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The Impact Of Home Insurance Regulations For North Dakota Residences

2010-02-20

Home insurance in the state of North Dakota is regulated by the North Dakota Insurance Department. This department ensures that coverage providers are operating within the laws set out by both the state and federal governments, but the department does not set homeowners insurance premiums. Instead, the department monitors the current rates being charged and requires companies to submit their proposals for new rates for review. Rates cannot go up without the permission of the department.

The state of North Dakota does not require homeowners to purchase or hold home insurance coverage under the law, but most banks or other lending institutions will. Home insurance in this state is divided into two broad categories - named peril policies and open peril policies. A "peril" as applied to home insurance is simply something bad that could happen to the home, such as a theft or fire. Named peril policies will come with a list of perils that the insurance company will cover, such a vandalism or damage from a windstorm. Any perils not mentioned in the policy will not be covered. Many insurance companies will offer "basic" and "broad" versions of these named peril policies, with the broad version simply covering more perils such as volcanic eruptions or falling objects. Open peril policies, in contrast, work in exactly the opposite way. Every peril will be covered except those specifically listed in the policy. If the only exclusion in the policy is for earthquake damage, then any other type of damage will be covered in the event of a home insurance claim. Open peril policies are provide far more coverage than named peril ones, and are correspondingly more expensive.

Home insurance policies in North Dakota are classified by type. An HO-1 policy is the most basic type of coverage and is a named basic peril policy with a very short list. An HO-2 policy is a broad peril policy. The most popular type of home insurance coverage in the state is the HO-3 policy, which can be either a broad peril policy with limited restrictions or a comprehensive or open peril policy. This provides the most coverage for a home. North Dakota also offers what is known as HO-8 insurance for homes which are older and do not meet regular insurance guidelines. It will only cover basic perils, but can be a good investment if no other options are available.

North Dakota has also recently passed legislation prohibiting insurers from using a customer's credit score or lack of credit to be the sole basis on which they are denied coverage. This, coupled with reasonable oversight from the Department of Insurance, leads to moderate rates for home insurance in North Dakota.