If you are shopping for home insurance or renters insurance, you may be mystified by the buffet of alphabet soup being served up by insurance companies.
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 right policy for your home.
According to the Insurance Information Institute (III), some of the disasters commonly excluded from home insurance policies include floods, earthquakes, sinkholes, mudslides, war, nuclear accidents, landslides, mudslides and sinkholes.
Home insurance perils
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 III, the following perils are commonly covered:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- Vandalism or malicious mischief
- Volcanic eruption
- Falling object
- Weight of ice, snow or sleet
- 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.
- Sudden and accidental tearing, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system.
- Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance.
- Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)
Types of home 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 is rarely available.
HO-2: A home insurance policy that typically covers all 16 perils, but is a basic policy with lower premiums and lower coverage levels.
HO-3: The most popular level of homeowners insurance according to III. It covers all disasters except those that are specifically excluded.
HO-4: A renters insurance policy that covers your belongings against all 16 perils.
Most HO-4 policies also provide liability insurance in case someone is injured in your home.
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.
The type of plan your condo association purchases will impact your HO-6 needs.
HO-8: An insurance policy designed for older homes.
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.
Your agent can help you pinpoint extras you might need, such as extra coverage for jewelry.