If you are planning to buy a new home, then you are probably aware that you will need to buy homeowner’s insurance too. Going through a bunch of different policies can get overwhelming and confusing, which is why you need to take time to learn your coverage options.
A. Different Types of Insurance Policies
There are different kinds of insurance coverage. Each policy is unique, so you have to carefully read your own policy to make sure that you understand every part of it.
Ask for home insurance quotes and have your insurance agent discuss each plan with you. Ask challenging questions when you meet with your agent. This will help you fully grasp what is included in your coverage.
1. Basic Form HO-1
This is, by far, the most straightforward kind of home insurance. Though it’s not common today, many homeowners used to subscribe to this plan. Numerous mortgage firms contend that this form of insurance only provides coverage for specific events like the following:
- Smoke or fire
- Lightning
- Explosions
- Windstorms
- Hail
- Volcanic eruption
- Civil commotions
- Riots
- Damage due to aircraft accident
- Damage due to vehicular accidents
- Vandalism
- Theft
2. Broad Form HO-2
Compared to HO-1, HO-2 is broader in terms of form. This kind of insurance provides coverage for the events above, as well as the following circumstances:
- Personal belongings insurance
- Accidental and sudden damage due to artificial electric current
- Unexpected and sudden tearing, burning, cracking, or bulging of piping and other home systems
- Freezing of heating, AC, or other household systems
- Damage due to the weight of sleet, snow, or ice
- Damage due to falling objects
3. Special Form HO-3
At present, the HO-3 is the most prominent and widely subscribed to type of home insurance. Rather than providing coverage for specific events, this type of policy covers any kind of structural and property damage. The exceptions are expressly stated in the insurance terms and home insurance quotes.
4. Comprehensive Form HO-5
Based on its name, this type of insurance coverage offers the most comprehensive benefits homeowners can buy. Just like HO-3, HO-5 also covers unexpected and sudden events, except those expressly excluded in the policy.
Then again, this form contains less exceptions. In fact, the homeowner can even decide his or her coverage limits.
B. Not all unfortunate events are covered
If you think that every type of damage that could befall your property is covered and reimbursable by insurance, think again. If there is one thing that all homeowners should thoroughly understand it’s that when it comes to insurance, the policy provides for the exclusions or the events that are not covered.
Typically, events like construction, landslides, earthquakes, and floods require you to purchase insurance that is higher than HO-3 policies. In any case, it is essential that you thoroughly read your policy before signing any home insurance policy.
In as much as you need to know the inclusions, you also have to know more about the insurance exclusions. Again, it is best to understand these by reading your home insurance quotes.
Depending on the area of your home, you might also need more coverage than what is covered under a standard policy.
In such a case, you might need to subscribe to rider insurance. A rider means a provision in the insurance that amends or adds coverage to your existing policy.
This usually comes at an extra cost, but the coverage you get is worth it. It is always better to be safe now than to be sorry later.
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