Homeowner’s 101

  • Looking to buy a home?
    • If so, likely you know that you will need Homeowner’s Insurance
    • Sifting through Policies can be confusing
    • Here is a breakdown of the 3 most common policies you will come across
  • Every Insurance policy is different so it is important for you to sit down and see what is covered

HO-1 BASIC FORM

  • The Simplest form of homeowner’s insurance
  • Not seen to much anymore
    • Mortgage companies believe it doesn’t offer enough coverage
  • ONLY COVERS
    • Fire or Smoke
    • Explosions
    • Lightining
    • Hail & Windstorms
    • Theft
    • Vandalism
    • Damage From Vehicles
    • Damage From Aircraft
    • Riots & Civil Commotion
    • Volcanic Eruption

HO-2 BROAD FORM

  • A broader form of HO-1 
  • This insurance is still specified
  • COVERS
    • The Events Covered In HO-1
    • Falling objects
    • Damage from the weight of ice, snow, or sleet
    • Freezing of household systems like AC or heating
    • Sudden and accidental tearing apart, cracking, burning, or bulging of pipes and other household systems
    • Accidental discharge or overflow of water or steam
    • Sudden and accidental damage from artificially generated electrical current
    • Your personal belongings

HO-3 Special Form

  • These Days, Most Common Type of Homeowner’s Insurance
  • Not confined to simply covering specified events
  • These polices cover any damage to:
    • your home’s structure
    • Your Belongings
  • They will cover these things unless it is specifically excluded from your policy
    • Remember Renters Insurance exclusions (Terrorism, Earthquake)

HO-5 Comprehensive Form

  • The most comprehensive Homeowner’s insurance you can buy
  • Like HO-3 policies it covers against sudden/unexpected events
    • Unless specifically excluded
  • This form has fewer exceptions

You can decide your own coverage limit

NOT EVERYTHING IS COVERED

  • Understand the Exclusions of your policy
    • What is specifically excluded
  • Typically these are ecluded
    • floods 
    • Earthquakes
    • Landslides
    • construction needed to bring your home up to code are not included in a standard HO-3 policy
  • Be sure to read over any policies while you’re shopping for home insurance, You’ll want to understand exactly what your exclusions will be.

NEIC CONTINUED

RIDER INSURANCE

Depending on where you live, you may need additional coverage that is not included in a standard policy

  • You may need RIDER INSURANCE
    • Provision that adds or amends coverage to your policy
    • While these come at an additional cost
      • Very much worth getting
      • Ex. Flood Insurance

Reimbursement

If you need to make a claim, and it is in fact covered under your policy, the insurance company will issue payment for your home or belongings in these 3 ways

  • CASH VALUE COVERAGE
    • Typically comes with more affordable policies
    • Smallest payout
    • IC will issue a payment for replacement, minus cost of depreciation 
  • REPLACEMENT COST COVERAGE
    • Replaces cost of items without cost of depreciation
    • Replaces up to your policy limits
    • If the cost goes beyond the limits, its OOPS
  • GUARANTEED OR EXTENDED COVERAGE
    • Most comprehensive payout
    • Most expensive
    • Pay for loss of items without cost of depreciation
      • Even if it is outside of the policy limits

Sources: https://www.forbes.com/sites/taramastroeni/2018/09/24/buying-home-insurance-101-what-you-need-to-know-about-your-coverage-options/#ac2d2d92a63e