THE INSURANCE SOLUTION FOR YOUR

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THE INSURANCE SOLUTION FOR YOUR

HOME…

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HOMEOWNER

OPTIONS

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STATE AUTO INSURANCE COMPANIES

HOMEOWNER OPTIONS PROGRAM

HO 0003 AND HO 0005

Coverages Included

Optional

Coverages

ESTATES OPTION

HO 0005 ComprehensiveForm Miscellaneous Endorsements

FI 280TX Estates Endorsement

HO 4297 Identity Fraud Expense Coverage

DEFENDER OPTION

HO 0003 Special Form HO 0005 Comprehensive Form FI 270TX Defender Endorsement Miscellaneous Endorsements

…SECURGARD OPTION

HO 0003 Special Form HO 0005 Comprehensive Form

HO 4297 Identity Fraud Expense Coverage HO 2302 Special Loss Settlement

HO 0530 Functional Replacement Cost Loss Settlement

FI 2304 Rep. Cost Pers. Property

HO 0420 Special Add’l Ins. Cov. A

FI 264TX Securgard Plus Endt.

Miscellaneous Endorsements

HO 0004

ESTATES OPTION

HO 0004 Contents Broad Form Miscellaneous Endorsements

FI 282TX Estates Renters Form

DEFENDER OPTION

HO 0004 Contents Broad Form Miscellaneous Endorsements FI 272TX Defender Renters Endt. HO 0561 Spec. Pers. Prop. Cov. HO 4297 Identity Fraud Expense Coverage

SECURGARD OPTION

HO 0004 Contents Broad Form HO 0561 Spec. Pers. Prop. Cov. HO 4297 Identity Fraud Expense Coverage FI 2304 Rep. Cost Pers. Property

Miscellaneous Endorsements

HO 0006

ESTATES OPTION

HO 0006 Unit Owners Form Miscellaneous Endorsements

FI 281TX Estates Condominium

DEFENDER OPTION

HO 0006 Unit Owners Form HO 1790 Unit Owners Spec. Cov. FI 271TX Defender Condo Cov. Miscellaneous Endorsements

SECURGARD OPTION

HO 0006 Unit Owners Form HO 1791 Unit Owners Cov. A HO 4297 Identity Fraud Expense Coverage HO 1790 Unit Owners Spec. Cov.

FI 2304 Pers. Prop. Rep. Cost

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EXPLANATION OF THE OPTIONS CONCEPT

State Auto provides homeowner coverage with three separate options: SECURGARD, DEFENDERand ESTATES.

What makes these options unique is that each one builds on the others with SECURGARD being the base option,

DEFENDER being the second option and ESTATES being the most comprehensive option of the three.

Why is this an advantage for the insured? This new product enables the insured and agent to “select” the specific coverages they desire. If they don’t want all of the coverages that are available in the ESTATES Option, they can

purchase the DEFENDER Option and purchase other coverage “options” that are available in stand-alone

endorsements. This same theory holds true for the SECURGARD Option. If the insured doesn’t desire all of the

coverage enhancements available in DEFENDER or ESTATES, they can simply purchase the SECURGARD Option and build it up with any optional endorsements they desire.

Insured’s qualify for any one of the options they desire simply based on the general underwriting guidelines and additional requirements for some coverages. See underwriting guidelines for complete details.

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STATE AUTO’S

OPTIONS PROGRAM

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SECURGARD OPTIONS

The SECURGARD Option is our base option for the HO 0003, HO 0004 and HO 0006 contracts. From this base you can build a package of endorsements to suit your client’s needs. Before you can determine which

endorsements to include, it is important to know specifically what each option contains. This section outlines owner’s forms, tenant forms and condominium unit owners forms.

1. SECURGARD OPTION HO 0003 SPECIAL FORM COVERAGE – INCLUDED

HO 0003 Special Form is included in the base SECURGARD Option for owner’s forms. This form provides open perils coverage on dwellings and other structures and named perils on contents (personal property).

COVERAGE OPTIONS

Comprehensive Form-Optional

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HO 0005

This form provides open perils coverage on buildings and contents (personal property).

Special Additional Amount of Insurance For Coverage A

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HO 0420

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Optional

This optional endorsement extends Coverage A protection included in the policy to provide replacement cost on the dwelling, when a total loss occurs, up to an additional 25% or 50% of the Coverage A limit in effect. In order for this endorsement to be applicable, the insured must:

A. Insure the dwelling to 100% of the replacement cost, as determined by:

1. A State Auto Home Replacement Cost Estimator completed and based on the accuracy of information

furnished by the insured, plus a photograph of the dwelling; or,

2. An inspection of the insured dwelling and other building structures.

B. Accept the Inflation Protection increase in the policy, agree to each annual adjustment in the dwelling protection

coverage limits of liability and pay the premium charged.

C. Notify us within 90 days of the start of any additions or other physical changes which increase the value of the

dwelling on the residence premises by 5% or more, and pay the resulting additional premium.

Replacement Cost Personal Property

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FI 2304

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Optional

This optional endorsement extends the Personal Property Coverage provided under the policy to a Replacement Cost basis for an additional premium.

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1. SECURGARD OPTION HO 0003 SPECIAL FORM COVERAGE – INCLUDED (Continued)

Securgard Plus Option Coverage Endorsement – FI 264TX (SECURGARD Option HO 0003

or HO 0005 only)

The SECURGARD Option HO 0003 or HO 0005 may be endorsed to provide a number of optional coverages by using the Securgard Plus Endorsement FI 264TX. Coverages that are conveniently packaged together in this endorsement include:

 Personal Injury Liability

 Replacement Cost-Personal Property

 Coverage C is increased to 65% of Coverage A

 $250 on Money

 $2,000 on securities

 $2,000 on watercraft including trailers

 $2,000 on trailers not used with watercraft

 $2,000 per article for jewelry, watches, and furs; $3,000 per occurrence

 $3,000 per occurrence for loss to silverware

 $10,000 for loss by theft, of firearms and related equipment

 $2,500 for business property away from the premises which is “computer equipment”/Originally $500

 Service Vehicle Coverage broadened for Section I and Section II

 Additional Living Expense/Fair Rental Value Option has been broadened

 Debris Removal has been broadened

 Trees, Shrubs and Other Plants coverage has been broadened to $750

 Fire Department Service Charge - $1,000

 Credit Card, Electronic Fund Transfer Card - $1,000.

 Loss Assessment Coverage-Section I or Section II - $5,000

 Freezer Contents-$1,000 with special $50 deductible

 Lock Replacement-$250 per loss, $500 per term

 Rented Golf Cart-physical damage - $5,000

 Incidental Low Power Recreational Motor Vehicle Coverage up to 15 miles per hour

 Deductible Waiver-Losses of $50,000 or greater, excluding earthquake, wind/hail or water back-up

 Arson, Fraud and Theft Rewards Coverage-up to $1,000

 Golf Cart Liability to and from golf course

 Outboard Motor Liability-up to 75 total horsepower

 Waterbed Liability

Special Loss Settlement

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HO 2302

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Optional for SECURGARD only

The standard Homeowners Policy provides loss settlement on a replacement cost basis if the Coverage A limit of liability represents at least 80% of replacement value. This percentage amount may be modified to 20%, 30%, 40%, 50%, 60% or 70% of the replacement value and still provide replacement cost loss settlement provision by using the HO 2302 endorsement. We will not pay more than the coverage A limit in effect on any one loss.

Functional Replacement Cost Loss Settlement – HO 0530 – Optional for SECURGARD only

The standard Homeowners Policy provides loss settlement on a replacement cost basis if the Coverage A limit of liability represents at least 80% of full

replacement value. This optional endorsement changes the loss settlement provisions from a replacement cost basis to a functional replacement cost basis if, at the time of loss, the limit of insurance on the damaged building is at least 80% of the functional replacement cost of the building immediately before the loss.

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1. SECURGARD OPTION HO 0003 SPECIAL FORM COVERAGE – INCLUDED (Continued)

Miscellaneous Endorsements

See the Optional Coverages section in the Homeowner Manual for many more options to further customize each policy to the insured’s individual needs.

2. SECURGARD OPTION HO 0004 CONTENTS BROAD FORM COVERAGE – INCLUDED

HO 0004 Contents Broad Form is included in the base SECURGARD Option for tenant renters forms. This form provides named perils coverage for the insured’s contents.

Special Personal Property Coverage Form

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HO 0561

This form extends open perils coverage to contents in the HO 0004 form.

Replacement Cost Personal Property Coverage

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FI 2304

3. SECURGARD OPTION HO 0006 UNIT OWNERS FORM COVERAGE – INCLUDED

HO 0006 Unit Owners Form is included in the base SECURGARD Option for condominium unit owners. This form provides named perils coverage for the insured’s building and contents.

Unit Owners Coverage A-Special Coverage

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HO 1791

This form provides open perils coverage for those items covered under Coverage A.

Unit Owners Coverage C-Special Coverage

–

HO 1790

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3. SECURGARD OPTION HO 0006 UNIT OWNERS FORM COVERAGE – INCLUDED

(Continued)

Replacement Cost Personal Property Coverage

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FI 2304

The SECURGARD Option is the base option that you start with when building your client’s homeowner coverage. There are many other optional coverages you can buy to further enhance this product. If you are looking for convenient package endorsements, the following pages reflect the DEFENDER and ESTATES

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The DDEEFFEENNDDEERROOppttiioonn is available with the HO 0003, HO 0004 and HO 0006 contracts. It includes a pre-packaged endorsement with pre-selected coverages. You can build on this package of coverages by adding additional endorsements to suit your client’s needs. This section outlines owner’s forms, tenant forms and condominium unit owner’s forms.

1. DEFENDER OPTION HO 0003 SPECIAL FORM COVERAGE – INCLUDED

HO 0003 Special Form is included in the base DEFENDER Option for owner’s forms. This form provides open perils coverage on dwellings and other structures and named perils coverage on contents.

DEFENDER OPTION ENDORSEMENT – FI 270TX (HO 0003 or HO

0005 only)

This form is a specially created package of coverages designed to be a convenient option for your home- owning customers. Included in this package of coverages are the following:

 Replacement Cost-Personal Property

 Coverage C limit is increased to 70% of Coverage A.

 Specified Additional Amount of Insurance-Coverage A-25%

 $250 on Money

 $2,000 on securities

 $2,000 per article for jewelry, watches, and furs; $3,000 per occurrence

 $10,000 for loss by theft of firearms and related equipment

 Service Vehicle Coverage broadened for Section I and Section II

 Additional Living Expense/Fair Rental Value Option has been broadened

 Debris Removal has been broadened

 Trees, Shrubs and Other Plants coverage has been broadened to $750

 Fire Department Service Charge $1,000

 Credit Card, Electronic Fund Transfer Card - $1,000.

 Freezer Contents - $1,000 with special $50 deductible

 Lock Replacement-$250 per loss, $500 per term

 Deductible Waiver-Losses of $50,000 or greater, excluding earthquake, wind/hail or water back-up

 Arson, Fraud and Theft Rewards Coverage-up to $1,000

 Outboard Motor Liability-up to 75 total horsepower

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1. DEFENDER OPTION HO 0003 SPECIAL FORM COVERAGE - INCLUDED (Continued)

Comprehensive Form

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HO 0005

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Optional

This form provides open perils coverage on buildings and contents (personal property) and can be purchased separately with the HO 0003 contract.

2. DEFENDER OPTION HO 0004 CONTENTS BROAD FORM COVERAGE – INCLUDED

HO 0004 Contents Broad Form is included in the base DEFENDER Option for tenant renter’s forms. This form provides named perils coverage for the insured’s contents.

DEFENDER OPTION RENTERS ENDORSEMENT – FI 272TX

This form is a specially created package of coverages designed to be a convenient option for your tenant homeowner customers. Included in this package of coverages are the following:

 Replacement Cost Coverage-Personal Property

 $250 on Money

 $2,000 on Securities

 $2,000 per article for jewelry, watches and furs; $3,000 per occurrence

 $10,000 for loss by theft of firearms and related equipment

 Service Vehicle Coverage broadened for Section I and II

 Additional Living Expense/Fair Rental Value has been broadened

 Debris removal has been broadened

 Trees, Shrubs and Plants has been broadened to $750

 Fire Department Service Charge-$1,000

 Credit Card, Transfer Card - $1,000

 Loss Assessment Coverage-Section I or Section II $5,000

 Lock Replacement-$250 per loss $500 per policy term

 Deductible Waiver-Losses of $50,000 or greater excluding earthquake, wind/hail or water back-up

 Arson, Fraud or Theft Rewards Coverage-up to $1,000

 Outboard Motor Liability up to 75 horsepower

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(Continued)

Special Personal Property Coverage Form

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HO 0561 (HO 0004 Only)

This form extends open perils coverage to contents in the HO 0004 form.

3. DEFENDER OPTION HO 0006 UNIT OWNERS FORM COVERAGE – INCLUDED

HO 0006 Unit Owners Form is included in the base DEFENDER Option for condominium unit owners. This form provides named perils coverage for the insured’s building and contents.

DEFENDER OPTION CONDOMINIUM ENDORSEMENT – FI 271TX

This form is a specially created package of coverages designed to be a convenient option for your condominium-owning customers. Included in this package of coverages are the following:

 Unit Owners Coverage A-Special Coverage

 $250 on Money

 $10,000 for loss by theft, of firearms and related equipment

 Trees, Shrubs and Plants has been broadened to $750

 Fire Department Service Charge - $1,000

 Loss Assessment Coverage-Section I or Section II $5,000

 Lock Replacement-$250 per loss $500 per term

 Incidental Low Power Recreational Motor Vehicle Coverage up to 15 mile per hour

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3. DEFENDER OPTION HO 0006 UNIT OWNERS FORM COVERAGE – INCLUDED

(Continued)

Unit Owners Coverage C-Special Coverage

–

HO 1790

This form provides open perils coverage for those items under Coverage C.

The DEFENDER Option is the second option available when building your client’s homeowner coverage. There are many other optional coverages you can buy to further enhance this product. If you are looking for a more comprehensive convenient package of endorsements, the following pages reflect the ESTATES

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ESTATES OPTIONS

The EEssttaatteessOOppttiioon is our third option for the HO 0005, HO 0004 and HO 0006 contracts (HO 0003 is not available n

with this option). It includes a pre-packaged endorsement which provides the broadest protection available from State Auto in one form. You can further build on this package by adding additional endorsements from our Optional Coverage Section to suit your client’s needs. This is broken out for you by owner’s forms, tenant forms and

condominium unit owners forms.

1. ESTATES OPTION HO 0005 COMPREHENSIVE FORM COVERAGE – INCLUDED

HO 0005 Comprehensive Form is included in the base Estates Option for owner’s forms. This form provides open perils coverage on buildings and contents (personal property) and is a required form. You cannot purchase the HO 0003 form where the Estates Endorsement is a part of the policy.

ESTATES OPTION ENDORSEMENT – FI 280TX

This form is a specially created package of coverages designed to be a convenient option for your home- owning customers. Included in this package of coverages are the following:

 Coverage B limit is increased to 20% of Coverage A

 Coverage C limit is increased to 75% of Coverage A

 $1,000 on Money

 $10,000 for loss by theft, misplacing or losing of firearms and related equipment

 $10,000 on property on the “residence premises” used primarily for “business purposes”

 $2,000 for business property away from the premises-$10,000 for computer equipment

 $2,000 for electronic apparatus while in or upon a motor vehicle not used in business

 $2,000 for electronic apparatus not in or upon a motor vehicle used for business purposes

 Vault Coverage-up to $25,000 coverage for securities, jewelry and silverware

 Loss of Use Coverage-no dollar limit for a maximum of 24 months

 Debris removal-unlimited expense on certain property

 Debris removal broadened-eliminates requirement that fallen trees damage property

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1. ESTATES OPTION HO 0005 COMPREHENSIVE FORM COVERAGE – INCLUDED

(Continued)

 Credit Card, Transfer Card $10,000

 Ordinance or Law Coverage increased to 25% of the Coverage A limit

 $5,000 for damage caused by Birds, Vermin or Rodents included if no infestation or nesting evident

 Lock Replacement-$500 per loss, $1,000 per term

 Physical Damage ACV for Owned Golf Carts

 Land Restoration Coverage-up to $5,000 for required excavation, replacement or stabilization

 $100,000 Volunteer Wrongful Acts Coverage

Although our Estates Option Endorsement is very comprehensive, refer to the Optional Coverages section in the Homeowner Manual for many more options to further customize each policy to the insured’s individual needs.

2. ESTATES OPTION HO 0004 CONTENTS BROAD FORM COVERAGE – INCLUDED

HO 0004 Contents Broad Form is included in the base EEssttaatteessOOppttiioonn for tenant renters forms. This form provides named perils coverage for the insured’s contents.

ESTATES OPTION RENTERS FORM – FI 282TX

This form is a specially created package of coverages designed to be a convenient option for your tenant homeowner customers. Included in this package of coverages are the following:

 $1000 on Money

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2. ESTATES OPTION HO 0004 CONTENTS BROAD FORM COVERAGE – INCLUDED

(Continued)

 Renter’s Special Coverage-Open Peril Coverage on Personal Property

 Trees, Shrubs and Plants has been broadened to $1,000

 $5,000 Damage by Birds, Vermin or Rodents included if no infestation or nesting evident

 Freezer Contents-$1,000 with special $50 deductible

 $100,000 Volunteer Wrongful Acts Coverage

3. ESTATES OPTION HO 0006 UNIT OWNERS FORM COVERAGE – INCLUDED

HO 0006 Unit Owners Form is included in the base EEssttaatteessOOppttiioon for condominium unit owners. This form n

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3. ESTATES OPTION HO 0006 UNIT OWNERS FORM COVERAGE – INCLUDED

(Continued)

ESTATES OPTION CONDOMINIUM ENDORSEMENT – FI 281TX

This form is a specially created package of coverages designed to be a convenient option for your condominium-owning customers. Included in this package of coverages are the following:

 Unit Owners Coverage A-Special Coverage-Open Perils Buildings

 Unit Owners Special Coverage-Open Peril Coverage on Personal Property

 $1,000 on Money

 Trees, Shrubs and Plants has been broadened to $1,000

 $5,000 Damage by Birds, Vermin or Rodents included if no infestation or nesting evident

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3. ESTATES OPTION HO 0006 UNIT OWNERS FORM COVERAGE – INCLUDED

(CONTINUED)

The EEssttaatteessOOppttiioonn is the third and most comprehensive option that you have available when building your client’s homeowner coverage. There are many other optional coverages you can buy to further enhance this product.

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UNDERWRITING

GUIDELINES

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New Business Underwriting Guidelines

Eligibility

Guidelines

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Available Forms HO0005, HO0004, HO0006 HO0003, HO0005, HO0004,

HO0006

HO0003, HO0005, HO0004, HO0006 Minimum Coverage Coverage A Coverage B Coverage C HO0003 HO0005 HO0004 HO0006 Coverage D HO-5 HO-3 HO-4 HO-6 Coverage E Coverage F 100% of Replacement 20% of Coverage A N/A 75% of Coverage A $10,000 $10,000 Unlimited/for 24 months N/A Unlimited/for 24 months Unlimited/for 24 months $100,000 $1,000 100% of Replacement 10% of Coverage A 70% of Coverage A 70% of Coverage A $10,000 $10,000 30% of Coverage A 30% of Coverage A 30% Coverage C 50% Coverage C $100,000 $1,000 YOUR OPTION 10% of Coverage A 50% of Coverage A 50% of Coverage A $10,000 $10,000 30% of Coverage A 30% of Coverage A 30% Coverage C 50% Coverage C $100,000 $1,000 Secondary Residence

Eligible with supporting primary residence

Coverage E and F are extended from primary residence Occupancy Must be owner-occupied dwelling and residential only Insurance to

Value

100% 100% 80%

Unless HO 2302, FI 248 or HO 0420 applies

Loss History One previous loss is permitted in the last three years. Must be reported with details on the application. (See General Underwriting Philosophy – Previous Losses)

Note: TAC § 21.007 and TIC Art. 5.35 prohibit use of an underwriting guideline based on any of the following:

1) A single prior water damage claim filed by the applicant or in the covered property.

2) Two prior appliance-related claims where certification form WDR-1 has been completed by qualified water damage remediation inspector(s).

3) Any mold damage or mold damage claim(s) provided certification form MDR-1 has been completed by qualified mold remediation inspector(s).

Financial Stability

In addition to other underwriting criteria, risks will be evaluated based on an applicant’s or named insured’s credit score developed from information in the person’s credit report.

Photo & Replacement Cost Estimator

Replacement Cost Estimator required. Photo required if home is over five years of age. In addition, the Company will order an inspection report on all homes valued over $750,000 Town or

Rowhouse

Eligible

Alarm System Central station burglary & fire alarms required for homes with Coverage A over $750,000 or if total Scheduled Personal Property value exceeds $100,000

Auto/Home Discount Eligibility

In order for the Auto/Home Discount to apply, all new homeowners applications must be submitted concurrently with the personal automobile application or the personal automobile policy must currently be written with State Auto. The personal auto applications must meet all of our underwriting requirements to qualify for the discounts. Please see the credits and discounts

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Eligibility

Guidelines

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…Pools In-Ground Pools:

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A 4’ fence with locked gate or an elevated decking completely surrounding the pool with a retractable ladder that leads to a self-closing, self-locking gate.

 Pools with diving boards are eligible if the board is no more than 20 inches above the water level, and the pool has a minimum depth of 8 feet.

 Pools with pool slides are eligible with a minimum pool depth of 5 feet.  Must meet local regulations.

Above-Ground Pools:

 Must be elevated decking completely surrounding the pool and a retractable ladder that leads to a self-closing, self-locking gate.

 Diving boards and pool slides are ineligible with above ground pools.  Must meet local regulations.

…Protection

Class

All Protection Classes are Eligible.

Protection Class 8B, 9, or 10 properties must:

 Be located among 10 or more homes

 Be located on all-weather state, county or city maintained roads  Be visible from the road

Protected Suburban properties must:

 Be located among 10 or more homes

 Be located on all-weather state, county or city maintained roads  Be visible from the road

 Be within 5 miles of the primary responding fire department

Solid Fuel Heating Device

Acceptable solid fuel heating devices include wood, coal corn & pellet stoves and other similar stoves, and fireplace inserts. They are eligible with a photo of the unit and a completed supplemental questionnaire, and must:

 Be UL listed and tested

 Be professionally installed and meet the manufacturer’s recommended clearances  Be cleaned and inspected regularly by a certified chimney sweep

 Not be the primary heat source or located in a workshop, garage or outside structure  Not have previous solid fuel heating related losses

 Not located in protection classes 8B, 9-19

 Wood furnace or wood furnace add-ons are not eligible solid fuel heating devices

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New Business Underwriting Guidelines (Continued)

Eligibility

Guidelines

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Ineligible Risks  Homes with a flat roof

 Log Homes

 Homes with roofs not in insurable condition.  Homes with asbestos siding

 Homes with wood shingle roofs  Mobile Home or manufactured homes  Farm properties

 Any isolated properties

 Homes under construction for insured’s who are not the intended occupant (“spec" homes)  Homes under construction, unless the FI-150 is attached to the policy

 Homes built with Exterior Insulation and Finish system are ineligible  Homes with aluminum or knob and tube wiring

 Any home that does not have a central heating system  Any home with less than 100 amp fuse service

 Any home that does not have a continuous masonry pier and beam or slab foundation  New business (effective 4/26/10 and after) in a tier one county with wind/hail coverage.  Homes with tainted/Chinese drywall

 ..Homes located in a “High” or “Very High” brushfire risk area that are less than 1,320 feet from a wildland area, as well as property located in a “Very High”

brushfire risk area classified as a wildland Dangerous

Dogs/Exotic Animals

The following animals are ineligible:

 Pets/Animals including but not limited to: Pit Bull (Staffordshire Terrier), Presa Canario, Sharpei, or other fighting breeds, Rottweiler, Wolf Hybrids, Chow, Doberman Pinscher, or any mix which includes these breeds;

 Any dog with a previous bite history, aggressiveness, or which is unrestrained; and  Any exotic animal that may be aggressive or dangerous.

Minimum Deductible

 The minimum all peril deductible is ½%.

 A minimum 5% wind/hail deductible applies to a portion of Harris County. It will only apply to HO 0003 and HO 0005 policies.

 A 2% minimum wind/hail deductible applies to the counties of: Bee, Brooks, Fort Bend, Goliad, Hardin, Harris County (portion not in TWIA), Hidalgo, Jackson, Jim Wells, Liberty, Live Oak, Orange, Victoria, and Wharton.

 A 1% minimum wind/hail deductible applies to the remainder of the state for forms HO 0003 and HO 0005.

Prior Approval  Any risk in a coastal county written by an out of state agency  Any home with a roof 15 years or older.

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We are in the business of providing insurance. This statement implies that coverage will be available to a broad cross section of the public at a reasonable cost, with the expectation of profitable operation for both our agents and the Company.

While it is our intention to establish a premium structure with sufficient flexibility to accommodate most potential policyholders, there are certain risk characteristics that present such a propensity to loss that they cannot be accepted in our programs. The purpose of this guide is to help define these acceptability standards.

It is important to note that State Auto adheres to the terms of any applicable statutes. Thus, to the extent any of the guidelines contained in this document are in conflict with applicable law, the guidelines are superseded by the law. Beyond the general guidelines contained herein, we also recognize the importance of the agent’s role in the underwriting process. By virtue of personal inspection of the property, the agent is in a unique position to assess risk characteristics and exercise underwriting judgment.

INSURANCE TO VALUE

An underwriting profit is achieved, in part, by the application of rates to adequately insured properties.

Underinsurance results in rate inadequacy and over insurance may create a moral hazard. Insurance to value not only provides adequate protection for the insured in the event of a large and unexpected loss, but also creates responsible, competitive rates.

Our best resource for ensuring adequate insurance to value up front is an agent’s personal inspection of the risk. This results in the accurate completion of our replacement cost estimator. This form, developed through extensive, ongoing analysis of building materials and labor costs by geographic area, utilizes square footage, type and style of home, and additional home features to estimate a current replacement cost. The replacement cost estimator is appropriate for all but very large, high valued homes. (See also the following section on high valued homes). Once a risk is written, we automatically apply an inflation factor to help ensure insurance to value throughout the life of the policy.

HIGH VALUED HOMES

High valued homes present unique exposures. They are usually one-of-a-kind structures, which may contain unique, and possibly rare, building materials. This creates an insurance to value challenge. Therefore, these homes require a valuation by a qualified home appraisal/inspection company. The most desirable risk of this type are protected by central station burglary and fire alarms, located in protected areas, and occupied by financially secure individuals who neither travel nor entertain with great frequency.

PREVIOUS LOSSES

Previous loss history may be one of the best indicators of future losses. Losses that reflect on the insurability of risks—such as those due to carelessness, poor maintenance of the property, hazardous conditions or situations— are of utmost concern. Large losses, depending on the circumstances, may also present an undesirable exposure to loss. In addition, a frequency of losses, regardless of the cause, exhibits a higher than average loss exposure and is, therefore, unacceptable.

CONDITION OF PROPERTY

The condition of a home is extremely important in underwriting the risk. The most desirable risk characteristics include a dwelling in good condition or better which is reflected by proper maintenance and good housekeeping. The absence of these characteristics present a higher than average exposure to loss.

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BINDING

AUTHORITY

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New Business Submissions The required application and any supplemental documents i.e. photos, replacement cost estimators, appraisals, privacy act notices, Utility Update Credit Certification, etc. need to be fully completed, signed by the Named Insured and Agent and submitted to the company within four (4) working days of the effective date of coverage.

Coverage A Protection Class 1-8 $600,000 Protected Suburban $400,000 Protection Class 8B, 9, and 10 $250,000 Scheduled Personal Property Jewelry-Single Item $15,000 Jewelry-Total Schedule $50,000 Furs-Single Item $15,000 Furs-Total Schedule $50,000 Fine Arts-Single Item $15,000 Fine Arts-Total Schedule $50,000

Cameras-Do Not Bind-any coverage on professional photographers. Musical Instruments-Do Not Bind-any coverage on professional musicians. Scheduled Personal Property

-Appraisal Requirements

Jewelry-Single Item $5,000 Jewelry-Single Item Agreed Value $5,000

Fur-Single Item $5,000

Fine Arts-Single Item $5,000 Higher Limit Binding Authority Refer To Company

Out of State Risks Refer To Company

Personal Liability $500,000

Wild Fire/Active Fire Line Agents need to get company approval before binding any new business or increasing current exposures for personal lines property, inland marine and auto coverages located within 15 miles of any existing wild fire or active fire line.

Moratorium – Do not bind any property coverage for 72 hours or any earthquake coverage for 30 days after a Seismic event of 4.0 or greater on the Richter Scale. This applies to both dwelling fire and homeowner policies.

Seismic Event Richter Scale Mile Radius of Epicenter Do not Bind Property Coverage Do not Bind Earthquake Coverage

4.0 – 5.9 250 miles 72 Hours 30 Days

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BINDING AUTHORITY (continued)

Coastal Property Moratorium

Providing property insurance in coastal areas requires special underwriting consideration, primarily due to hurricane exposure. Therefore, we are providing the following guidelines for property risks located in coastal areas. For your guidance in handling new risks or placing additional coverage for existing accounts during a Hurricane Watch or

Hurricane Warning, our guidelines are as follows:

From the time the National Hurricane Center (NHC) issues a Hurricane Watch/Warning until 24 hours after the watch or warning is lifted, no new business, increases in existing business, or reduction of any deductibles may be written or bound in the following counties: Angelina, Aransas, Atascosa, Austin, Bee, Brazoria, Brooks, Calhoun, Cameron, Chambers, Colorado, DeWitt, Duval, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Hardin, Harris, Hidalgo, Houston, Jackson, Jasper, Jefferson, Jim Hogg, Jim Wells, Karnes, Kenedy, Kleberg, La Salle, Lavaca, Liberty, Live Oak, Madison, Matagorda, McMullen, Montgomery, Nacogdoches, Newton, Nueces, Orange,

Polk, Refugio, Sabine, San Augustine, San Jacinto, San Patricio, Shelby, Starr, Trinity, Tyler, Victoria, Walker, Waller, Washington, Webb, Wharton, Wilson, and Zapata.

For further information refer to our current Hurricane Bulletin issued at the start of each Hurricane Season. Hurricane Season runs from June 1st through November 30th each year.

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General Rules Section

Topic

Page

1. General Instructions ... 1 2. Policy Forms and Descriptions of Coverage ... 1 3. Eligibility ... 2 4. Additional Interest ... 3 5. Mandatory Coverages ... 4 6. Processing Instructions ... 4 7. Policy Period/Payment Plan ... 5 8. Other Insurance ... 6 9. Cancellation Or Reductions In Limits of Liability Or Coverages ... 6 10. Manual Revisions ... 6 11. Restrictions Of Individual Policies ... 6 12. Definitions ... 7 13. Protection Class ... 8 14. Protected Suburban Class ... 8

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1. GENERAL INSTRUCTIONS

The Homeowner Options Program provides property and liability coverages, using the forms and endorsements specified in this manual. This manual contains the rules and classifications governing the writing of Homeowners policies. The rules, rates, forms and endorsements of State Auto Insurance Companies for each coverage shall govern in all cases not specifically provided for in this manual. Please note that the following rules pertain to all policies unless otherwise noted.

2. POLICY FORMS AND DESCRIPTIONS OF COVERAGE

The following is a general description of the coverages provided by the individual Homeowners Policy Forms. The Policy should be consulted for exact contract conditions.

A. Property Coverage Section Coverages – Property Damage

Coverage A – Dwelling

Coverage B – Other Structures Coverage C – Personal Property Coverage D – Loss of Use

1. Form HO 0003 – Special Form – Covers dwelling, other structures and loss of use against all risks of

physical loss, with certain exceptions. Personal Property is covered against loss on a broad “named peril” basis.

2. Form HO 0004 – Contents Broad Form – Covers personal property, including the insured’s interest in

building additions and alterations, and loss of use against loss on a broad “named peril” basis.

3. Form HO 0005 – Comprehensive Form – Covers dwelling, other structures, personal property and loss of

use against all risks of physical loss, with certain exceptions.

4. Form HO 0006 – Condominium Unit-Owners Form—Covers personal property, building additions and

alterations of the unit and loss of use against loss on a broad “named peril” basis.

B. Liability Coverage Section Coverages –Liability—All Forms

Coverage E – Personal Liability

Coverage F – 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

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General Rules Section

3. ELIGIBILITY

A. Form HO 0005 is eligible for the ESTATES, DEFENDER and SECURGARD Options. Form HO 0003 is eligible

for the SECURGARD Option and DEFENDER Option only. These forms may apply in the following scenarios:

1. To any owner-occupant(s) of a one, two, three or four family dwelling which is used exclusively for private

residential purposes. A one family dwelling may not be occupied by more than one additional family or two roomers or boarders.

2. To the purchaser-occupant(s) who has entered into a long term installment contract for the purchase of the

dwelling and who occupies the dwelling but to whom title does not pass from the seller until all terms of the installment contract have been satisfied. The seller retains title until completion of the payments and in no way acts as a mortgagee. The seller’s interest in the building and premises liability may be covered using Endorsement HO 0441 – Additional Insured; or

3. It is permissible to extend the Homeowner Options Policy, without additional premium charge, to cover the

interest of a non-occupant joint owner in the building and for premises liability; or

4. To the occupant of a dwelling under a life estate arrangement when the Coverage A amount is at least 80%

of the dwelling’s replacement cost or 100% of replacement cost if the Specified Additional Amount of Insurance For Coverage A Dwelling is provided in endorsement HO 0420 or any of the DEFENDER or ESTATES optional endorsements. The owners interest in the building and premises liability may be covered using Endorsement HO 0441 – Additional Insured; or

5. To cover dwellings in the course of construction provided the policy is issued only in the name of the

intended owner-occupant of the dwelling and the following underwriting requirements are met:

a. The named insured will be residing in the home when complete.

b. The home will be completed within 120 days of the inception date of the policy.

c. A Replacement Cost Estimator is submitted with the application and a photo at completion. Use Endorsement FI 150 – Provisional Amount Endorsement

6. Residence Held In Trust (All forms except HO 0004) – A Homeowner Options Policy may be issued in the

name of a trust and trustee(s) when legal title to a one through four family dwelling or a condominium unit is held solely by the trust and;

a. The trustee and/or beneficiary or grantor regularly reside in the residence held in trust; and b. The residence held in trust is used exclusively for residential purposes.

B. Form HO 0006 – A Condominium Unit Owners Policy may be issued in the SECURGARD, DEFENDER or

ESTATES Options to the owner-occupant of a single family condominium or cooperative unit which is used exclusively for private residential purposes and is not occupied by more than one additional family or more than two boarders or roomers.

C. Form HO 0004 – Contents Broad Form policy may be issued in the SECURGARD, DEFENDER or ESTATES

Options only in the following scenarios:

1. The tenant(s) (non-owner) of a dwelling or apartment situated in any building; or

2. The owner-occupant(s) of a dwelling, cooperative unit or of a building containing an apartment not

otherwise eligible for an Options Policy, 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

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3. ELIGIBILITY (Continued)

D. When two or more apartment units in a 2, 3, or 4 family dwelling are occupied by co-owners, each occupying

distinct living quarters with separate entrances, a Homeowner Options 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 Homeowner Options Policy Form HO 0004 may be issued to the co-owner(s) occupying the other apartment in the dwelling. It is permissible to extend the Homeowner Options Policy, without additional premium charge, to cover the interest of a non-occupant joint owner in the building and for premises liability. Use Endorsement HO 0441 –

Additional Insured.

E. Subject to all other sections of this rule, a Homeowner Options Policy may be issued to cover a seasonal

dwelling when the primary residence is also written with State Auto Companies.

F. A Homeowner Options Policy shall not be issued covering any property to which a farm form or rates apply

under the rules of the Company. In no event shall a policy be issued to cover any property situated on premises used for farming purposes.

Optional Section II liability coverage is available for certain farm liability exposures.

G. A Homeowner Options Policy shall not be issued to cover any mobile home, trailer home, house trailer or

sectional home or their contents.

H. Certain occupancies incidental to the dwelling are permitted provided: 1. The premises are occupied principally for dwelling purposes; and 2. There is no other business conducted on the premises.

I. A Homeowner Options Policy will not be issued to a residence with a flat roof.

4. ADDITIONAL INTEREST

A. In addition to the mortgagee(s) shown in the Declarations or elsewhere in the policy, other persons or

organizations may have an insurable interest in the residence premises. When coverage is not provided to such persons or organizations under Additional Insured Endorsement HO 0441 or its equivalent, their interest in the residence premises may be acknowledged by naming them in the endorsement referenced in Paragraph D.

B. Such persons or organizations are entitled to receive notification if the policy is canceled or non-renewed by the

insurer.

C. No additional charge is made for use of this endorsement. D. Use Additional Interest Residence Premises HO 0410

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General Rules Section

5. MANDATORY COVERAGES

A. It is mandatory that insurance be written for all coverages provided under both Property and Liability Coverage

Sections of the Homeowner Options Policy.

B. Liability Coverage Section of the policy requires coverage for the following exposures. When such exposures

exist, refer to the Optional Coverages Section.

1. All additional insured locations where the named insured or spouse maintain a residence other than

business or farm properties; and

2. All residence employees of the named insured or spouse not covered or not required to be covered by

Worker Compensation Insurance.

C. Coverage for business property/business pursuits is limited under the Property Coverage Section and excluded

under the Liability Coverage Section of the Homeowner Options Policy. If an incidental business occupancy is permitted by the Company to be covered under a Homeowner Options Policy, it is required that the policy be endorsed, at an additional premium charge, to cover the exposure. When a permitted exposure exists, refer to the Optional Coverage Section of this manual.

D. Inflation Protection is provided automatically for all policies. At renewal, Property Coverage Section will be

adjusted based on the factors reflecting current construction costs. The renewal premium will be based on the new Property Coverage Section coverage limits.

6. PROCESSING INSTRUCTIONS

A. Applications

New policies, except agency issued policies, will be issued using the ACORD application. A separate application must be submitted for any secondary residence with a notation in Policies and Coverages – Coverage E and F – that the policy is for a secondary residence.

B. Change Requests

You must complete a current ACORD change request, indicating the minimum information requirements for any endorsement that takes place during the term of the policy. This form must be used when making changes.

C. Agency Issued Policies

Homeowner Policy proof of insurance can be obtained from the agent’s office by issuing a policy directly from netXpress. The Evidence of Property Insurance, ACORD27, is available immediately for the insured’s convenience for proof of insurance.

D. Required Information

The date of birth and social security number of the named insured(s) and spouse must be shown on the application or in the remarks section of the application. This is for any applicable discounts the insured(s) may qualify for, as well as enabling us to receive applicable underwriting reports.

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7. POLICY PERIOD/PAYMENT PLAN

A. The Homeowner Options Policy may be written for a period of one year. Renewal terms are processed

according to the current rates and forms.

B. The Homeowner Options Program is eligible for Direct Bill and Electronic Fund Transfer Billing per the table below:

Twelve Month Policy Term Pay Plan Options E-Pay

Available

Service

Charge Billing Due Dates

Full Pay Yes N/A Full payment due at inception of policy term.

Two Pay Yes $3

N/A -- EFT

50% due at inception with remaining due in 6 months.

Four Pay Yes $3

N/A – EFT

25% due at inception with remaining billed in 25% installments each 90 days.

Monthly Pay Yes $3

N/A - EFT

1/12th due at inception with remaining billed in installments every 30 days.

C. Timing Considerations – The number of installments will be determined by the number of months remaining

in the policy term at the time the policy is set up. At renewal, the payment cycle will convert to the valid pay plan that was selected.

D. Electronic Funds Transfer (“E-Pay”)

The insured has the option of choosing a date between the 1st and 28th of the month that they would like the deduction to take place on EFT billed policies. Using the effective date of the policy for the EFT effective date will endure that the insured is current on installment payments. The insured will be notified by the company 14 days in advance of the initial amount of premium to be deducted, as well as any changes to that amount of one dollar ($1.00) or more.

This option is available for new and existing business. Once State Auto receives the enrollment form, the insured’s policy will be set up for the electronic funds transfer. This option is not available on premium financed, mortgagee billed policies.

E. Customers Can Pay:

1) By Check – Customers can mail in a check with the invoice billing stub.

2) EFT – Customers can have an automatic deduction taken from their bank account. Refer to item D.

3) Payments can be made any time of the day or night, seven days a week, by credit or debit card (Visa or Master Card), or automated check (ACH payment), using either of these options:

a) Pay on the Web at www.stateauto.com – After selecting the option to “Pay Your Policy” customers can make a one-time payment without enrolling in the system or they can enroll in our “Pay Now” program where personal and payment type information is stored to facilitate and expedite future

payments.

b) Pay By Phone using our automated service – just call 1-800-444-9950, extension 5118.

F. Agent “Sweep”/Upload Payments – Agents can collect insured payments in their office, deposit in their bank

account, and State Auto “Sweeps” the money out via electronic transaction.

1) New Business – Agencies may upload insured new business and down payments through AgentSite

netXpress.

2) Installment Payments – Agents can “Sweep” insureds installment payments received in their office via

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General Rules Section

7. POLICY PERIOD/PAYMENT PLAN (Continued)

Contact Agency Interface Services at 1-888-999-8103 for more information on “Sweeping”

G. NSF Charge: A $20 non-sufficient fund fee will be charged on all returned payments if returned for insufficient

funds.

H. If the homeowner policy is to be mortgagee bill, the policy must be paid in full.

8. OTHER INSURANCE

Credit for existing insurance is not permitted.

9. CANCELLATION OR REDUCTIONS IN LIMITS OF LIABILITY OR COVERAGES

It shall not be permissible to cancel any of the mandatory coverages in the policy unless the entire policy is canceled.

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.

10. MANUAL REVISION

Changes in manual rules or rates will be announced. Each revised page will show the effective date of the revision. Information with a pencil symbol () indicates an important change. Minor editorial changes will not show the symbol.

A manual revision, meaning any revision of premium applicable to the Homeowner Options 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.

11. RESTRICTION OF INDIVIDUAL POLICIES

If a Homeowner Options Policy would not be issued because of unusual circumstances or exposures, the named insured may request a restriction of the policy provided no reduction in the premium is allowed. Such requests shall be approved by the Company before binding.

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12. DEFINITIONS

A. Construction

Frame – exterior wall of wood or other combustible construction, including wood-iron clad, or plaster on

combustible supports. Aluminum or plastic siding over frame.

Stucco/Asbestos – outer walls of stucco, asbestos board, rigid asbestos sidings.

Masonry Veneer – exterior walls of combustible construction veneered with brick or stone shall be classified as

masonry construction.

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).

Mixed – 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 1/3% of the total exterior wall area; otherwise class and code as masonry.

Non-Combustible – exterior walls, floors and roof constructed of, and supported by metal, asbestos, gypsum,

or other non-combustible materials.

Masonry Non-Combustible – exterior walls constructed of masonry materials (as described in Masonry

above) and floors and roof of metal or other non-combustible materials.

Fire Resistive – exterior walls and floors and roof constructed of masonry or other fire resistive materials or

any construction with exterior walls, floors, joists, studs, and roof trusses treated with the Intumescent Fire Retardant Coating, No-Burn Plus.

Non-Combustible, Masonry Non-Combustible, and Fire Resistive construction types are eligible for the Superior construction credit in the Credits/Discounts/Charges section.

B. Seasonal Dwelling Definition

A seasonal dwelling is a dwelling with continuous unoccupancy of three or more consecutive months during any one year period.

C. 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 fire wall which extends uninterrupted from the foundation through the roof in the form of a parapet at least 24 inches high shall be considered single family dwellings. Communications between buildings with independent walls or through masonry fire walls described above shall be protected by at least a Class A Fire Door installed in a masonry wall section.