When you buy a house, in most states you are obligated to buy homeowner's insurance to make sure your property is covered in evidence of a natural disaster or an accident. Depending on where you live, you may have to buy additional coverage for some natural disasters like earthquakes. Which home insurance policy you buy will depend on how much coverage you need and what type of home you purchase.
What Homeowner's Insurance Covers
A basic homeowner's policy covers your home, any other buildings on your property and some of your personal items if there is a fire, flood or some other disaster that results in a loss. However, not all homeowner's insurance policies cover the same things; it depends on which home insurance policy you purchase.
Coverage for Your Home
If there has been damage to your house due to a covered loss, such as fire, hurricane or flood, then your policy will pay for repairs to your home or to rebuild it if it was a total loss. Your policy will pay to repair damages to your electrical wiring, plumbing, heating and your air conditioning unit. It is important that the policy you purchase will pay to rebuild your home if necessary.
Other Buildings on Property
If you have other buildings on your property, such as a detached garage, fences or a tool shed, then they will be covered by your homeowner's insurance policy as well.
When your home is damaged, you could end up losing personal property like your clothing, the appliances, furniture or any electronics that you have in your house. Depending on which home insurance policy you have, those items should be covered as well so you can replace them. However, some items may not be covered by a regular homeowner's policy, such as expensive jewelry and firearms so you may have to purchase additional coverage to make sure those items are insured.
Loss of Use
If your home has been damaged to the point that you cannot stay there, then your homeowner's policy will cover the cost of temporary housing for you and your family. That may mean covering rent on a home or an apartment, but it could also mean paying your hotel bill if you are only inconvenienced for a few days.
Depending on which home insurance coverage you purchase, you should have liability insurance to cover any injuries or damage to people or property after having an accident on your property. This would cover medical expenses if someone was injured in a fall at your home or damage due to a fallen tree limb onto a car.
Additional Insurance Coverage
If you live in an area where earthquakes occur, you may need to buy insurance to cover damaged caused by an earthquake, as most homeowner's policies do not cover earthquakes. You can also purchase additional coverage for personal property usually not covered by the home insurance coverage you already purchased.
Types of Homeowner's Insurance
There are seven types of insurance that covers homeowners, renters, cooperatives and condominiums. While these policies do not cover mobile homes or house trailers, you can purchase other policies to cover those types of dwellings. Which home insurance policy you buy will depend on the age of your home and the type of coverage you want for your property.
This policy just covers the basics and it is rarely sold today due to its coverage limitations. In fact, it has been discontinued in many states because of the limitations. It provides hazard insurance with a covered list of perils and it also provides liability insurance.
This type of policy covers the home, other structures on the property, personal items like clothing, books, and furniture, and it also has liability coverage. The list of perils with this policy is broader and some of these policies provide loss of use insurance as well. The personal property coverage is a percentage of the value of the policy, which may be as high as 70 percent.
This type of insurance is the one most commonly purchased today. It offers the same coverage as HO-2, but also includes coverage for damage not specifically excluded. Coverage for damage due to floods, earthquakes or water seepage is usually excluded. Personal property coverage is also provided for the perils listed in this type of policy.
Policies listed under this type of insurance have an open perils clause instead of a list of perils like HO-2 and HO-3 policies. Any damage or loss to structures or personal property is covered unless specifically excluded in the policy.
This type of policy is specifically for older homes that have a replacement cost that is higher than its market value. It pays to repair or replace damage using common construction materials and methods and provides for functional replacement, which costs less. For instance, if your home had hardwood floors, then they may be replaced by plywood instead. Theft coverage is restricted to items from the main residence and usually only covers up to $1,000 per occurrence.
Policies under this type of insurance are a modified version of HO-2 policies and are for homeowners who have bought cooperatives or condominiums. These policies have two components, the building and common areas and the property of the owner. It covers property within the dwelling like carpet, cabinetry, appliances, etc., but not the structure or common areas as those are insured by the cooperative or condo association.
This is basically renter's insurance that covers both losses of personal property within the dwelling and on the outside of it, as well as liability insurance.
Policies under HO-2, HO-3, and HO-5 are typically for newer homes, but which home insurance you buy will depend on the coverage you need. An insurance agent can help you select the policy, and any additional coverage for your home or personal property, that is best for your needs, as well as your budget.