Homes are important investments that can open the door to many other possibilities. The purchase and ownership of a home allows you to use it as collateral for loans and is generally regarded as a major milestone in one’s life. Homeowners insurance is the best way to protect such an important property and ensure you are not left in the cold in the event of an unforeseen disaster.
Homeowners insurance has about as many different options as there are different types of properties. They come in several broad types of policies, ranging from a very basic, minimum coverage homeowners insurance policy to special homeowners insurance policies for older homes and rental properties. Just as each home has its own unique features, each homeowners insurance policy must be tailor fit to the property it is protecting.
To help sort through the details, this blog will overview the major types of homeowners insurance policies. Having some information is important when it comes to looking for the best homeowners insurance policy for your property so the insurance agent can build the most cost effective homeowners insurance policy and make sure the policy covers all the hazards that the homeowner wants. The basic homeowners insurance policy, the HO1 policy, covers only a limited number of listed hazards specifically listed in the homeowners insurance policy. However, it is generally the cheapest type of homeowners insurance where the home belongs to the policy holder (the exception being renter’s insurance, or HO4 insurance). The basic homeowners insurance policy can have specific hazards covered through additional add-on policies, such as flood insurance (flood insurance is rarely included in homeowners insurance) to provide additional protection. An expanded form of homeowners insurance is the HO2 policy, which adds on several more hazards that are covered, however like the HO1 homeowners insurance policy, only the named hazards are the ones that the policy will protect against.
The HO3 homeowners insurance policy is typically the most comprehensive form of homeowners insurance applied to single family homes. While covered hazards are still named in the homeowners insurance policy, the list is very long, protecting from nearly every potential hazard that is not covered in a special insurance policy (such as earthquakes and floods). For property owners, the HO5 is the next homeowners insurance policy, and instead of naming covered hazards, names excluded hazards. Basically, if the cause of the damage is not listed in the homeowners insurance policy, it is covered by the homeowners insurance policy.
The basic homeowners insurance policies can afford varying degrees of protection for varying costs. Other special types of homeowners insurance policies can also be adapted to special situations, such as renters insurance, condominium insurance, or insurance for older homes, where the replacement cost exceeds the property value. Sorting through all these homeowners insurance options can be a difficult task, however an independent insurance agency can use its connections with many different insurance providers to do the shopping for you.