The Ins and Outs of Homeowners Insurance I: Policies and Coverage
Written by Kristina Lee
So you've finally done it. You've taken the plunge and bought a house that you hope to make into a home. But don't stop there - take the necessary precautions to make sure that if anything ever does happen to your home, you won't be left out on the street. Here's a quick guide to obtaining the homeowners insurance that is right for you:
Step 1: Pick your policy type
The Homeowners insurance policy is the statement that describes what is covered, and to what extent the insurance company will pay to return you to your original state, should a disaster happen. The following list describes the types of homeowners insurance that exist:
HO-1 – A limited policy that offers varying degrees of coverage but only for items specifically mentioned in the policy. This policy might be used to cover a valuable object found in the home, such as a painting.
HO-2 – Similar to HO-1, HO-2 is a limited policy in that it covers specific portions of a house against damage. The coverage is usually a "named perils" policy, which lists the events that would be covered. These factors must be outlined in the policy.
HO-3 – This policy is the most commonly written policy for a homeowner and is designed to cover all aspects of the home, structure and its contents as well as any liability that may arise from daily use, as well as any visitors who may encounter accident or injury on the premises. Covered aspects as well as limits of liability must be clearly outlined in the policy to insure proper coverage. The coverage is usually called "all risk". Also called an "open perils" policy.
HO-4 – This is commonly referred to as renters insurance or renter's coverage. Similar to HO-6, this policy covers the contents of a renter’s home or apartment. The structure of the building is not covered, but changes made to the inside of the building, e.g. carpeting, appliances, built in furniture, are covered. This policy can also cover liabilities arising from accidents and intentional injuries for guests as well as passers-by up to 150 feet of the dwelling. Common coverage areas are events such as lightning, riot, aircraft, explosion, vandalism, smoke, theft, windstorm or hail, falling objects, volcanic eruption, snow, sleet, and weight of ice.
HO-5 – This policy, similar to HO-3, covers a home (not a condo or apartment), the homeowner and its possessions as well as any liability that might arise from visitors or passers-by. This difference in this coverage is that it covers a wider breadth and depth of incidents and losses than an HO-3.
HO-6 – As a form of supplemental Homeowners insurance, HO-6, also known as Condominium Coverage, is designed especially for the owners of condos. It includes coverage for the part of the building owned by the insured and for the property housed therein of the insured. The HO-6 typically covers liability for residents and guests of the insured in addition to personal property. The liability coverage, depending on the underwriter, premium paid, and other factors of the policy, can cover incidents up to 150 feet from the insured property, all valuables within the home from theft, fire or water damage or other forms of loss.
HO-8 – It is usually called "older home" insurance. For house owners who have higher replacement cost than the market value, this policy allows them to insure their home at the lower market value rate.
Dwelling Fire policy - This is generally available for non-commercial owners of rented houses, covering property damage to the structure, and sometimes to the owner's personal property (such as appliances and furnishings). The owner's liability is generally extended from her own primary home insurance, and does not comprise part of the Dwelling Fire policy. It is a counterpart to the HO-4 renter's policy.
Insurance for motor homes – If you classify your motor home as a residence with homeowners insurance then you can be taxed for property and school taxes. The best way to insure your motor home is to insure it as a vehicle. This way, the land it sits upon is just undeveloped and less expensive.
Flood insurance – Ordinary homeowners insurance does not cover floods. You may need earthquake insurance in California. The Federal Emergency Management Agency offers flood insurance.
HO-6 – As a form of supplemental Homeowners insurance, HO-6, also known as Condominium Coverage, is designed especially for the owners of condos. It includes coverage for the part of the building owned by the insured and for the property housed therein of the insured. The HO-6 typically covers liability for residents and guests of the insured in addition to personal property. The liability coverage, depending on the underwriter, premium paid, and other factors of the policy, can cover incidents up to 150 feet from the insured property, all valuables within the home from theft, fire or water damage or other forms of loss.