In the market for home insurance? It’s easy to get overwhelmed by all the options. We’re here to help. Keep reading to learn more about the different levels of home insurance coverage available and how to narrow down your options to find the best solution for your home.
Step 1: Know Your Policy Types
Home insurance policies are broken down into 8 major groups. Knowing which group option is the most relevant for your situation will help simplify the process when you’re collecting quotes!
HO-1: Basic Homeowner’s Insurance
This type of policy protects against ten specific named risks.
HO-2: Broader-Form Home Insurance Coverage
An HO-2 policy protects against a wider variety of risks—the ten specific risks named in an HO-1 policy, as well as six additional risks.
HO-3: A Special, Tailored Policy
This type of policy is one of the most popular options; it covers everything except perils that your policy specifically excludes.
HO-4: Insurance for Tenants/Renter’s Insurance
This type of policy is designed specifically for renters; it only covers your belongings and personal liability.
HO-5: Premium Coverage
This type of policy is one of the most comprehensive out there; it covers more perils than any of the above policies and excludes only those specifically noted in your policy.
HO-6: For Condo Owners
An HO-6 policy is designed to cover only your belongings and the interior of your condo, usually including the walls, floors, and ceiling. The building owner is responsible for insuring the structure itself.
HO-7: Mobile Home Coverage
This type of coverage is basically an HO-3 policy designed specifically for residents of mobile homes.
HO-8: For Older Homes
This is the policy to choose if you live in an older home; unique provisions and adaptations ensure that your older home is well-protected.
Step 2: Market Value vs Replacement Cost Coverage
The amount of coverage you want will depend on many factors: your home’s age and how well it’s been maintained, and your personal preferences and comfort level. When you talk to an agent about purchasing a new home insurance policy, they’ll ask you how much you would like to insure your home for. Jumping to the conclusion that you should insure your home for the amount you paid for it could prove costly. Let us explain the difference between Market Value and Replacement Cost.
Replacement Value: This means that if a covered peril completely destroyed your house, you’d get a check that would pay to rebuild your house, new construction, from the ground up. This is the most popular option by far.
Market Value: This coverage would reimburse you with a check equal to the estimated market value of your home at that time—the amount you could expect to sell it for on the market. This amount can vary widely, based on various market conditions. In most cases it would be far less than what it would cost you to rebuild your home, leaving you with the responsibility to cover the balance of the cost.
Still not sure how much coverage you need for your home? Feel free to call us. We’ll connect you with one of our knowledgeable agents who can talk you through the options to consider as you decide which policy is perfect for your family and your home.