What is Home Insurance?
Home insurance, also commonly called hazard insurance or homeowner's insurance (and often abbreviated in the US real estate industry as HO1), is a type of property insurance that covers a private residence.
It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one's home, its contents, loss of use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.
Home insurance policy types
Depending on the dwelling you live in and your home insurance needs, one of these eight home insurance policies should fit:
Often called a “basic form” policy, the HO1 is the most bare-bones coverage you can get. It covers:
The HO1 is a “named peril” policy. This means if the cause of the damage is not expressly listed in your policy, your claim will not be covered. Usually HO1 policies pay out claims at replacement cost. This is a popular choice, as claims for covered damage to your home pay out without depreciation being figured in.
If an HO1 policy doesn’t use replacement cost, it will pay out at actual cash value (ACV). This means that depreciation is figured into your claim amount. Make sure to know if your policy is replacement cost or ACV. It can be the difference between your claim being fully or partially paid out.
You don’t see many home insurers offering HO1 policies anymore. This is mostly because the following policy types offer much better coverage at reasonable prices. Many states have done away with the HO1 policy type completely.
This “broad form” policy provides all of the coverage of the HO-1, but also includes:
The HO3 is also referred to as a “special form” policy. This is the most common choice for homeowners for its coverage and cost. It covers everything the HO1 and HO2 do, as well as personal property and liability coverage.
HO3 covers personal property for named perils in the policy. However, dwelling coverage is provided as “open peril”. This means that unless a peril is excluded in writing in your policy, it’s covered. Frequent exclusions include:
Similar in coverage to the HO2, “tenant form” policies are strictly renters insurance policies. If you rent a home, apartment or condo, an HO4 will cover your personal property against named perils. If you have $75,000 in HO4 personal property coverage, you should have a maximum of $75,000 to replace stolen or damaged belongings in the rental.
Most HO4s also provide personal liability and medical payments to others coverage. Dwelling coverage is not included in an HO4. This is simply because the structure of the rental unit should be covered under the landlord’s home insurance.
This is considered the highest-tier home insurance you can get. It is the most comprehensive coverage available to homeowners. HO5 is similar to HO3 coverage with some significant differences:
Usually an HO5 policy is only available to new homes in low-risk areas. Still, it won’t hurt to talk to your home insurer and see if you qualify. If you meet the criteria for an HO5 and the price isn’t that much higher than an HO3 policy, it’s worth your while to get the HO5.
The HO6 insures condo units. It is designed to cover much of what your condo association does not. Personal liability coverage is included if someone is injured in your unit and you’re at fault. Guest medical coverage is included as well. If someone is injured in your condo, the HO6 will cover the medical bills regardless of whose fault it is.
Building property protection will pay for repairs to your unit, fixtures and interior if damaged by a named peril. Personal property coverage is provided for your belongings, as well as for named perils. You can chose a payout at ACV, or at replacement cost for a higher price.
This home insurance policy provides HO3-level coverage for mobile homes. Dwelling coverage is provided against open perils at replacement cost. Content coverage is provided against named perils and pays out by ACV.
The HO7 covers both the home and detached structures like fences or a garage.
The HO8 policy covers older homes that are more than 40 years old. It provides named peril coverage against the same perils listed in the HO1.
The key reason for the HO8 is the replacement cost of building materials used in older homes. If your home was built in the early 1900s, chances are the materials used are obsolete or very expensive to replace. This would make the standard HO3 or HO5 coverage cost prohibitive. An HO8 policy provides for the upgrading of materials used in older homes for current, up-to-date materials after a covered incident.
The standard HO8 policy pays out at ACV, but can be upgraded to replacement cost as an endorsement. well
Typical Home Insurance Coverages
Section I — Property Coverages
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