You’ve decided to make what is probably going to be the biggest purchase of your life – you bought a home – and that’s exciting. However, before you set your heart on the number of bedrooms you want, neighborhood, backyard pool, etc., you should look into the cost of home insurance and determine what you can reasonably afford. Becoming a homeowner won’t be as fun if you end up with a house that is going to cost you astronomically in the insurance department. Since homeowner’s insurance isn’t something you can just skip over, it’s important to analyze safety features, local weather conditions, and crime rate in the community you’re considering moving into. Home insurance policies vary depending on different factors, and taking a closer look into what each of them encompasses will ensure you’re sufficiently covered.
HO-1
This is the most simple home insurance policy on the market. It covers direct damage to the home only caused by specific hazards that include fire, lightning, hail or windstorm, explosions, riots, aircraft, other vehicles, smoke, vandalism, theft, and volcanic eruption. You have to be careful with this policy as it does not include personal liability coverage.
HO-2
An HO-2 defends your home and its surrounding structures, like a detached garage or fence, and includes personal liability. This policy steps it up a bit and covers everything mentioned in the HO-1 as well as falling objects, plumbing system floods, power surges, frozen pipes, broken heater, air conditioner, water heater or fire sprinkler and destruction caused by the weight of sleet, snow or ice.
HO-3
This is the insurance policy many homeowners decide to go with because of the level of coverage and comfort it provides. You will be able to work with your insurance agent to come up with a list of exclusions you really feel you won’t need coverage for and include them in the contract, meaning you will be protected from loss or damage as a result of anything else. Some of these exclusions may include nuclear threats, earthquakes, deterioration, neglect, and war.
HO-4
The HO-4 plan is designed to specifically give coverage to renters. It will provide for the loss of any of the tenant’s personal belongings due to the same perils listed in an HO-2 policy and personal liability of the renter, but does not cover any property damage.
HO-5
Similar to the HO-3 plan, the HO-5 is the most inclusive policy a homeowner can obtain. The biggest difference is that the insured’s personal belongings within the home are fully covered unless something has been pointedly excluded.
HO-6
This will meet the needs of a condo owner who would like to insure their belongings and anything not considered to be covered by the property owner’s policy for common areas.
HO-8
An older home can be more difficult to insure, but that’s what an HO-8 policy is for. If the estimated cost to rebuild your home is more than its current market value this plan will allow you to make sure you are getting some kind of replacement coverage under the damages listed. Depending on the amendments you make, the insurance company may only payout to replace your home using modern materials instead of paying more for the antique qualities it once had.
Going over all your home insurance options and discount possibilities before jumping into a huge investment will give you an advantage and save you in the long run. There may be things in a policy you simply don’t need or depending on the climate you live in, there may be things that are necessary to add.
