Everything You Need to Know About Constructing a New House

Close to two-thirds of homes in the United States don’t have enough insurance coverage. With an increase in floods, tornados, wildfires, and other extreme events, you could find yourself in a financially devastating situation.

Homeowners insurance is confusing. How are you supposed to know the difference between HO-1 and HO-5?

You just assume that you’re paying for insurance, so you should be covered. It turns out there are different types of homeowners insurance that you should have.

Keep reading to become a smart homeowner and learn about the types of insurance policies for your home.

1. Basic Insurance

This is known as HO-1 in the insurance industry. The home and personal effects get covered at their depreciated value, not replacement value.

This is important to note because if you have a five-year-old computer to replace, you’ll get the cash value, which is probably $100 if you’re lucky. The cost to replace it would be at least $700.

It only covers 10 events, such as theft, fire or lightning, vandalism, smoke, riot, and vehicles.

HO-2 is an upgraded version of the basic form of insurance. Your home gets covered at the replacement value and your personal property at cash value.

2. Special Form

HO-3 is the insurance policy that most homeowners have. It’s supposed to cover all risks, but read your policy carefully.

Insurance companies have a list of events that are exempt from coverage. Wear and tear, mold, animals, and government action are found on the list of exclusions.

Check your policy to see if your property gets replaced at cash value or the replacement value. Most policies automatically have cash value. You may have to get an additional rider to cover the replacement value.

3. Comprehensive Form

HO-5 policies cover your home and belongings at their replacement value. You’ll get comprehensive coverage for hard-to-replace items.

Fine art, antiques, and jewelry have higher coverage limits. This type of homeowners insurance policy is appropriate if your home has a lot of value.

Even if you have a mid-range home value, you might find the higher premium costs to be worth it knowing that you have full coverage.

4. Contents Broad Form

HO-4 is actually a renter’s insurance policy that covers the contents of a home or apartment. This covers personal liability and living expenses if you have to live elsewhere because of damage.

This applies if this is a rent to own with poor credit situation. Since you don’t own the property yet, you just obtain a renter’s insurance policy. The landlord gets adequate homeowners insurance.

You’ll get a homeowners policy once you become the owner of the property.

Know the Types of Homeowners Insurance

Insurance is a strange, confusing world. A lack of knowledge could turn out to have dire financial consequences.

Arm yourself with information and learn the types of homeowners insurance. Purchase the right policies to get complete insurance coverage.

That’s when you’ll truly have peace of mind. For more lifestyle tips, be sure to visit the home page of this site.

Read more: How to Select the Right Liability Insurance for Small Business

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