Understanding Your Homeowner Insurance Policy
Before you buy homeowners insurance, you need to take time to understand all of the different types of insurance that exist. Home insurance comes in 7 different forms and each of these forms are designed to provide a different level of protection for a different type of property. While there are several different types of homeowner’s insurance that you can purchase, not all of these policies will provide adequate protection to keep your assets safe. Here is a brief description of each policy form that is available so that you know what you are buying before you sign any contracts.
The HO-1 is the most basic form of home insurance available. While some smaller insurance companies sell this type of policy, not many companies offer an HO-1 form any longer. An HO-1 is designed for homeowners and will cover the dwelling and personal property against 11 different listed perils including fire, theft, vandalism, lightening, windstorm, hail, and malicious mischief.
While the HO-2 home insurance policy offers a more broad range of coverage against perils, it still offers very limited coverage on a listed peril basis. This means that only the perils that are listed on the policy form will be covered. All of the perils covered under an HO-1, including other perils like damages caused by falling objects, water related damages from appliances, damage from weight of snow, and electrical surge damage are covered.
An HO-3 is one of the most common forms of homeowner’s insurance purchased today. It is an extended form and an all risk policy. What this means is that all of the risks, except for those that are excluded from the policy, will be covered. In addition to covering personal belongings onsite, the policy will also cover property when it is damaged or stolen off the premises.
Renters will need to purchase a special form of property insurance called the HO-4. Unlike an HO-1, HO-2, or HO-3 policy, an HO-4 provides coverage for only personal property and tenant improvements. Typically, an HO-4 policy will provide coverage against the same perils as those listed on the HO-2 home policy.
Premier or Replacement Cost (HO-5)
The HO-5 is the newest homeowner’s insurance policy that will provide the highest level of protection for individuals who own their homes and are residing in them. This All Risk policy will offer extended replacement cost cover, which gives the homeowner more protection to rebuild their home when the cost of rebuilding is higher than the cost of dwelling cover listed on the policy.
While condo owners do not own the entire structure of a condo, they do own the condo from the walls in. This creates the need for a specialized condo insurance policy. The HO-6, known as the condo unit owners policy, provides building coverage for the inside of the condo, coverage for personal belongings, and liability cover.
Older Home (HO-8)
This modified homeowners insurance policy provides coverage for older homes on an actual cash value basis. This form will cover an older home or a manufactured home and personal belongings in the home.
As you can see, there are a variety of different types of homeowners insurance that you can choose from. Be sure to compare the coverage options built into each policy, assess how much coverage you will need, and choose a policy that will help you recoup from any serious loss.
Disclaimer: This is for information purposes only and NOT a recommendation from Mills Insurance. Please contact a licensed insurance specialist to discuss insurance coverage’s and laws.
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