When it comes time to revise your homeowners policy or get a brand new one for a house you just purchased, it helps tounderstand the types of homeowners insurance in the market. Superficially buying insurance seems simple, but when you start getting into language and coding, all of a sudden your head starts to hurt. When that happens, grab some aspirin then finish reading this blog.
What Year was your Home Owners policy issued?
First some basics. Any house insured before 1990 probably doesnt have adequate coverage. Why? Because policies before that date werent required to recoup one hundred percent of the cost to rebuild a structure. So the issue date on your policy will be the first clue as to whether your policy needs revision.
Homeowners policies by the Numbers:
There are eight categories of Homeowners insurance available. An HO-1, for example, is the most basic policy. It only covers a few types of damage (sometimes also called a Fire Policy). Some absentee landlords use a State-provided HO-1 to cover their properties with renters. Other types of risks covered under an HO-1 are vandalism, lightning, theft, and hail). Some states no longer use this type of insurance because it proved to be too limited.
HO-2: The HO-2 policy is a slight step above the HO-1, covering more potential damages (17 dangers in all). One thing thats particularly appealing about the HO-2 is that it doesnt cost that much more than an HO-1 and covers water damage stemming from plumbing and hot water systems. The extra cost for this policy can typically be offset by opting for a higher deductible.
HO-3: Where HO-1 and HO-2 only protected the homeowner from very specific hazards, the HO-3 flips coverage. In this case youre covered for everything except those perils specified in the policy (flood being a common example). Sometimes the items this policy excludes can be added with the use of an endorsement, which of course costs more.
HO-4: This is a renters policy and covers only those items inside the home and liability against the potential risks of all the hazards of a HO-2 policy. The building itself has no coverage.
HO-5: The HO-5 picks up where the HO-3 left off. The HO-3 names the perils it will not cover, while the HO-5 covers close to everything. For example, if you left a window open and rain came in damaging your wooden floor, the HO-5 would cover that. The only exceptions to the HO-5 policy are things like war, nuclear explosions, earthquake and flood. The HO-5 is written for both the structure of the home and your property and is considered the best type of insurance on the market today.
The last three homeowners insurance categories are the HO-6, HO-7, HO-8. HO-6 is for condo owners wanting more coverage than whats provided by their condo association. It also affords liability coverage. The Ho-7 is insurance for mobile home owners.
Finally the HO-8 may be offered to you when you buy an older home. Depending on the age, condition, and safety issues in an older home, it may not qualify for an HO-3 or HO-5. This coverage is modified typically without replacement cost coverage on the building materials.
