A homeowner has the responsibility of protecting his home from unforeseen events that can cause irreparable damage to his property. Homeowners insurance policies, also known as ‘HO Policies’, protect the home against damage, and provide insurance against loss of personal belongings.
Choosing the Appropriate Policy
HO-1: This is the most basic policy that covers damage due to the following factors: fire, lightning, smoke, vandalism, theft, ice, snow, windstorm hail, riot, and volcano eruption. Since this policy provides very basic coverage, its popularity has faded over the years.
HO-2: In addition to insuring against the above mentioned events, this policy protects against loss due to the following: freezing of plumbing, flooding due to plumbing overflow and heating system malfunction. Generally, mortgage lenders insist on a homeowners insurance. This is because the house functions as their collateral. While HO-1 covers damage due to 11 factors, HO-2 protects against 17 factors that may result in loss of property and belongings.
HO-3: This policy provides protection against the perils of nature. The premium may be higher in case of homes located in areas prone to hurricanes and windstorms. The policy also covers up to $2,000 worth of jewelry against loss due to theft. It covers the cost of rebuilding the house in case it gets destroyed. Just like the HO-2 policy, HO-3 covers the cost of damage to the house on account of flooding due to plumbing overflow and heating system malfunction. Liability suits that may be filed against the homeowner by people who may get injured on the property are also covered by this policy. However, it provides no protection against floods and earthquakes, for which, a homeowner is expected to buy additional insurance.
HO-4 and HO-6: These policies do not cover any damage to the building. They only provide protection against loss of personal property. Hence, it is ideal for condominium owners and tenants.
HO-5: This is the most comprehensive policy. The cost of the policy is 15% more than the cost of HO-3. In addition to including the coverage provided by HO-3, this policy insures against loss of building and property due to a number of factors. Buying a package that provides protection against a number of factors gives peace of mind to the owner. Also, it is cheaper to buy a single policy that protects against a number of factors, rather than buying individual coverage.
Shopping for the Best Quote
A homeowner should shop around for the best quote after deciding on the appropriate policy. He/she may get a good quote by installing motion sensors and surveillance cameras. In general, arming the house will help get a good deal on the policy. The insurance company should have strong fundamentals and should not be involved in any insurance fraud. The homeowner should also be aware of any consumer complaints against the company.
The amount of HO policy coverage for personal belongings is generally half of the amount of coverage provided for the home. Although a HO policy remains in effect, a landlords insurance policy is a must for houses that have been rented out or leased. This is because, ‘HO policies’ are only designed to provide adequate coverage for owner-occupied houses.
