Types of Homeowners Insurance Policies: Which One’s Right for You?
When it comes to homeowners insurance, you should understand the different types of policies available so that you can make an informed decision.
Whether this is the first time you are shopping for a homeowners insurance policy or if you currently have a policy, it is always a good idea to be well educated to make sure you have your home properly and adequately covered. It’s also important to know what your deductible is.
Standardized HO (homeowners) insurance policies include:
HO-A provides extremely limited actual cash value coverage for your home and contents. Only the types of damage specifically listed in the policy are covered. HO-A amended policies provide more extensive coverage than the base HO-A but less coverage than an HO-B.
HO-B provides replacement cost coverage for most types of insurable perils, except for exclusions.
HO-C policies provide the most extensive coverage.
When you shop for homeowners insurance, it is very important that you know what your policy covers. Your policy is designed to protect homeowners from insurable perils. These perils can include fire, theft, hurricanes and several other events. Your individual policy is determined by named perils and exclusions. Policies can differ from homeowner to homeowner. With your agent’s help, you can determine how much coverage you and your family need.
To receive full payment (minus your deductible) for a partial loss, you must insure your house for at least 80% of its replacement cost. If you insure for less, the insurance company will only pay for part of the expense of a partial loss. If your home is destroyed and you only have actual cash value coverage, you may not be able to completely rebuild with the claim payment you receive.
With any policy there are exclusions. Your policy typically does not cover injuries to animals or damage to motor vehicles or aircraft. You also are usually not covered for losses due to floods, mudslides, water damage from sewer backups, damage from war or nuclear hazards, neglect, earthquakes, power failures, seepage, dry rot or vermin.
Homeowners insurance policies have different covered perils and exclusions. Check your policy carefully so you understand the kinds and extent of coverage you have.
Five Key Home Insurance Coverage Types
The rates you pay for your standard homeowners insurance policy includes the following essential types of coverage:
Coverage for the structure of your home.
Coverage for other structures.
Coverage for your personal belongings.
Additional living expenses (ALE) also known as loss of use.
Liability protection.
1. The Structure of Your Home
Coverage for the structure of your house is the part of your policy that includes repairs or rebuilding if your home (dwelling) was damaged by fire, hurricane, hail, lightning or other disasters listed in your policy. Your “dwelling” typically includes your house, attached structures and fixtures in your house such as built-in appliances, plumbing, wiring, heating systems, and permanently installed air-conditioning systems. This coverage does not include damage caused by floods, earthquakes or routine wear and tear. When you buy your homeowners insurance, it is very important that you purchase enough to rebuild your home.
2. Coverage for Other Structures
Most standard policies also cover detached structures such as garages, storage sheds, and fixtures attached to the land such as fences, driveways, sidewalks, and retaining walls. These kinds of structures are usually covered for about 10% of the amount of coverage you have on your home. If you believe you need more coverage on these structures, make sure you talk to your insurance agent. If a detached structure is used for a business purpose, it is not covered under a homeowners insurance policy.
3. Your Personal Belongings
Items such as furniture, clothing, and sports equipment are covered if they are stolen or destroyed by insured disasters. Some policies may have limited coverage for small boats but not motorized vehicles unless they are unlicensed and only used at your home. Some belongings or items may have limited coverage. These could include artwork, firearms, electronic data and money. Usually you have 50% to 70% of the amount of insurance you have on the structure of your home. It is very important to conduct a home inventory to determine if you have enough coverage to replace these belongings.
Costly items such as silverware, jewelry, and furs are covered but there are usually dollar limits. Your coverage even includes “accidental disappearance,” meaning if you lose the item it is covered by your policy. However, there is no deductible. To insure expensive belongings for their full limits you need to buy a special personal property endorsement.
Trees, plants and shrubs are also covered under the Personal Belongings part of your policy as long as they were damaged by insurable perils. They are not covered if the damage occurred from wind or disease. The coverage is usually 5% of the insurance on your home.
Your policy also includes off-premise coverage anywhere in the world. Sometimes the limit is 10% of the amount on the policy.
Your policy includes up to $500.00 of coverage for unauthorized use of your credit cards.
4. Additional Living Expenses (Or Loss of Use)
This part of your policy covers any additional expenses you may have above and beyond your normal living expenses if you cannot live in your home due to damage caused by insurable perils. This means hotel costs, meals, and other living expenses are covered while your home is being repaired or rebuilt. The amount available to pay for these expenses is usually equal to 20% of the insurance on your house. If you rent part of your home, the loss of income will be reimbursed. Policies differ company to company. Make sure you know what is covered. This part of your insurance policy is to help you maintain a “normal standard of living.”
5. Liability Protection
Liability protection provides personal liability coverage against lawsuits for bodily injuries or property damage that you or other members of the family who live in the home cause others on your property. It also covers any damage or injury your pet may cause. This part of your policy includes no-fault medical coverage so medical expenses are paid with no liability claim filed against you. The cost of defending you in court and court awards are covered, up to the limit of your policy. This coverage covers you, your family members, or your pets anywhere in the world.
Home insurance experts highly recommend that you buy at least $300,000 worth of protection. You can also buy an umbrella or excess liability policy. This kind of policy covers you for slander or libel claims. These policies cost between $200 to $300 for every $1 million of additional coverage.
Your inventory can be documented by photographing each item or by making a video tape. Make sure to store these documents in a very safe place, not in your home. You can download free home inventory software at www.knowyourstuff.com. Better yet, keep your records and digital photos inside a free KeepandShare account.
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Videos, songs, writing, notes, spreadsheets… all gone. Police came and did their report taking thing. Haven’t heard back from Apple or Macmall where I purchased it, but I suspect Applecare does NOT cover this sort of thing. No homeowners insurance. I’m very sorry that I won’t be able to have any new vids up for a while. UPDATE: Many of you have very kindly offered to help with replacing my computer. The sentiment is most appreciated, but I’m not really comfortable with accepting any gifts; …
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Heather L. Clark is a Web researcher and writer. Check out her favorite sources for home insurance advice, printable greeting cards and family calendars.
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Posted by American Car Insurance on June 30th, 2009 filed in homeowners insurance | 18 Comments »
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18 Responses to “Types of Homeowners Insurance Policies: Which One’s Right for You?”
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June 30th, 2009 at 7:36 pm
“OOOOOOOO I luv to dance a little side step, now you see me now you don’t. I’m here and gone” LOL
June 30th, 2009 at 7:57 pm
Agreed JT, how can we, as US citizens, execute our rights as defined in the Constitution? I would support this monumental task in defending our greatest, most sacred document.
The GM issue seems to be inline with the country as a whole. We all know GM won’t survive in it’s current state, no matter how much money we throw at them, and this is the same thing we’re going through as America. No matter how much money Obama spends, it’s not going to fix anything. It’s inexperience in the truest sense
June 30th, 2009 at 8:43 pm
They don't ask, but there is a good chance they will find out anyway. My aunt has a trampoline in her back yard, which is prohibited, but she figured no one would ever know. It went unnoticed until some teenager tried to dial a number on his cell and hit the front of her house. Her insurance company (along with his) came out to inspect the damage and saw the trampoline.
They also find out when the dog attacks someone in the neighborhood or gets loose and chases the mailman and a complaint is filed.
There are plenty of incidents that could take place that would cause the insurance company to come out.
June 30th, 2009 at 8:50 pm
It really depends on how it breaks, what type of policy you have and the insurance company?
Some company's can even add riders to your policy to cover it.
Call you insurance company or ask your agent!
July 1st, 2009 at 4:06 am
Yes very much so. Certain breed's of dogs will void a home owners insurance policy. This is based usually on vicious breeds who tend to generage alot of liability claims. It states this clearly in your policy. If your friends looks at her HO3 policy she will see which specific breeds will cancel her policy. Also many HO3 policies place exclusions against trampolines & swimming pools.
If she chooses to keep the dog – she will have to go through an excess/surplus company to get her homeowners insurance. She will pay about 3x the amount she was paying prior. Its up to her if the dog is worth keeping.
July 1st, 2009 at 10:13 am
Do you think Mccane be any different ?
July 1st, 2009 at 5:35 am
Thank you for running into each other instead of an innocent person who is following the rules.
You stand as much chance as your homeowner paying the bills for your accident as there is that your auto insurance would cover your house burning down.
If that's not plain enough, NO.
Which ever of you was at fault in the accident owes the other for all damages.
July 1st, 2009 at 6:06 pm
yes mccain would be different he wouldnt spend trillions on earmarks like this man did we would have fewer issues to deal with him than this fake president .i thought we was going to bring the troops home cause since hes in office now the world will like us .LIES .oh what about the 750 BILLION stimulus bill where they dont know where the money went to .LIES .passed 400 billion package to remove bad assets from banks.LIES
July 2nd, 2009 at 11:52 am
oh can someone answer this? in all the money that he passed ,how many millions went back to work or gotten back into their homes didnt he promise that in his campaign did all he said that he promised came true yet? show me where he kept his promise in anything he said
July 2nd, 2009 at 6:20 pm
If I were you, I'd look into two things in particular:
First is a mortgage disability policy. You would probably want to take out this policy on both you and your husband. This will help to cover mortgage payments if you or your husband are injured and unable to bring in income.
I'd also look into life insurance policies on each of you. If your husband were to pass away, would you be able to continue making mortgage payments on your own? Would you choose to move? If not, life insurance is a must.
July 3rd, 2009 at 5:34 am
You’re right Keats, plus, if I were them, I’d be mad to! If I voted for the retard we call Obama, and he broke every campaign promise in the first 100 days, I’d be mad as hell!
We tried to warn them, but the old saying holds true, you can’t fix stupid!
They can only wish for George W Bush! Wait till Barry cuts 20% of our missile defense systems, $2Billion! I guess he had to pay ACORN with something. Oh well, hope you’re ready for this America, because it’s ain’t gonna be pretty!
July 3rd, 2009 at 9:38 am
Well put.
July 3rd, 2009 at 12:35 pm
You need to call an insurance company for quotes, start with your auto insurance company & go from there. There are many questions, what does the master policy cover? You would need to read the condo bylaws to find out. Does that policy cover everything attached to the unit or only to the studs? Does it cover anything that you add to or alter in the unit? So, you would purchase a condo policy (HO6 form), you would need to find out from the condo association what you actually need to cover. That would be the dwelling limit you need. Then you need to tell the insurance company how much contents coverage you want (if you had to replace everything you own), then get at least $500,000 liability, $5,000 medical payments & get $50,000 (or the company maximum) loss assessment (this covers if you are assessed for damages to common property – simplified definition – you would need to speak to an agent to explain it to you). You would also need to tell the agent the deductible you want (property coverage).
Good luck in your purchase but no one here can give you a quote.
Homeowners insurance is always an annual policy.
July 3rd, 2009 at 4:17 pm
The more available you are to potential customers, the more likely you will get to quote them. I know that when I am attempting to buy something, I partly base my decision on how easy it is to get ahold of someone.
July 3rd, 2009 at 8:50 pm
Go the the taxing authorities homepage for your county (Google it). You can look up the average taxes on the homes for the neighborhoods you are considering.
July 4th, 2009 at 3:06 am
Not only that, but he obviously wouldn’t answer the question, “if the tax cut for 95% is not in the bill, will you sign it”HAHAHAHA, ya’ll been had! How’s that working for ya? Don’t you feel proud for making history? You made history alright! The people who truly lose are the weak and dependent, and that appears to be the majority of the people that voted for this charade. Wonder how many of them smoke? How will they pay for them after 4-1?Did they think ACORN would continue to pad their habit?
July 4th, 2009 at 7:16 am
imyourdave-he has the chance-We are not united, We are crucially divided. We are not standing nor are we falling. We are already on our knees. Get with it, sir. Stop making excuses for this disgrace of a ‘President’. He may be the laughing stock of Europe, Asia, and the Middle East, but this individual, this ‘Manchurian Candidate’, is bound and determined to ruin much of what we have become. Our allies chuckle at us- If God cannot help us, please Americans-vote this bastard out of office.
July 4th, 2009 at 1:33 am
I have to say, I support the insurance company on this one. They have to manage risk, and part of that risk the dogs people own. Unfortunately, there are quite a few really bad pit owners out there. Don't blame the insurance company, blame the irresponsible owners.
Besides, to make a comparison- a regular doc's malpractice insurance is about a fraction of what it is for a ob- have you ever wondered why there seem to be a larger number of docs getting OUT of the baby business? Used to, all gyns did OB, now, that number keeps dropping. Mostly because they can't afford to pay the insurance AND deliver babies. Are the insurance companies discrminiating against OB's?