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Types of homeowners insurance and coverage

By Posted : 02/16/2017

Home insurance soupKnowing details about the types of homeowners insurance is imperative when shopping for the right polcy. If you need homeowners insurance or renters insurance, you may be mystified by the buffet of alphabet soup being served up by insurance companies.

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Memorizing the differences between an HO-2 and HO-3 insurance policy isn't necessary, but understanding their terms and the perils they cover can help you identify the best coverage for your home.

Perils covered by most types of homeowners insurance

When getting home insurance quotes, check with individual insurance companies to confirm the coverage provided by their policies. However, most companies follow similar standards of protection for homeowners. According to Insurance Information Institute (III), the following perils are commonly covered:

  1. Fire or lightning
  2. Windstorm or hail
  3. Explosion
  4. Riot or civil commotion
  5. Damage caused by aircraft
  6. Damage caused by vehicles
  7. Smoke
  8. Vandalism or malicious mischief
  9. Theft
  10. Volcanic eruption
  11. Falling object
  12. Weight of ice, snow or sleet
  13. Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance.
  14. Sudden and accidental tearing, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system.
  15. Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance.
  16. Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)

Some of the disasters commonly excluded from home insurance policies include floods, earthquakes, sinkholes, mudslides, war, nuclear accidents, landslides, mudslides and sinkholes.

 

Types of homeowners insurance policies

The specific terms of a policy can vary by state and by companies within your state. But generally speaking, here are the standard policy types:

HO-1

A limited insurance policy that only covers 10 perils compared to the 16 perils covered under equally affordable standard policies. It doesn't include personal liabiltiy for those injured on your property and your belongings aren't automatically covered. Many mortgage companies don't think HO-1 policies provide sufficient coverage. For these reasons, it isn't widely available or very commonly used.

HO-2

A home insurance policy that typically covers all 16 perils, but is a basic policy with lower premiums and lower coverage levels. However, the HO-2 is a "named peril" policy. That means any damage caused by events other than those listed on your policy typically won't be covered. 

HO-3

The most popular level of homeowners insurance according to III. It covers all disasters except those that are specifically excluded. That means you're protect against any and all perils unless your policy specifically mentions them in the exclusions. In addition to your home, the HO-3 insures attached structures, for example a deck or garage and your belongings. It also includes personal liability coverage if you accidentally injure someone or damage their property. Still, HO-3s won't cover everything and what's not protected depends on the details of your specific policy.

HO-4

A renters insurance policy that covers your belongings against all 16 perils. It only covers your personal items and not the building because the landlord is responsible for insuring the dwelling. Most HO-4 policies also provide liability insurance in case someone is injured in your home and provide money for living expenses should you need to stay elsewhere temporarily while the rental property is being repaired or renovated.

HO-5 

This is a more comprehensive version of the HO-3 form. It is typically only available to those who own a new, very well maintained home within close distance to fire protection services. Just like an HO-3 form, an HO-5 policy will financially protect you against all perils unless your policy specifically excludes them in writing. The difference between an HO-3 and HO-5 is that HO-5 provides better protection for your personal belongings. An HO-5 insures your belongings against all causes of loss that are not specifically excluded, whereas HO-3 only covers causes named on a specified list. 

HO-6

A condominium or co-op insurance policy similar to renters insurance. It covers the personal property of condo owners against all 16 perils and typically also includes liability insurance. Generally, condo insurance will extend to the walls, ceilings and floors of your dwelling, though the building structure is insured by the condo association. The type of plan your condo association purchases will impact your HO-6 needs.

HO-7

Similar to an HO-3, an HO-7 is designed specifically to cover mobile or manufactured homes.    

HO-8

An insurance policy designed for older homes. The coverage details of a HO-8 are similar to an HO-3, but with special adjustments to better suit older homes. This type of policy is usually also used for historic homes and registered landmark dwellings. According to III, older homes are sometimes not eligible for replacement cost insurance, so the reimbursement for damages to possessions or the property would be based on the replacement cost minus depreciation.

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