Learning Center -> Home Insurance

Are there different types of policies?

The types of homeowners policies are fairly standard. Bellow are short descriptions of different types of policies that exist throughout the country.

If you own your home

If you live in your own home and want to insure, you have several policies to choose from. The most popular policy is the Standard Home Owner Package Policy. It 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:

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Damage caused by aircraft
• Damage caused by vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Volcanic eruption

HO-2: Basic policy

It provides protection against total of 16 disasters, which include those in H1, plus the following:

• Falling object
• Weight of ice, snow or sleet
• Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance.
• Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system.
• Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance.
• Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)

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.

All perils except flood, earthquake, war, nuclear accident, landslide, mudslide, sinkhole and others specified in your policy. Check your policy for a complete list of excluded perils .

HO-8: Older home

This policy is designed for older homes and usually reimburses you for damage on an actual cash value basis. This cost of replacement, 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 property they live in. This policy protects against all 16 disasters all your possessions, any parts of the appliances that you own, such as new kitchen cabinets you install, including fixtures and the costs of interior decorations and repairs,

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 or town-home provides coverage for your belongings and the structural parts of the building that you own. The association usually buys the policy for fire and liability. Your personal policy covers you against the rest of all 16 disasters.

Your level of coverage

The following three options are offered by all types of homeowner policies:

1. Actual cash value - This type of policy pays to replace your home or possessions minus a deduction for depreciation.
2. Replacement cost - The policy pays the cost of rebuilding/repairing your home or replacing your possessions without a deduction for depreciation.
3. Guaranteed or extended replacement cost - A guaranteed replacement cost policy pays whatever it costs to rebuild your home as it was before the fire or other disaster - even if it exceeds the policy limit. This policy offers highest level of protection, including protection against sudden increases in construction and building material costs, usually occurring after a widespread disaster, or any other unexpected expenses. Generally code required upgrades are not cover for the house to comply with new building codes. You can, however, buy an addition (endorsement) to your policy, called "Ordinance or Law" to help you pay for these additional costs. A guaranteed replacement cost policy may not be available if you own an older home.

Insurance companies offer an extended, rather than a guaranteed replacement cost policy. An extended policy pays a certain percentage over the limit to rebuild your home, generally, 20% to 25% more than the limit of the policy. So if your policy limit is $100,000 you coverage can be extended to by $20,000 to $25,000

Guaranteed/extended replacement cost policies may not be available in all states. However, if it does, it offers the best financial protection for your home.