There are eight different levels of homeowners insurance. The one you choose for your home will depend on your living situation and several other factors, such as whether you are a renter, the type of structure your own and the age of your property.
Outside your dwelling, your homeowners insurance policy can also cover your personal belongings, personal liability and additional living expenses if your house is uninhabitable during an incident. Getting the right coverage is essential as it gives you peace of mind that you’ll receive adequate compensation to repair or replace your home and belongings in the event of damage.
What Is Homeowners Insurance?
Homeowners insurance is not only for those who own their own home. Even if you rent a property, having this type of policy is wise. Some landlords require tenants to have renters insurance, which we’ll cover later in this article. Each type of policy is customizable, but there are some standard factors that the insurer covers:
Exterior and interior home damage: Your policy will generally cover fire, lightning, hurricanes, vandalism and other disasters. Depending on the damage, the insurer will compensate you for repairing or rebuilding your home. Your coverage should match the amount you would pay to replace your home based on current labor and material costs.
Other structures: Many policies cover free-standing structures such as garages and gazebos at 10% of the value of the dwelling, but this amount may vary. You can purchase additional coverage if you feel that 10% is inadequate.
Personal belongings: Many policies also cover contents such as clothes, furniture and appliances in the event of damage or theft. You can also get off-property coverage for items such as jewelry. This coverage ensures you receive compensation if the items are stolen or lost outside your property. There may be a limit to the amount, but most companies cover 50 to 70% of the cost of your dwelling coverage.
Personal liability for damage or injuries: This liability coverageprotects you from lawsuits that others file. It can even cover pets. For example, if your dog bites your neighbor or your child breaks your neighbor’s window, you can also file a claim to cover the expense of replacing it.
Medical payments to others: This coverage is for minor medical injuries incurred by nonhousehold members on your property. This coverage applies regardless of whose fault the injury is.
Hotel or house rental costs: Also known as loss of use or additional living expenses, it provides coverage if your home is uninhabitable — you’ll quickly see the benefit of having this type of coverage. It will reimburse you for rent, hotel costs, restaurant meals and other additional living costs that you incur while waiting for your home to become habitable again.
What Are The Types Of Homeowners Insurance Coverage?
There are eight types of homeowners insurance available. To understand how homeowners insurance policies, it’s essential to know how they work. A peril in terms of a homeowners insurance policy is a problem or incident that causes damage to your home, property or belongings. A policy has two types of perils — an open peril and a named peril:
An open peril is a hazard not included in the policy as an exclusion. The policy covers any risk that the policy does not list as an exclusion.
A named peril is a hazard covered by the policy. These hazards are explicitly listed — anything not listed in the policy is an exclusion.
Now let’s look at how this may look in various policies.
What Is HO-1 Homeowners Insurance?
This policy is known as the basic form of homeowners insurance. A HO-1 insurance policy generally pays out if your incident falls under one of the following perils:
Fire or lightning
Explosion
Windstorm or hail
Riot or civil commotion
Damage caused by vehicles or aircraft
Smoke
Vandalism or mischief
Volcanic eruptions
Theft
The HO-1 policy is basic because it only covers 10 perils, unlike either policies that cover 16 or more. The coverage is for the actual cash value of the house. This value means you’ll only receive compensation for the value of your home minus depreciation because of its age instead of the amount you need to rebuild.
The policy also excludes cover for personal property and additional living expenses. It is the cheapest because it provides the most minor coverage — however, it is only available in some states. If you have a mortgage loan, your provider will most likely require you to have a higher level of coverage.
What Is HO-2 Homeowners Insurance?
Also known as the broad form, this policy covers all the perils of the HO-1 policy, including the following:
Weight of snow and ice
Freezing of plumbing and air conditioning
Accidentally overflow or discharge of water or steam
Cracking or building caused by an unexpected, accidental event
Falling objects
Sudden and accidental damage from an artificially generated electrical current
The HO-2 policy also covers the following:
Your home and other structures on the property
Personal belongings
Personal liability
Loss of use or additional living expenses
Medical payments to others
The cover for your belongings is theactual cash value — how much the items are worth after depreciation.
What Is HO-3 Homeowners Insurance?
This policy is the most common among homeowners as it provides comprehensive coverage. This policy typically pays out the actual cash value of your house and belongings. It covers your home and personal belongings and includes personal liability, medical payments to others and additional living expenses. An HO-3 policy, known as an open peril policy, covers all perils unless they are stated explicitly as exclusions.
This policy is a special form that will pay out to repair or replace your house up to your policy limits for damage that excludes the following typical perils:
Power failure
Earthquake
Flooding
Industrial pollution or smoke
Intentional damage
War or nuclear accidents
Pets and insects
Negligence
Settling, wear and tear
Government and legal actions due to lack of permits, faulty design, construction or maintenance actions taken by the government and other associations
Damage to a home that is under construction or unoccupied
Deterioration caused by weather conditions that worsen existing excluded conditions
There are different conditions for your personal belongings, furniture and appliances. An HO-3 policy generally covers belongings for the following 16 perils:
Smoke
Fire or lightning
Windstorm or hail
Explosions
Riot or civil commotion
Damage caused by an aircraft or vehicle
Vandalism
Theft
Volcanic eruption
Falling object
Weight of snow, ice or sleet
Accidental overflow of water that comes from household appliances, heating, plumbing, air conditioning or fire sprinkler system
Freezing of household appliances, heating, plumbing, air conditioning or fire sprinklers systems
Accidental cracking, burning or tearing of heating, plumbing, air conditioning or fire sprinkler systems
Accidental damage from shortcircuiting of electrical current
This policy only covers specialty, expensive belongings such as furs, watches, firearms, goldware and silverware for damage or theft.
This policy is known as renters insurance for people renting houses or apartments. An HO-4 policy covers belongings for the same perils as an HO-3 policy. It also includes cover for personal liability and additional living expenses.
An HO-5 policy is known as a comprehensive policy. It offers the highest level of insurance for your house and belongings. It covers your home and belongings against all damage except those considered exclusions. These exclusions are the same as an HO-3 policy.
Unlike the HO-3 policy, this policy compensates you for the replacement value of your house and belongings instead of the actual cash value. For this reason, it is the ideal choice for new construction. The scope of coverage for belongings is also greater than an HO-3 policy — the policy provides coverage for any event not excluded in the policy. The policy also covers additional living expenses, personal liability and medical payments to others.
Expensive and specialty items such as jewelry, furs, watches, firearms, goldware and silverware are covered if stolen, misplaced, lost or damaged.
What Is HO-6 Homeowners Insurance?
This policy is known as “walls in” cover for those living in a condo or co-op. Homeowners insurance for condos covers the following under the policy:
Renovations made after buying it
Walls, floors and ceiling
Personal liability
Medical payments to others
Additional living expenses
Personal belongings
Before purchasing this policy, it’s important to check with your condo owners association’s policy to check what coverage you already have and ensure there are no gaps in your overall coverage.
What Is HO-7 Homeowners Insurance?
An HO-7 policy is similar to an HO-3 policy, except it only covers mobile homes. The cover only applies to mobile homes when stationary and not in transit. This insurance policy covers the following types of mobile homes:
Single and double-wide manufactured and mobile homes
Sectional homes
Modular homes
Trailers
Like an HO-3 policy, an HO-7 will have exclusions for a mobile home.
What Is HO-8 Homeowners Insurance?
An HO-8 policy is for homes older than 40 years old, historic homes or registered landmarks. The costs to rebuild such dwellings are usually greater than their actual market value. The insurance covers the structure and belongings for the following 10 specific perils:
Windstorm or hail
Fire or lightning
Explosion
Damage from vehicles or aircraft
Riot or civil commotion
Smoke
Vandalism
Volcanic eruption
Theft
This policy also includes cover for personal liability, additional living expenses and medical payments to others.
What Type of Home Insurance Do I Need?
Before settling on an insurance policy, there are a few important factors to consider. Choosing the right policy for your home will depend on the following:
Your property’s age and condition
The type of structure — whether it is a mobile home, etc.
The type of coverage you need or want — for example, if your house is in danger of exposure to a volcanic eruption
If you have a mortgage loan, your lender will have specific requirements for your coverage
In most cases, an HO-3 or HO-5 policy provides adequate for homeowners. An HO-4 policy will be your ideal choice if you are a renter. As a mobile homeowner, your best choice will be the HO-7 policy, and if you own a condo, you should go for the HO-6 policy.
If you need assistance comparing the different plans and finding the right one for you, we can help. We can search for and compare several homeowners insurance plans to get you the coverage you need at the best rates.
When you’re searching for an insurance company, it’s important to research each provider thoroughly. Even when it appears that they offer the same rates, their customer service, settlement time and limits will differ. These tips can help you find a reputable and reliable insurance provider:
Consider rebuilding costs: A mistake people often make is not getting an accurate estimate of how much it costs to rebuild their homes. To ensure you receive adequate compensation if you need to rebuild, ask your insurance company for an estimate of how much it will cost to replace your home in the event of a fire or major disaster. Make sure you have coverage for your structure that matches this amount.
Revalue your home for improvements: When you remodel your home or make renovations, update your insurance for these changes. Any remodeling may change your home’s value. You must update your insurance for any changes to ensure adequate coverage. Advising on changes doesn’t necessarily mean paying more for your insurance policy.
Cover your valuables: Some policies have a special sub-limit for specific types of special belongings. If you have precious belongings, it’s wise to ensure your insurance covers them sufficiently.
Research the company: When choosing an insurance provider, research the company. Check their customer service history. Are their clients satisfied with their level of service? Research their reputation and read reviews on the experience of past customers.
Look at claims response: Before choosing a company, ask your agent whether a licensed adjusteror a call center will handle your claims process. After experiencing a disaster, you’re looking for a company that will respond quickly and settle your claim promptly. Choose a company with a track record of paying claims in a fair and timely manner. You also want to ask whether they hold back provisions — some companies only pay out funds once they have proof from the homeowner that renovations are underway.
Ask about homeowners insurance discounts: If your house has unique features, you may qualify for a discount. For example, installing a home security system can lower the cost of your home insurance. You may also be eligible for a discount if you use the same company for your auto and home insurance.
Compare quotes: Once you know what type of insurance you want, you can shop around and compare different quotes from insurance companies. Rates differ between companies, so make sure that you ask for quotes and compare them before settling on a provider. Beyond the rates, you should also compare each company’s limits and coverages. Even if their rates are the same, these factors may differ.
Protect Your Home With Insurance From David Pope Insurance Services, LLC
The right homeowners insurance policy for you will depend on your needs and the type of dwelling. The policies vary for homeowners, renters, mobile homeowners, condo owners and older homes. By choosing a policy that applies to your living situation, you can ensure your requirements are covered, and you’re paying the right amount.
To help you find the best coverage, we look at your individual needs — ensuring your structure, belongings and persons are adequately covered. We compare various plans to help you get feasible coverage that gives you the peace of mind you need. Get in touch with our agents today, and we’ll send you a free home insurance quote to get you the best coverage!
