Understanding how homeowners insurance policies work can be helpful for every homeowner. A home is not just a place to live; it's an investment and can be a source of security. Knowing the different types of homeowners insurance policies which may be available can help a homeowner safeguard their assets.
This comprehensive guide provides valuable insights into the eight common types of homeowners insurance policies to help homeowners make informed decisions about their homeowners insurance coverage.
Types of Homeowners Insurance Policies
Homeowners insurance comes in various forms. Let's explore eight common types of homeowners insurance policies:
1. HO-1: Basic Form
The HO-1 policy, often referred to as the Basic Form, generally only offers limited coverage. While the terms and conditions of each policy will vary, it typically covers a narrow range of perils, such as fire and lightning. While it may serve as a homeowners insurance option, it may leave gaps in coverage, making it less popular among homeowners seeking more comprehensive protection.
2. HO-2: Broad Form
The HO-2 policy, referred to as the Broad Form, provides broader coverage than the HO-1 policy. While the terms and conditions of each policy will vary, it typically includes coverage for a more extensive list of perils, such as damage from falling objects or the weight of ice and snow. This increased coverage makes it a more attractive option for many homeowners.
3. HO-3: Special Form
The HO-3 policy, referred to as the Special Form, is often considered the most common type of homeowners insurance. HO-3 typically offers coverage for a wider range of perils. It may be seen as a balance of affordability and protection, making it a popular choice for homeowners. Although the terms and conditions of each policy will vary, commonly excluded perils may include floods and earthquakes, highlighting the importance of additional coverage options.
4. HO-4: Contents Broad Form (Renters Insurance)
The HO-4 policy, also referred to as the Contents Broad Form or Renters Insurance, is designed for renters rather than homeowners. While it does not cover the rented structure itself, it helps to cover losses to personal property and can include personal liability coverage.
5. HO-5: Comprehensive Form
The HO-5 policy, referred to as the Comprehensive Form, typically offers more extensive coverage for both the dwelling and personal property than the other options above. This policy is often considered an “upgrade” from the HO-3 policy due to its broader range of covered perils. If a homeowner is seeking comprehensive protection for their home and belongings, the HO-5 policy may be a good option to consider.
6. HO-6: Unit-Owners Form (Condo Insurance)
Specifically designed for condo owners, the HO-6 policy typically covers the interior structure of the condo unit and the personal property inside it. Also referred to as the Unit-Owners Form, HO-6 policies complement the master policy held by the condo association. Condo owners should carefully review their association's policy to understand the extent of coverage needed.
7. HO-7: Mobile Home Form
Owners of mobile or manufactured homes can opt for the HO-7 policy, designed to protect the structure as well as personal property. It typically offers coverage tailored to mobile and manufactured homes' unique characteristics and risks.
8. HO-8: Modified Coverage Form (Older Homes)
For owners of older or historical homes which may not qualify for standard coverage, the HO-8 policy, also referred to as the Modified Coverage Form, may be a suitable choice. This type of policy typically covers losses at the actual cash value (or depreciated value), rather than replacement cost, and commonly only covers a list of specifically enumerated hazards. It can nevertheless be a valuable option for helping to preserve the character of older properties.
Some Additional Coverage Options
In addition to the homeowners insurance policy types listed above, homeowners can consider additional insurance coverage options to address specific risks and circumstances, including:
Flood Insurance
Flood insurance can be crucial, especially if a homeowner lives in a flood-prone area. Although the specific terms and conditions of each policy will vary, most standard homeowners insurance policies generally do not cover damages or losses resulting from floods. Flood insurance is specifically designed to help cover losses caused by flooding and can offer financial protection for homes and personal belongings. This, in turn, can help provide assistance for what could otherwise be a very challenging situation.
Earthquake Insurance
In seismic regions, earthquake insurance can be a wise investment. While the specific terms and conditions of each policy will vary, most standard homeowners insurance policies do not typically cover damages and losses resulting from earthquakes. Earthquake insurance generally helps cover structural damage and personal property losses resulting from earthquakes.
Umbrella Insurance
Umbrella insurance is a type of policy which offers an extra layer of liability coverage beyond the limits of other insurance policies held by the policyholder, such as homeowners and auto insurance policies. It can be helpful to supplement existing personal liability protection.
The Bottom Line
Understanding the various types of homeowners insurance policies and additional coverage options is important to help safeguard an investment in a home. The appropriate insurance policy can help offer peace of mind and provide assistance in what could otherwise be a challenging situation.
At Acrisure, we pride ourselves on being a trusted insurance partner. Our experienced team of insurance professionals understands that choosing the right homeowners insurance policy can be a complex and critical decision. We are here to help simplify this process for you.
Acrisure can help you access a network of top insurance providers. We aim to help you find the insurance coverage that aligns with your requirements. Contact us today, and let us help you build the insurance solution that works for you.