Homeowners insurance can be complicated. No wonder, with a staggering eight different policy types in the homeowner’s insurance industry alone. Each policy is designed for different types of homes and degrees of coverage, but knowing what you need can be complicated. Let’s look at some examples of homeowners insurance policies so you can get a better understanding of what to look for when shopping around.
HO-1 – Basic: the most limited in terms of coverage; provides protection for your home and personal belongings at their actual cash value for 10 named perils, also known as “causes of loss”. This policy type is no longer offered by most insurance providers.
HO-2 – Broad: an upgrade from the basic policy type; covers your home at replacement cost value (RCV) and your personal belongings at their actual cash value (ACV) for an additional 6 named perils.
HO-3 – Special: the most common policy type in use today; provides protection for the home at RCV and personal belongings at ACV against all losses except for those specifically excluded by the policy. These policies usually include liability and loss-of-use coverage as well.
HO-4 – Content Broad: commonly referred to as renter’s insurance; covers only personal property for the 16 named perils from the previous policy types, usually at RCV. This policy usually provides liability and loss-of-use coverage.
HO-5 – Comprehensive: these policies are generally for high net-worth properties in high-risk areas and provide similar protection to HO-3 policies, but at higher levels of coverage for special items like jewelry, electronics, etc.
HO-6 – Unit-Owners: this type of insurance is also known as “condo insurance” and is designed for those living in condominiums. The coverage will vary depending on what is otherwise covered by the homeowner’s association (HOA) insurance. Coverage also typically includes personal property, liability, and loss-of-use protection.
HO-7 – Mobile Home: basically, an HO-3 policy that is tailored for protection of homes with wheels (mobile homes, RV’s, 5th-wheel trailers) and modular homes.
HO-8 – Modified Coverage: insurance for homes that do not meet typical standards, usually due to inadequate wiring, plumbing, or other deficiencies. Coverage is limited to the 10 named perils in a HO-1 policy, up to ACV.
Depending on your circumstances, you may need these additional forms of insurance as well:
Termite Coverage – most insurance excludes damage from termites, so you may need an additional policy which specifically covers this particular peril. Policy requirements may demand regular treatment and periodic (usually annual) inspections.
Flood Insurance – excluded by other insurance and only available in specific flood-prone areas, this insurance is subsidized by the federal government to cover losses related to flooding.
Scheduled/Specialized Coverages – may be required on certain items like jewelry, coin collections, vintage furs, artwork, or electronics.
To best be informed about which insurance policy fits your needs, talk with a licensed insurance agent that has experience in the industry. Your agent can help you to understand your specific policy, what is covered, and what options you have when it comes to getting better coverage for a different rate.
