Different Types of Home Insurance Policies
At Colby Insurance Group we want to help you improve your Insurance IQ by gaining a better understanding of insurance. Your house is likely one of your biggest financial investments and more importantly the place your family calls home. The goal of most home insurance policies is to try to make you whole again if you suffer a loss. Part of that is choosing the right homeowners’ insurance policy to fit your unique situation.
Understanding the different types of Home Insurance Options
A person who owns his or her home would have a different policy from someone who rents. Policies also differ on the amount of insurance coverage provided.
The different types of homeowners insurance policies are fairly standard throughout the country. However, individual states and companies may offer policies that are slightly different or go by other names. The policy naming structure begins with an HO for Homeowners’ Policy and is followed by a number indicating the type of Homeowners’ policy it is. For example, an HO-1 is a Homeowners’ policy that offers limited coverage and an HO-3 is a special forms policy that has more coverage except for excluded perils. An HO-4 policy is specific to renters and an HO-6 is a specific policy for co-op housing or condo owners.
If you own your home
If you own the home you live in, you have several policies to choose from. The most popular policy is the HO-3, which provides the broadest coverage. Owners of multi-family homes generally purchase an HO-3 with an endorsement to cover the risks associated with having renters live in their homes.
HO-1: Limited coverage policy
This ‘bare bones’ policy covers you against the first 10 disasters. It’s no longer available in most states.
HO-2: Basic policy
It provides protection against all 16 disasters. There is a version of HO-2 designed for mobile homes.
HO-3: The most popular policy
This ‘special’ policy protects your home from all perils except those specifically excluded.
HO-5: A common choice for high-value homes
This type of homeowners’ policy has open perils and broader coverage for the contents of the home. If you have a lot of custom features in your home or expensive belongings an HO-5 will address those needs. For homes with a value of over $750,000 a high-value homeowners’ policy is often recommended.
HO-8: Older home
Designed for older homes, this policy usually reimburses you for damage on an actual cash value basis which means replacement cost less depreciation. Full replacement cost policies may not be available for some older homes.
If you rent your home
HO4-Renter
Created specifically for those who rent the home they live in, this policy protects your possessions and any parts of the apartment that you own, such as new kitchen cabinets you install, against all 16 disasters. Renter’s insurance is affordable and easy to get.
If you own a co-op or a condo
H0-6: condo/co-op
A policy for those who own a condo or co-op, it provides coverage for your belongings and the structural parts of the building that you own. It protects you against all 16 disasters.
Our agents like to take a coverage first approach to ensure you have the coverage you need in case you suffer a loss. Another thing you want to be mindful of when shopping for homeowners’ insurance is the policy limits and the valuation of your home based on the replacement cost or the actual cash value. Many times people confuse the market value of their home, or what appears on their tax card as the value of their home when it comes to the insurance policy. A more effective way to look at it is what is the replacement cost value of your home. In other words, what would it cost in today’s market to replace the home to its original state before the loss.
Some additional home insurance considerations
A common way for you and your agent to better manage your insurance needs and to realize possible discounts on your insurance bill is to bundle your homeowners’and auto insurance policies with the same insurance carrier. An added benefit is that the renewals for both auto and home insurance will be at the same time each year making it more convenient for you.
To consult with an insurance advisor, call 800-392-6532 or email insure@colby-group.com.
This article is for informational purposes only. Insurance needs and coverages vary; therefore, the terms of your policy will be specific to your situation. We recommend that you discuss your insurance needs with a licensed agent for details on pricing, coverages, and exclusions.
