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Home insurance is an important financial investment that can protect your property against unforeseen events. During the purchase home insurance, it is important to note that you can choose from several types of insurance policies. Because every home and personal situation is different, not every policy or form will suit your needs.
A home insurance policy can be either a named risk policy or an open risk policy, or a combination of both. A named perils policy covers a specific set of events (such as flood, fire, or wind damage), while an open perils policy covers all potential risks except those specifically excluded in your policy.
Here’s what you need to know about types of home insurance.
With Credible, you can easily compare home insurance rates of the best carriers.
Types of home insurance
The choice of your home insurance depends on the structure of your home and your needs. If you are renting, you may not need the same type of cover as a landlord, and if you are a landlord, you will not need the same protection as a landlord. Here are the eight forms of home insurance policies:
HO-1: Basic Form
Best for: Any owner who wants minimum coverage
An HO-1 policy covers your home and your personal property inside your home (such as furniture, electronics, carpeting, and clothing). This form of insurance typically provides financial protection against major natural disasters such as fire, lightning, windstorms and hail. Additionally, an HO-1 policy provides coverage for volcanic eruptions, theft, vandalism, glass breakage, aircraft damage, riot damage, explosions, and smoke damage.
This insurance generally does not cover floods or earthquakes. However, most home insurance companies have the option of adding insurance endorsements for additional coverage for an additional fee.
It is important to note that HO-1 insurance is rare and few insurers sell this type of policy because it offers such minimal coverage.
HO-2: Wide shape
Best for: Homeowners who want a little more coverage than an HO-1 or who live in high-risk areas
An HO-2 policy covers damage caused by the same types of incidents as an HO-1 policy, in addition to other events, including falling objects, heavy snow, sleet or ice, accidental water overflow from plumbing systems, accidental HVAC rupture, freezing of pipes and damage caused by electrical current.
The advantage of this policy is that it offers more coverage than an HO-1 policy. Although some of these perils are less common, they can cause significant damage. If you live in a colder climate prone to freezing pipes or heavy snow, an HO-2 insurance policy may be beneficial.
Best for: Homeowners who prefer open risk coverage for their home
HO-3 insurance is the most common type of home insurance in the United States. This policy covers your home against all perils except for specific incidents named as exclusions in your policy. Keep in mind that your personal property is always covered on a named peril basis with an HO-3 policy.
You’ll get more coverage than with an HO-1 or HO-2 policy without having to pay for the most comprehensive policy. An HO-3 policy covers up to the replacement value of your home and the actual cash value of your personal items.
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HO-4: Broad form of content
Best for: Tenants
If you don’t own a home, you can still protect yourself against financial loss with a tenant’s insurance policy. Some landlords require tenants to purchase this insurance. An HO-4 policy only covers your personal belongings because your landlord insures the property themselves. This form of insurance includes coverage for the same events listed in an HO-2 policy.
Best for: Owners who want maximum coverage
An HO-5 policy is the most comprehensive home insurance policy available, but it also means that it is usually the Very expensive. This insurance covers your home and personal effects from all events except those specifically mentioned in your policy.
Comprehensive coverage is often more expensive because it covers the loss of your personal property and items at replacement value rather than actual cash value, which deducts depreciation.
REPLACEMENT COST VS. MARKET VALUE IN HOME INSURANCE
HO-6: Co-owners form
Best for: Co-owners
HO-6 insurance covers condominiums and an interest in a co-op. It generally covers standard risks, but only for the interior of your unit – it does not cover shared areas of your complex. Your HO-6 policy complements a master policy for the complex your condominium corporation manages. As with residential mortgages, your lender will likely require you to have condominium insurance.
Best for: Mobile home owners
Mobile homes are not classified in the same way as traditional homes and they have their own type of insurance. An HO-7 policy provides open perils coverage for your mobile home and named perils coverage for the contents of your home. Your open perils cover will cover most events, but some things it typically excludes are floods, mold, nuclear hazards and acts of war.
HO-8: Amended Coverage Form
Best for: Owners of old houses
HO-8 policies are specifically for older homes which are more difficult to insure because the cost of rebuilding is often above market value. The policy has more restrictions, but it helps protect homes that might otherwise not qualify for home insurance. An HO-8 policy covers both your home and your personal property for its actual cash value. It covers the same risks as an HO-1 policy.
Get the right home insurance takes some consideration. You want a policy that offers the right amount of protection without breaking your budget. When shopping for a home insurance policy, there are a few things you need to think about:
- The age of your house — Older homes may benefit from less coverage. You will need to find out what insurance you can get to properly insure your home.
- The amount of coverage you need — Most insurance policies cover either the actual cash value or the replacement value of your home. The actual cash value is the replacement cost of your home, less depreciation. Replacement cost value is the amount of money you would need to replace your home today, taking into account the current cost of materials. Although replacement cost policies are generally more expensive than actual cash value policies, they will pay you more if you file a claim.
- Your deductible — Like car insurance and health insurance, you have to pay a certain amount before your home insurance pays the rest. A higher deductible will result in a lower monthly payment, while a lower deductible will likely result in a higher monthly payment. prime. Before choosing a deductible, make sure you can actually afford the out-of-pocket expenses if you need to file a claim.
- Your location – If your state or region has a higher risk of certain types of natural disasters, like floods or earthquakes, you’ll want to consider the likelihood that you’ll need this coverage. Even if you’re not in a high-risk area, these additional policies can give you peace of mind – between 2015 and 2019, more than 40% of all National Flood Insurance Program claims came from insured in low to moderate risk areas. .
Paying for home insurance can seem like a hassle, but when the unexpected happens, you’ll probably be grateful you don’t have to pick up the expense yourself. Take the time to research policies and insurers to ensure you find the policy that best suits your needs.
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