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Types of Homeowners Insurance

Homeowners Insurance - Overview Types

As described in Wiening et, prior to the 1950s, there were separate policies for the various perils that could affect a home. A homeowner would have had to purchase separate policies covering fire losses, theft, personal property, and the like.

During the 1950s, policy forms were developed, allowing the homeowner to purchase all the insurance they needed on one complete policy. However, these policies varied by Home insurance company, and were difficult to comprehend. The need for standardization grew so great that a private company based in Jersey City, New Jersey, Home Insurance Services Office, also known as the ISO, was formed in 1971 to provide risk information and issued a simplified homeowners policy for resell to Home insurance companies. These policies have been amended over the years until currently, the ISO has seven standardized homeowners insurance forms in general and consistent use.

Homeowners Insurance - Types Description

HO-1

A limited policy that offers varying degrees of coverage but only for items specifically outlined in the policy. These might be used to cover a valuable object found in the home, such as a painting.

HO-2

Similar to HO-1, HO-2 is a limited policy in that it covers specific portions of a house against damage. The coverage is usually a "named perils" policy, which lists the events that would be covered. As above, these factors must be spelled out in the policy.

HO-3

This policy is the most commonly written policy for a homeowner and is designed to cover all aspects of the home, structure and its contents as well as any liability that may arise from daily use, as well as any visitors who may encounter accident or injury on the premises. Covered aspects as well as limits of liability must be clearly spelled out in the policy to insure proper coverage. The coverage is usually called "all risk". Also called an "open perils" policy.

HO-4

This is commonly referred to as renters insurance or renter's coverage. Similar to HO-6, this policy covers those aspects of the apartment and its contents not specifically covered in the blanket policy written for the complex. This policy can also cover liabilities arising from accidents and intentional injuries for guests as well as passers-by up to 150' of the domicile. Common coverage areas are events such as lightning, riot, aircraft, explosion, vandalism, smoke, theft, windstorm or hail, falling objects, volcanic eruption, snow, sleet, and weight of ice.

HO-5

This policy, similar to HO-3, covers a home (not a condo or apartment), the homeowner and its possessions as well as any liability that might arise from visitors or passers-by. This coverage is differentiated in that it covers a wider breadth and depth of incidents and losses than an HO-3.

HO-6

As a form of supplemental homeowner's insurance, HO-6, also known as a Condominium Coverage, is designed especially for the owners of condos. It includes coverage for the part of the building owned by the insured and for the property housed therein of the insured. Designed to span the gap between what the homeowner's association might cover in a blanket policy written for an entire neighborhood and those items of importance to the insured, typically the HO-6 covers liability for residents and guests of the insured in addition to personal property. The liability coverage, depending on the underwriter, premium paid, and other factors of the policy, can cover incidents up to 150' from the insured property, all valuables within the home from theft, fire or water damage or other forms of loss. It is important to read the Associations By-laws to determine the total amount of insurance needed on your dwelling.

HO-8

It is usually called "older home" insurance. It lets house owners with higher replacement cost than the market value insure them at the lower market value rate.

Homeowners Insurance - Your level of coverage

Regardless of whether you are an owner or renter, you have the following three options:

This type of policy pays to replace your home or possessions minus a deduction for depreciation.

Homeowners Insurance - Replacement cost

The policy pays the cost of rebuilding/repairing your home or replacing your possessions without a deduction for depreciation.

Homeowners Insurance - Guaranteed or extended replacement cost

This policy offers the highest level of protection. A guaranteed replacement cost policy pays whatever it costs to rebuild your home as it was before the fire or other disaster–even if it exceeds the policy limit. This gives you protection against sudden increases in construction costs due to a shortage of building materials after a widespread disaster or other unexpected situations. It generally won't cover the cost of upgrading the house to comply with current building codes. You can, however, get an endorsement (or an addition to) your policy called Ordinance or Law to help pay for these additional costs.

A guaranteed replacement cost policy may not be available if you own an older home. Some insurance companies offer an extended, rather than a guaranteed replacement cost policy.

An extended policy pays a certain percentage over the limit to rebuild your home. Generally, it is 20 to 25 percent more than the limit of the policy. For example, if you took out a policy for $100,000, you could get up to an extra $20,000 or $25,000 of coverage. Even though a guaranteed/extended replacement cost policy may be a bit more expensive, it offers the best financial protection against disasters for your home. These coverages, however, may not be available in all states or from all companies. In addition, a Dwelling Fire policy is generally available for non-commercial owners of rented houses, covering property damage to the structure, and sometimes to the owner's personal property (such as appliances and furnishings).

The owner's liability is generally extended from their own primary home insurance, and does not comprise part of the Dwelling Fire policy. It is a counterpart to the HO-4 renter's policy.

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