HO Policies Explained

Insurance should be a priority for homeowners at all times. Many people believe that this is a choice. Quite the opposite, insurance should be regarded as safety. It protects your home in case an accident happens. Think of it this way; it may be the best one thing you buy, hoping that you’ll never have to use it.

Before selecting the right homeowners insurance policy, one must understand what an HO actually stands for and what kind of coverage it provides. The three main valid reasons to buy insurance are:

1- Property Coverage: Insurance covers for damage or/and destruction of your property. Damage to exterior and interior of your house. This means in case of hurricane, flood, fire, lighting or even vandalism, your property is covered. Any personal belongings like high priced possessions (e.g. fine art and jewelry) and contents inside your home (e.g. furniture, appliances, and clothing) are also covered if the event is insured.

2- Liability: In case a person is injured or killed in your property during an event or disaster, your insurance provider will assume coverage. In case a person’s property is damaged or destroyed while they are on your property, it is likely insurance will also take financial responsibility.

3- Mortgage: Most banks will only loan if you have insurance. Even landlords sometimes require tenants to purchase the renter’s insurance which covers belongings, liability and living expenses in case of unexpected circumstances of loss.

4- Hotel or Rental: Many insurance policies cover hotel or rental expenses while your home is being repaired or restructured after a disaster.

Many people ignore the specific disasters or losses insurance covers. Although there are nine types of homeowners insurance policies, most policies cover a common list of perils.

Common Types of Damage Covered:

  1. Fire damage
  2. Theft and vandalism
  3. Falling trees and other objects over structure
  4. Water damage
  5. Ice and snow damage
  6. Damage by any kind of vehicle

What Is Usually Not Covered?

Insurance companies will do their best to exclude and restricts certain perils that happen over time. Although water damage is covered from an unexpected ruptured pipe, it may not be covered for a flood that happened by rising sea levels during an extended period of time.

Most insurance policies exclude floods or sewers in the property, any kind of pollution damage, earthquakes and land movement, damage done by pets, deliberate damage or gradual tear of home structure.

Types of HO Policies:

HO-1 (Basic Form): It covers only the following ten basic perils— fire or lighting, hail or windstorms, explosions, riots or civil commotion, damage from vehicles, smoke, theft and vandalism, volcanic eruptions. If a peril is not included in this list, then it is not covered under the HO-1 policy.

HO-2 (Broad Form): This policy covers the same 10 perils the HO-1 does with the inclusion of a few more like — damage to electrical currents, frozen pipes, damage to the water heater, water damage from plumbing, heating or air conditioning overflow, riots or civil disturbances. It also includes coverage for personal belongings and liability.

H0-3 (Special Form): This the most common type of policy and it is written on an open per peril basis, meaning that it covers any risks except the ones excluded in the policy. Some exclusions are: earthquake damage, water damage from flood and sewer backup, demolition of your home required by law, seizure or demolition by public authority. Remember that this policy only covers for events explicitly listed in the policy.

HO-4 (Tenant’s Form): This kind of insurance is used by renters. It covers both personal belongings and personal liability — not the building structure.

HO-5 (Comprehensive Form): This type of policy is very similar to the H0-3 as it is written on an open per-peril basis and has some exclusions. Common perils included in this policy are damages associated with earth movement, power failure, water damage from flood, war, nuclear hazard, intentional loss, theft or vandalism, mold or fungus, collapse of structure, wear and tear or deterioration, smog, smoke, discharge, infestation and more. Although the H0-5 has a great coverage, its benefits come at a higher cost.

HO-6 (Condominium Unit Owners): This type of policy is commonly used by owners of condominiums or co-ops. It provides personal property coverage, personal liability coverage and specific coverage for the individual unit owner with some limitations. This policy assures coverage inside your walls against many perils.

HO-7 (Mobile Home Form): Although this policy may be very similar to the HO-3, it is intended for mobile homes only therefore some exclusions and limitations apply.

HO-8 (Older Home Form): This policy is used for homes that were built 40 years ago. They can be a historical landmark or architecturally important. Many materials for older structures cost more than the market value of the property. It is very similar to the HO-3 form with the major difference being the age of the structure.One important exclusion in this policy is the fact that it doesn’t cover for personal belongings but it does provide protection against common perils.

Dwelling Fire Form: This policy is intended to cover for dwelling and some specific perils. Many homeowners use it as an alternative for their vacations homes — not their primary residences.

Many homeowners disregard the importance behind choosing the right insurance It is only after a tragedy or disaster that they realize how important it is to have sufficient coverage. The right policy is not alway the one with the most coverage rather the one that meets your needs.

It is very important you invest the time in understanding each type of homeowners insurance policy and how each is better suited for you and your home. Every minute you spend looking at all the options and evaluating will be worthy.

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