Home Insurance Basics

Bizhen Fu, Mar 19, 2014
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Questions to Ask Before Shopping

 

How much coverage do I need?

Most of us think that insuring our home for its current market value is enough to cover any damage incurred. But the reality is the cost of rebuilding our homes could likely be a lot higher than what it was deemed to be worth at the policy outset. This should be considered especially for homes in flood or tornado prone areas.

What are the basic types of policies?

HO2 and HO3 Policy 

These are policies that offer coverage for homeowners. An HO2 policy is a basic policy that provides peril coverage (fire, theft, storms and others). HO3 policies on the other hand are a more flexible option. They give homeowners the option of choosing the type of coverage that is included in your policy. With an HO3 policy, homeowners are able to negotiate for lower premiums because they are able to determine which coverage are to be included in their policy.

HO4 and HO6 Policy

An HO4 policy provides the same basic coverage provided in an HO2 policy but excludes the property itself. This basically provides protection for all personal belongings located in the rented home/ apartment. It also includes coverage for injuries, claims or liabilities. HO6 policies specifically provide cover for condominium owners. It includes the same basic cover in HO2 policies as well as any structural damage in the property.

HO8 Policy

This type of insurance covers older homes. It is especially useful when the cost of rebuilding the home is much more expensive than the property’s market value.

Four Basic Types of Coverage

Structure and Other Structures

This involves any damage to your home or other structures (garage, gazebo) caused by perils (fire, earthquake, storms, etc) covered under your policy. The company pays for the repair or rebuilding of your home but this is limited to the maximum amount covered. The actual amount of rebuilding your home actually exceeds its market value. This is why you should always consider the current costs of rebuilding your home rather than basing the maximum amount on its market value.

Personal Belongings

This covers losses of personal property (furniture, jewelry, appliances, etc). But basic policies may not include high value items such as jewelry or paintings. Additional coverage which is referred to as a floater is required to provide specific coverage for these items.

Living Expenses

This involves expenses incurred while your home is being rebuilt. This may be limited within an agreed time period where the company pays for living expenses. It also reimburses lost income when rented space is damaged.

Liability Protection

Liability protection involves coverage for injuries or destruction of property caused by you, your family, property or pets. This includes medical coverage for injuries to a person visiting your home or property.