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Home owner insurance coverage guide. The right home
owner insurance coverage is vital to a home insurance
policy. Are you at risk to lose all your possessions?
Homeowners insurance policies vary widely. To obtain
a policy that best serves your needs, you should understand
these variations and differences. There are currently
five standard insurance packages designed for homeowners.
As with other types of insurance, consumers may purchase
varying degrees of coverage with each of the packages.
As a general rule, the more a policy covers the higher
the cost or premium. The higher the deductible- the
amount the policyholder must pay before receiving benefits-
the lower the cost.
Keep in mind that different companies frequently use
different names for each of their packages and that
coverage may vary between seemingly similar packages.
It is also important to note that homeowners insurance
frequently insures considerably more than just a home
and its contents. It may, for example, insure you against
the loss or theft of your credit cards, provide considerable
personal liability insurance for someone injured on
your property, and even pay certain medical bills.
Provides coverage for eleven types of potential losses
to both the structure of the house and its contents.
Included are damages resulting from fire and lightning,
smoke, windstorms and hail, vandalism, theft, explosions,
riots and civil commotion, damage by vehicles and aircraft,
glass breakage and volcanic eruption
Provides similar coverage for all eleven areas covered
in HO-1, plus six other areas. The additional coverage
includes damage resulting from the weight of snow, ice,
sleet, surges or short circuits in electricity (radio
and television tubes are usually not covered), or problems
stemming from improperly functioning plumbing, heating,
and air conditioning systems or domestic appliances.
Provides maximum protection for the structure, above
what is covered under HO-1 and HO-2. Coverage for personal
belongings is extensive but not as complete as with
HO-5, below. Also, while HO-3 policies should be checked
for specific exclusions, most HO-3 plans cover everything
except damage resulting from floods, earthquakes, war,
nuclear accidents and similar catastrophes.
Provides the most comprehensive and expensive coverage
available to homeowners. HO-5 is not offered by all
companies. Except for damage resulting from such occurrences
as war, flood and earthquakes, HO-5 covers virtually
everything. The companies that do not offer HO-5 frequently
offer similar protection by adding supplementary insurance
to a HO-3 policy. This method of coverage may be more
cost-effective.
Older Homes Policy HO-8 Provides basic coverage similar
to that available under HO-1. However, HO-8 differs
in that it insures the house for its actual cash (market)
value, not for what it would cost to replace. The cost
to replace many older homes might be prohibitively expensive.
Actual cash or market value is different from replacement
value. Market value represents what you could sell your
house for at the time of appraisal. Replacement cost
is what it would cost to rebuild, not including the
value of the land and foundation.
Most homeowner policies cover the following:
Structure - In most cases, a house
is not considered adequately insured unless it is covered
for at least 80 percent of the replacement cost. If
cost is no object the house structure should be insured
for 100% of its replacement cost. Keep in mind, however,
that the purchase price of a home includes the cost
of land and foundation which are not destroyed in a
fire.
Landscaping - Generally, trees and
plants surrounding the house are insured up to five
percent of the level of coverage on the structure. Additional
home owner insurance coverage is almost always available
at an extra cost. However, do not expect insurance to
replace a 200 year-old oak tree with a duplicate, since
that is impossible.
Personal Property - Normally, personal
property is insured for up to 50 percent of the coverage
on the house structure. However, there are actual dollar
limits on such items on jewelry, silverware, stamps
and coin collections, and furs. In order to adequately
insure these items it is usually wise to purchase additional
home owner insurance coverage by way of a "floater"
or "rider" policy. These policies will independently
insure specific items against theft, damage of any other
type of loss in the home or away from home. Most expensive
items must be professionally appraised before they will
be insured under a floater.
Temporary Home Expenses - If damage
to your home requires that you live temporarily elsewhere,
some or all of the extra cost may be covered.
Personal Liability - Personal liability insurance is
designed to protect the homeowner against a claim or
lawsuit that could devastate the homeowner financially.
If, for example, a visitor slips and falls on the front
porch, the homeowner could be sued for hundreds of thousands
of dollars. The homeowner also could be liable for damages
caused by a tree in his yard falling and damaging his
neighbor's house. In either event, the insurance company
will pay the damages assessed against the homeowner
up to the limits of the policy.
Flood insurance is never included in a home owner
insurance coverage policy. The federal government offers
flood insurance for your home that can be obtained through
an insurance agent. The Department of Housing and Urban
Development's Federal Insurance Administration administers
a program to make flood insurance available in designated
flood-prone areas at low costs. To qualify for flood
insurance, the homeowner's property must be located
in a community that has agreed to plan and carry out
land-use control measures to reduce future flooding.
Your insurance agent can tell you if the home owner
insurance coverage is available where you live. Since
the mid 1980's, the Federal Insurance Administration
has permitted private companies to issue flood insurance.
Under a "write-your-own" program, private
insurers can sell new policies under their own names
and settle claims. The U.S. government then repays the
insurance companies.
Most home owner insurance coverage policies exclude
damage resulting from earthquakes. Policies covering
earthquakes, however, are generally available from insurance
companies and recommended in areas where earthquakes
occur. These policies, usually, require a deductible
of 10 percent of the cost of the damage.
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