Miguel and Juliana Santiago, ages 30 and 28, were recently married in Dallas. Miguel is an electrical engineer with Silicon Systems, a computer component design firm. Juliana has a master’s degree in education and teaches at a local middle school. After living in an apartment for 6 months, the Santiagos have negotiated the purchase of a new home in a rapidly growing Dallas suburb. Lone Star Savings and Loan Association has approved their loan request for $270,000, which represents 90% of the $300,000 purchase price. Before closing the loan, the Santiagos must obtain homeowner’s insurance for the home. The Santiagos currently have an HO-4 renter’s insurance policy, which they purchased from Miguel’s tennis partner, Brad Smitham, who is an agent with Rockwell’s Insurance Company. To learn about the types of available homeowner’s insurance, Miguel has discussed their situation with Brad, who has offered them several homeowner’s policies for their consideration. He has recommended that the Santiagos purchase an HO-3 policy because it would provide them with comprehensive coverage. 

Critical Thinking Questions

1. What forms of homeowner’s insurance are available? Which forms should the Santiagos consider? 

2. What are the perils against which the home and its contents should be insured? 

3. Discuss the types of loss protection provided by the homeowner’s policies under consideration. 

4. What advice would you give the Santiagos regarding Brad’s suggestion? What coverage should they buy?