Did you know that each year out of all insured homes about 1 in 20 people file a claim? A large percentage of claims result from wind and hail damage.
Without homeowners insurance, you could lose your most valuable asset and never recover from the financial loss.
There are many different types of homeowners insurance policies, and you’re not alone if you’re confused!
Are you shopping for a homeowners policy? Keep reading for a better understanding of homeowners insurance.
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The HO-1 policy is an unpopular choice because it’s the most basic policy available. The only thing covered under this policy is the home’s structure.
This policy typically covers 10 specific named “perils” like vandalism, theft, and fire. Many companies no longer offer the HO-1 policy because of its limited nature.
The HO-2 covers a broader range than the HO-1, giving it the name “board form.” It’s better than the HO-1 but still only offers limited coverage.
The HO-2 does offer some coverage for the contents of your home but is still limited to specific perils.
Did you take out a loan to buy your home? Most mortgage lenders won’t accept an HO-1 or HO-2 policy, mandating at least an HO-3 for your home.
The HO-3 covers your home and personal property. It also covers additional living expenses if something happens to your home. Also covered is some liability and medical payments.
An HO-3 policy differs from the others in that it covers all perils except specific, named exclusions. Those exclusions are usually:
- Construction defects
- Poor maintenance
- Foundation problems
- Normal wear and tear
- Animal or pet damage
- Government actions
- Frozen pipes, vandalism, and theft in a vacant home
Coverage extends to your personal property in an HO-3 policy. Always check the circumstances under which coverage of personal property might be excluded.
Also ask what types of insurance you can add to the policy, such as flood insurance. Most policies don’t cover floods caused by weather but it’s a good idea to have flood insurance.
Mortgage lenders require flood insurance in areas at risk for flooding. You can get flood insurance quotes at betterflood.com.
HO-4 Renters Insurance
The HO-4 policy is a standard renters insurance policy. This covers your personal property when you’re renting a home or other dwelling. Sometimes it covers additional living expenses.
You’ll notice most renters policies cover named perils.
HO-5 is the highest policy available. It covers almost any type of peril. It also offers higher limits than other policies for personal belongings such as expensive jewelry.
As with other policies, read the exclusions. An HO-5 is a great policy but some common exclusions are:
- Government actions
- Earth movement
- Intentional loss
- Pet damage
- Vandalism if the property is vacant
With an HO-5 policy, there’s no need to prove that damage was caused by a covered peril.
Some Types of Homeowners Insurance Policies
There are many types of homeowners insurance policies. These are five of the most common types.
It pays to know what your homeowners insurance policy covers so you’re not left paying the bill in the event of damage or theft. If you’re shopping for a policy, read the fine print and know what’s included.
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