The Fort McMurry wildfires in 2016-17 resulted in 60,000 insurance claims that totaled nearly $4 billion of losses.
Without the right home insurance, those people might be left covering some of those expenses from their own pockets. Choosing the right policy is only a matter of understanding the different types of home insurance available to you.
You need insurance whether you own a house, a condo, a mobile home, or you rent. What differs between them is the type of home insurance you need, as well as the level of coverage.
If you’re unsure about the differences between the types of homeowners insurance policies, and which one you need, keep reading to find out.
Types of Homeowners Insurance When You Own Your Home
Homeowners insurance applies to attached and detached homes, townhomes, tiny homes, and historical home. If you own any one of those types of dwellings, you need one of the following five policies.
The policy you choose will depend on a combination of the type of dwelling as well as the level of coverage you need.
HO1: The Limited Coverage Policy
Otherwise known as the peril policy, this type of homeowners insurance only covers the perils that are outlined in the policy. With limited perils covered, this is the most basic of all types of homeowners insurance.
With an HO1 policy, damage to your home is only covered for disasters that rarely strike. These include:
- Hail and windstorms
- Fire or smoke
- Riots and civil commotion
- Damage from vehicles
- Damage from aircraft
These policies typically don’t offer any coverage for your personal property or belongings. They also don’t provide personal liability coverage. Meaning if an accidental fire from your home spreads to a neighbor, those damages aren’t covered by your insurance policy, and you’ll be paying out of pocket.
HO2: The Basic Policy
Also known as a broad coverage policy, an HO2 policy covers all of the damage included in a limited coverage policy. In addition to that, it covers:
- Falling objects
- Damage caused by the weight of ice, snow, or sleet
- Freezing of household systems (i.e. AC or heating)
- Water damage caused by accidental discharge or overflow of water or stream
- Unintentional and sudden damage from an electrical current
- Unintentional and sudden cracking, burning, bulging, or tearing of household systems (i.e. plumbing systems)
Beyond all the damage it covers, a broad coverage policy also provides coverage for your personal property as well as liability.
HO3: The Special Form Policy
When we think of a typical homeowners insurance policy, the HO3 policy is the most common. Also known as a comprehensive open peril policy because the damage isn’t defined, this type of insurance policy protects your home a bit differently.
With an HO3, what you’re covered for isn’t listed in the way it is for an HO2 or HO1. Instead, your home is covered against damage from everything, with the exception of what’s listed in the policy. These policies usually extend to any other structures that are part of your home, including garages, boathouses, and sheds.
The items excluded from coverage will differ from insurer to insurer. It’s important to understand what your particular policy covers before deciding that it’s right for you.
HO5: The Most Comprehensive Policy
An HO5 policy provides the most comprehensive coverage a homeowner can get. But in terms of insurance costs, they’re also the most expensive of all types of homeowners insurance. You might opt for this type of coverage if you live in a high-value home compared to the rest of the state – as long as you also live in a low-risk area.
What sets an HO5 policy apart is how you’re reimbursed for damages. Like some of the other types of homeowners insurance, an HO5 policy reimburses damages to the dwelling as well as personal property claims.
But they do this using a replacement cost value calculation. Meaning that you get the highest dollar value for your belongings and your repairs. Plus, valuable items like furs, electronics, and jewelry can be covered under an HO5.
HO8: The Older Home Policy
If you own an older home, you require a different type of homeowners insurance. Because older homes are made with different building materials that can’t be replaced or are no longer in use, they need an insurance policy that reflects that.
The replacement terms of HO8 coverage are therefore modified to reflect that damages will be repaired using updated fixtures and materials. For example, old wiring and electrical fixtures would be replaced with modern, updated electrical work.
These policies are specific to homes that are more than 40 years old. And, like the HO1, they only provide coverage for predetermined perils.
Optional Types of Home Owners Insurance Coverage
Beyond those types of homeowners insurance, there are added options that you might consider. These supplemental insurance packages have their own deductibles and provide coverage for events that fall outside of your primary policy.
Though optional, these might be a smart investment, depending on a number of factors. For example, if you live in a flood-prone area, you should think about purchasing flood insurance. Not usually covered in primary policies, it could save you $1000s in a world where flooding is getting worse.
If there’s a backup in the sewer or drain and this causes damage to your home, a Water Backup policy covers your belongings and repairs.
An HO2, 3, and 5 will cover you from damage caused by burst pipes and overflowing toilets, sinks, and tubs. If you have Water Backup coverage, you’re also covered for damage that results from sewer and drain backups. None of these policies will cover you in the case of a flood.
Outside of the Water Backup policy, those policies only cover damage when the water originates from within the home or from the sky. But when you incur damage as the result of water coming from rivers, creeks, and flash floods, you need a separate flood insurance policy.
With this type of coverage, anybody injured from an accident that occurred on your property can receive immediate medical treatment. This insurance can be used to cover the cost of that person’s medical expenses without determining fault.
Personal Umbrella Liability
This is supplemental liability coverage that covers property damage and personal injury to others.
Ordinance Law Insurance
If you have an older home and ever need to rebuild or make major repairs, you might find that you have to bring it up to code. That makes a simple plumbing or electrical job a lot bigger than what your primary policy will cover. In that case, this type of coverage helps you cover those additional costs.
Replacement Cost Plus
If your house is ever considered a total loss, this added coverage can help you rebuild.
Other Important Types of Home Insurance
Homeowners insurance aren’t just for homeowners and renters, they’re also for condos and mobile homes. These types of dwellings require their own type of homeowners insurance.
HO4: The Renters Policy
An HO4 is the renter’s policy. Although not required by law, your landlord may require you to have rental insurance before you sign the lease.
This type of homeowners insurance covers all of the same damages as an HO2. It’s almost the same as an HO3, but with one important difference.
Renters insurance doesn’t include dwelling coverage. Because a renter doesn’t own any of the structure or building in which they live, there’s no need to have insurance on the dwelling.
Instead, an HO4 policy provides coverage for the tenant’s personal effects and property located within the unit. Like an HO2 or HO3, it also provides liability coverage for the tenant.
HO6: The Condo Policy
Condo insurance is for people who own their condominium. It differs from conventional homeowners insurance because condo owners have added coverage from the condo association insurance policy. So a condo owners insurance policy must differentiate between their unit and the overall building the unit is located in.
HO6 insurance policies provide coverage for 16 types of accidents that can occur within the dwelling. They also cover the personal property inside the unit and storage locker as well as liability.
HO7: The Mobile Home Policy
You need an HO7 if you live in any of the following types of mobile home:
- Single-wide mobile homes
- Double-wide mobile homes
- Sectional homes
- Modular homes
- Park model homes
An HO7 provides the same coverage as H03, but the terminology is changed to reflect mobile homes.
Get a Homeowners Insurance Quote
There are different types of homeowners insurance for homeowners, condo owners, mobile homeowners, and renters. But the type of insurance coverage you need will not only depend on your dwelling but also the degree of coverage you want. While a limited coverage policy only covers you against the most seldom of disasters, an HO8 covers a lot more than what many people need.
When you’re ready to choose your homeowners insurance, get a quote from us.