What Are Different Types of Homeowner's Insurance?

Owning a home can be a risky enterprise. Homeowner’s insurance provides protection against risks such as medical payments for anybody who injures himself in your property, legal fees in the event the injury case goes to court and danger insurance against the cost of damage from fire, theft, wind or even a bursting water pipe. Mortgage lenders require borrowers to carry out hazard insurance to guard against the loss of the home. Insurance comes in many normal forms.

HO-1

Insurers use the term HO-1 to identify a bare-bones policy (discontinued in several nations, as stated by the International Risk Management Institute). It provides hazard insurance covering a list of”named perils,” and liability insurance. Liability occurs when an owner is held responsible for an accident on his property, such as a visitor tripping over a loose step and breaking her arm.

HO-2

HO-2 covers the operator’s home, additional buildings on the property, personal property–furniture, clothes, books etc –and liability insurance coverage. The list of”named perils” is broader than under HO-1. Some policies also pay costs in the event the owner must move to a hotel or apartment while his home is being fixed. The policy covers personal property up to a proportion of the value of the policy, typically 50 to 70 percent.

H0-3

HO-3 is the policy now most commonly used, the institute says. It gives the very same characteristics as HO-2, but protects homes against any harm not specifically excluded; floods, earthquakes and water seepage are standard exemptions. Private property is just covered for harm from the 16 named perils in the policy.

Cash Value

A cash value policy pays owners that the original cost of whatever was ruined, less depreciation for wear and tear, the Federal Citizen Information Center says. If the owner purchased her home for about $80,000 10 years back, the most she can claim is $80,000 less a decade of depreciation, even if the appraised value of the home is greater.

Replacement Value

A replacement value policy covers the cost of replacing or repairing a home or personal possessions, regardless of the cash value or the original purchase price. A $125,000 policy, for instance, will pay for replacements and repairs up to the worth of the policy. A guaranteed or extended replacement value policy will cover costs over the value of the policy.

See related