KWupdatesMost people don’t think much about homeowners insurance until something happens. But the right policy can save you a ton of money and headaches if disaster strikes. We get it, sifting through insurance jargon isn’t exactly a thrill ride.
But having the wrong coverage (or not enough) leaves your precious property vulnerable. We’ll break down the eight most common policies in simple terms so you can pick the one that truly shields your home.
What Is Homeowners Insurance?
Homeowners insurance is an insurance policy you purchase as the owner of a house or condo. It protects you financially from damage that occurs to your property and losses you might incur due to that damage.
Homeowners insurance covers things like:
- Fire and smoke damage
- Water damage from burst pipes, flooding, etc.
- Wind and hail damage
- Theft
- Vandalism
- Liability, if someone is injured on your property
It typically does not cover damage from earthquakes, floods, war or nuclear disasters. Separate supplemental policies can be purchased to cover those risks.
The amount of homeowners insurance you need depends on the value of your home and possessions. The policy limit should equal the full replacement value of your dwelling and personal property. This ensures you can fully rebuild and replace items if a total loss occurs.
Homeowners insurance protects the biggest investment most people make—their home. While it may not cover every possible incident, having adequate coverage gives peace of mind knowing you can recover from a fire, storm, or other common disaster.
Reviewing your policy annually and making adjustments as needed can ensure you have the coverage you need as your home and belongings change over time.
Types of Homeowners Insurance Policies
There are several types of homeowners insurance policies available to fit your needs. Here’s a quick overview of some main policy types:
Homeowners Insurance Policy- 1 (HO-1)
Home Owners Insurance Policy-1, otherwise known as HO-1 is the most basic type of homeowner insurance coverage. It only covers the structure of your home, related structures such as garages and appliances, and interior elements such as carpeting. It excludes coverage for personal property, liability, and additional living expenditures. Because of these limitations, it is less popular than more strong policy alternatives.
HO-1 insurance is a named perils policy, therefore it only protects your property in particular conditions, which often include:
- Damage from planes or automobiles.
- Explosions
- Fire and Lightning
- Hail and windstorms
- Riots
- Smoke Theft
- Vandalism
- Volcanic eruption.
With HO-1 insurance, your home, associated buildings, appliances, and home features will only be covered if they are damaged by one of the dangers specified in your policy. If they sustain damage from something else, you will be unable to file a claim with your home insurance carrier and will have to pay for the repairs out of pocket. It’s worth mentioning that a HO-1 policy excludes liability, loss of use, and medical costs coverage. Because the coverage is so limited, many insurers do not offer this sort of policy.
Homeowners Insurance Policy- 2 (HO-2)
An HO-2 insurance policy, commonly known as a broad form, protects your home and personal goods. Most house insurance providers will cover your personal items up to a certain limit, whether they are at home, in your car, or somewhere else. Under certain conditions, HO-2 plans may offer liability coverage. To find out if your HO-2 policy covers liability, contact your insurance provider directly.
Like a HO-1 policy, HO-2 insurance is a named perils coverage that protects your house and personal belongings against the losses specified in your policy. Typically, the losses contained in an HO-2 policy are identical to those found in an HO-1, however they may include a few more:
- Accidental discharge or overflow of water or steam in the residence.
- A falling object
- Freezing of pipelines, heating, and air conditioning systems.
- Specific electrical currents can cause sudden and unintended injury.
- Tearing apart, scorching, and cracking from several home systems
- Weight of ice, snow, or sleet
Homeowners Insurance Policy-3 (HO-3)
The HO-3 Special Form policy is the most popular type of homeowners insurance, and it covers your home, personal property, liability, additional living expenses, and medical payments. Unlike HO-1 and HO-2 policies, your home and related structures are covered on an open-peril basis, meaning they are protected against all types of losses save those specifically excluded by your policy.
Laura Adams, a personal financial and insurance specialist, explains that a HO-3 is considered typical coverage. It provides ‘open perils’ coverage for your house structure, which covers you against all disasters unless the policy specifies otherwise. However, you obtain ‘named perils’ coverage for personal possessions, which applies to calamities specified in the policy.”
Your home and other constructions often have the following risks excluded:
- All animals owned by the insured
- Birds, rodents, and varmint
- Defective construction or upkeep.
- Earth Movement
- Flood and foundation issues
- Government acts
- Intentional loss.
- Mechanical breakdown.
- Mold, fungus, and moist rot
- Neglect
- Nuclear hazard
- Ordinance or Law
- Pet or animal damage
- Pollution and corrosion.
- Outage of electricity
- Smog, rust, or corrosion?
- Theft, vandalism, and frozen pipes in abandoned residences
- Wear and Tear War
Although a normal HO-3 policy does not cover floods and earthquakes, you may be able to obtain an endorsement or a supplemental flood insurance or earthquake policy to meet these coverage requirements.
- Damage from planes or automobiles.
- Damage from the weight of snow or ice
- Electrical current causes damage.
- Explosions
- Falling Objects
- Fire and Lightning
- Hail and windstorms
- Pipes freeze.
- Riots
- Smoke Theft
- Vandalism
- Volcanic eruptions.
- Water damage due to plumbing or HVAC overflow
- Water heater damage.
Homeowners Insurance Policy- 4 (HO-4)
An HO-4 policy, often known as renters insurance, is designed for renters who wish to protect their items while also receiving additional coverage, such as liability and supplementary living expenses. An HO-4 is not a “homeowners” policy because renters do not own their homes, hence it lacks coverage for the building’s construction.
Renters insurance policies are commonly called perils policies, and they cover the following events:
- Damage from planes or automobiles.
- Damage from the weight of snow or ice
- Electrical current causes damage.
- Explosions
- Falling Objects
- Fire and Lightning
- Hail and windstorms
- Pipes freeze.
- Riots
- Smoke Theft
- Vandalism
- Volcanic eruptions.
- Water damage due to plumbing or HVAC overflow
- Water heater damage.
Homeowners Insurance Policy-5 (HO-5)
An HO-5 policy provides the most comprehensive coverage, including your house, personal items, liability, additional living expenses, and medical payments for others. These policies may also have higher available limits for items such as jewelry than the more usual HO-3 policy. However, not all house insurers provide HO-5 plans, and not all homeowners will be eligible to acquire one due to the tight qualification requirements.
Adams shows how a HO-5 policy could benefit individuals who own high-value things. She goes on to state, “It typically costs more and may not be offered by every insurer but could be worth it if you have many valuable possessions.”
With a HO-5 policy, both your home and your personal belongings are protected under open perils. Some typical exclusions are:
- Earth Movement
- Government acts or laws
- infestation of birds, rodents, or insects
- Intentional loss.
- Mechanical breakdown.
- Mold
- Nuclear hazard
- Pets
- Vandalism occurs if the property is empty for more than two months.
- War
- Water damage from floods or sewer backups
Because an HO-5 policy is established on an open perils basis rather than a named perils basis, it covers more situations and can make filing a claim easier because you do not need to prove that a covered hazard caused the damage. An HO-5 policy is typically more expensive than a conventional HO-3 coverage because of the increased degree of protection.
HO-6
HO-6 insurance is tailored for condominium owners. It insures everything in your unit, as well as personal liability and additional living expenses. Condo plans usually include some housing coverage, as condo owners may be liable for the inner walls of their units. Because condo residents only own their apartment and not the entire building, the condo association often has insurance coverage that covers the common facilities, grounds, and exterior of the building. In most cases, condo members contribute to the association’s insurance through condo or HOA fees.
HO-6 policies, or identified perils insurance, typically cover:
- Damage from planes or automobiles.
- Damage from the weight of snow or ice
- Electrical current causes damage.
- Explosions
- Falling Objects
- Fire and Lightning
- Hail and windstorms
- Pipes freeze.
- Riots
- Smoke Theft
- Vandalism
- Volcanic eruptions.
- Water damage due to plumbing or HVAC overflow
- Water heater damage.
HO-7
An HO-7 insurance coverage covers mobile or manufactured homes, such as trailers, sectional homes, recreational vehicles, and modular homes. This type of policy covers your home’s construction, personal items, liability, additional living expenses, and medical payments.
The exterior of your property is protected by an open perils policy, which covers any situation that is not explicitly listed in your insurance policy.
However, HO-7 plans to provide coverage for your items under a designated peril policy. This means that your items are only insured under a specific set of circumstances, including:
- Damage from planes or automobiles.
- Explosions
- Fire and Lightning
- Hail and windstorms
- Riots
- Smoke, theft, and vandalism
HO-8
The HO-8 coverage is the final level of homeowners insurance, and it is likely best suited for homeowners with older homes or homes that are more difficult to replace. This covers architecturally important buildings, historic landmark residences, and homes constructed with materials and methods that are uncommon today. If the cost of repairing your damaged home exceeds its present value, HO-8 coverage may be an appropriate option.
HO-8 insurance contains conventional coverage for the home, personal property, liabilities, supplementary living expenses, and medical payments. A named perils policy covers both your home’s structure and your possessions. This encompasses incidents like:
- Damage from planes or automobiles.
- Explosions
- Fire and Lightning
- Hail and windstorms
- Riots
- Smoke Theft
- Vandalism
- Volcanic eruption.
Frequently Asked Questions
What does a homeowners insurance policy cover?
At a minimum, your homeowners insurance policy will cover damage to your dwelling, other structures like a detached garage, and personal property inside the home against covered losses like fire, lightning, windstorms, hail, explosions, smoke, vandalism, theft, and more. It also provides liability coverage if someone is injured on your property.
What factors determine my premiums?
Insurance companies look at a variety of risk factors like your home’s location, age and building materials, the amount of coverage you select, and more. Having safety features like smoke detectors and alarm systems can also lower your rates.
How much dwelling coverage should I have?
As a homeowner, a good rule of thumb is to insure your home for 100% of the cost to completely rebuild it in the event of a total loss. An insurance agent can help determine the replacement cost value.
What does personal property coverage insure?
Personal property coverage pays to repair or replace your possessions inside your home if they are stolen or damaged by a covered loss. As a homeowner, you need to create a home inventory to help determine what limits to purchase.
What is liability insurance?
The liability portion of your policy pays if someone is accidentally injured on your property and you are found legally responsible. It can also cover injury or damage caused by your pets. Higher limits are wise if you host gatherings.
What about flood or earthquake damage?
Unfortunately, homeowners insurance does not cover flooding or earthquakes. You’d need to add separate flood insurance or earthquake insurance riders to get protection against these risks.
Be sure to reach out to a knowledgeable insurance agent if you have additional questions about getting the right homeowners insurance coverage for your unique situation!
Conclusion
So there you have it – the 8 most common types of homeowners insurance to choose from. As you can see, there are plenty of options depending on your needs and what kind of property you own. Just remember to assess your risks, understand what’s covered under your policy, and shop around to find the best value. Comparing quotes and coverage from different insurers is key. At the end of the day, having the right homeowners insurance provides peace of mind and financial protection in case a disaster strikes. So be sure to review your policy regularly and contact your insurer or agent with any questions. Protecting your home is a necessity, not a luxury.
Read Also: Renters Insurance 101: What You Should Know First
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