligibility | Must show declination by the voluntary market |
| Placement | Through a licensed Tennessee producer |
| Pricing | Rates run higher than the standard market |
| Inspection | Property inspection frequently required |
| Limits | Subject to FAIR Plan maximums |
Typical FAIR Plan users include older homes that fail standard underwriting, properties with adverse loss history, and dwellings in high-exposure locations. Producers should treat the FAIR Plan as the fallback after documenting voluntary-market declinations.
Exam Tip: The FAIR Plan covers the building and basic perils; it does not automatically include liability or replacement-cost contents. Settlement is often ACV, and coverage is narrower than an HO-3.
Under an HO-3 Special Form, who bears the burden of proving the cause of a personal-property loss, and on what basis is the dwelling covered?
How many days advance written notice of non-renewal must a Tennessee homeowners insurer give, and to whom?
A homeowner is rejected by every standard carrier because the dwelling is 90 years old with a history of claims. What Tennessee mechanism provides basic coverage of last resort?