What Type of Homeowners Insurance is Right for Me?
In the midst of all the chaos that comes with buying property, you will find that you also need to obtain homeowners insurance to get a mortgage. When buying property insurance for the first time, it can be difficult to wade through the jargon and information that is thrown your way.
What you need is an insurance policy that will pay for you to get a professional to your home when damages occur. But how do you know what coverage is right for you?
To answer this question, we have put together a quick and easy guide to the different types of homeowners insurance available to you.
This is basic coverage that protects your home and personal property from losses caused by fire or lightning, wind or hail, explosion, riot or civil unrest, aircraft, vehicles, volcanic eruptions, smoke, theft, vandalism or malicious mischief and self-damaging instances.
This policy has broader coverage. It includes everything found in HO-1, but also includes damages that occur from snow; falling objects; freezing or accidental discharge of water from plumbing, heating, air-conditioning or from a household appliance; and electrical surge damage.
This is the most commonly purchased coverage among homeowners. It protects your home from loss or damage due to any peril except for flood, earthquake, war or nuclear accident. Because some HO-3 policies exclude different events, it is important to read the fine print carefully so that you know exactly what your policy protects you against.
This is renters insurance. It covers household contents and personal possessions (but not the building) against the risks in the HO-2 policy.
This is condominium and co-op coverage, and is similar to the HO-4 policy. HO-6 offers everything HO-4 does, but is designed specifically for condo and co-op owners in that it insures everything not covered by an association policy.
This is a policy that targets older homes with historic value. It is basic coverage from disasters and is limited to repairs or cash value of the insured items. This policy does not cover rebuilding or replacement costs, since some parts of the home bearing historic significance can make these costs higher than their current market value.
Additionally, there are different classes of coverage for each type of policy. These classes are based on standard American Association of Insurance Services forms:
Coverage A – Dwelling
This covers the value of the dwelling itself, but not the land the home sits on. Typically, a coinsurance clause states that as long as the dwelling is insured to 80 percent of actual value, it will be replaced.
Coverage B – Other Structures
This covers structures around the home, but not the home itself. These structures include garages, guest houses, pools, pool houses, pagodas, etc. This coverage is typically limited to 10 percent of what Coverage A is insured for.
Coverage C – Personal Property
This covers the contents of your home. Personal Property can also be located off premises, but must be noted in policy documentation. Examples include items located in a secondary residence, items in luggage while you are on vacation, items in storage and items not covered by auto insurance that are stored in your vehicle.
Coverage D – Additional Living Expenses
This coverage will protect you if your home is damaged beyond normal living conditions or the repairs force you to relocate into temporary housing during construction.
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