Types of Homeowners Policies
Most policies cover losses against fire, storm damage, and other named perils. Depending on your coverage, your policy pays for repairs, loss of use, liability claims, medical payments, and more. Types of policies can cover different types of losses, including basic, broad, and special (all-perils) coverage. These will pay actual cash value to replace your home and possessions minus depreciation, referred to as replacement cost value. This is the actual cost of replacing your home or belongings up to your policy limit less depreciation. Some of the more common policies include:
HO-1 Policies
HO-1 is the base homeowner’s policy. It only covers perils that are named.
HO-2 Policies
The HO-2 is for mobile homes. It covers perils named for both the structure and contents.
HO-3 Policies
The HO-3 is a very popular policy. It protects against all perils except those that are named as excluded. This policy is a broader form of homeowner’s insurance. It provides more comprehensive coverage.
HO-4 Policies
The HO-4 is a renter’s insurance policy. It protects only the contents rather than the structure of your home. It only covers perils that are named.
HO-6 Policies
An HO-6 policy provides coverage for condominiums or co-ops. You’re protected against losses from perils cited in the policy for the portion of the structure that you own.
HO-8 Policies
And HO-8 provides basic coverage for older homes for actual cash value less depreciation. These policies don’t often offer a full replacement cost option. It’s a “named perils” policy.
Homeowner’s Insurance Policy Exclusions
Review your homeowner’s policy, including the declarations page. Take note of what types of losses aren’t covered. Common homeowner’s exclusions include losses from:
FloodBusiness equipmentEarthquakesValuable personal propertyFuture assetsDamage from warPollutionNuclear accidentIntentional damageNormal wear and tearConstruction defectsVehicles parked on your propertyFrozen pipesVandalismTenants’ propertyPets and other animals on your property
This isn’t a complete list. It’s just some of the more common ones. And it doesn’t mean that you can’t be protected against these types of losses even though a peril may not be covered on your policy.
Policy Riders for Added Protection
A rider, also known as an endorsement, adds coverage for perils not listed in your policy. It will provide the extra coverage for an extra premium. You also have the option to buy a special coverage policy if a rider can’t be added to your policy.
Flood Insurance and Other Special Endorsements
Some policies can include riders like pet insurance, boat insurance, and earthquake insurance. But most policies will not include flood insurance. Coverage for floods is only offered through the National Flood Insurance Program (NFIP) and its authorized private insurers. This type of policy has a standard base cost regardless of the provider it’s purchased through. But it does allow you to add modifications that can have varying costs and levels, depending on the provider.
Earthquake
Your home is only insured against earthquake damage if you’ve added an earthquake rider to your policy. It will pay for repairs to your home and other structures that aren’t attached to your home, such as a garage, after an earthquake. It can also pay for costs to bring your home up to current building codes. It can pay for other incurred expenses such as debris removal.
Inflation Guard
It may not be enough to replace your home if a total loss should occur and you insure your home for the price you paid for it. An inflation guard rider can help. The coverage amount increases every year to keep up with inflation.
Sewer Backup
A sewer backup can cause costly water damage that can be very hard to repair. It may also pose a health risk to you and your family. It is not a pricey endorsement to add to your policy—typically between $50 and $250 per year. Check with your insurer to find out how much it would cost to add this rider to your policy.
Scheduled Personal Property
Do you have valuable items outside of the normal household inventory, such as jewelry, electronics, computers, or fine art? You may want to schedule these items to make sure you can replace them at their full value in the event of a loss.
Personal Property Replacement Cost
The personal property replacement cost rider pays replacement cost for your personal property without depreciation in the event of a covered loss.
Home Business Endorsement
More and more homeowners are running home businesses these days. They need insurance to cover business equipment and legal liability for a home-based business that’s not provided in a basic homeowner’s policy. A home business endorsement will add this.
Watercraft Endorsement
You can add a watercraft rider. This will add coverage for any boat that you own or use. It protects you against damages that happen while you’re boating or when the boat is docked. It also offers liability protection. It offers payment of medical fees as a result of a boating accident.
Theft Coverage
Theft coverage provides protection against theft for your personal assets. Riders are based on the type of policy you have. Check with your insurer to find out what type of theft coverage is available to you.
Secondary Residence Premises Endorsement
This rider adds coverage to your homeowner’s policy for a vacation home. Buying a rider may be a cheaper option than buying a separate policy for a secondary residence.
Personal Injury Endorsement
A personal injury rider adds liability protection to your policy for things such as false arrest, wrongful eviction, slander, defamation, personal and advertising injury, legal liability, and other types of personal injuries that are harmful but aren’t actual physical damage to the body.
The Bottom Line
Adding extra coverage to your policy may cost you an extra premium. But it may be worth it in the long run. You don’t have a moment to lose to get your home repaired and back in living condition if disaster strikes. Weigh the risks to figure out if you need more coverage than you have. It’s not a bad idea to consult with a professional to review your options. It may be as simple as getting a more comprehensive policy. It will depend on your unique circumstances and needs. Do an insurance checkup at least once a year to make sure you’re covered against any unexpected losses.
