The Farm Program of the American Association of Insurance Services

The Farm Program of the American Association of Insurance Services

Reviewed December 10, 2009

Dwelling and Personal Property Coverage—Primary Property Coverages

Summary: American Association of Insurance Services (AAIS) provides a flexible farm program for owner-occupants, owner-nonoccupants, certain incorporated farming ventures, and tenant farmers. The policy may be issued covering household/personal exposures as well as farm exposures, or farm exposures only. Additional endorsements are required to provide personal and farm liability coverage.For owner-occupied farms, one of three forms covers the insured’s dwelling and personal property: FO-1, FO-2, or FO-3. Tenant-occupied farms are covered by form FO-4. This treatment examines in depth the FO-3 (analogous to homeowners, form 3).Forms FO-1 and 4 provide for loss settlement on an actual cash value (ACV) basis. If the insured chooses form FO-2 or 3, he or she may also choose replacement cost or ACV loss settlement. AAIS provides endorsements for this purpose.Form FO-1 covers the insured’s dwelling and contents for the following perils: fire, lightning, and extended coverage, along with sinkhole collapse, volcanic action, vandalism, and theft. Forms 2 and 4 cover fire, lightning, and extended coverage, along with the broad form perils and theft. Form 3 covers the residence for “risks of direct physical loss” with certain exclusions, and contents for the same perils as form 2.Covered properties include the residence, related private structures, personal property, additional living costs, and loss of rent. This treatment discusses the first four of the “personal” coverages of the AAIS program.

Topics covered:IntroductionInsuring agreement and definitionsPrincipal property coveragesCoverage A—ResidenceCoverage B—Related Private StructuresCoverage C—Personal PropertyCoverage D—Additional Living Costs and Loss of Rent

Introduction

The AAIS farm program specifies that the main residence must be used exclusively for residential purposes and contain no more than four families. The rules allow certain incidental business occupancies and up to two roomers or boarders per family.

The residence may be occupied by any of the following: