Understanding homeowners insurance coverage and policies

Deciding between an HO-3 policy and a dwelling insurance policy can mean the difference between being adequately covered for possible perils and having your home insurance claim denied. Understanding homeowners insurance coverage and policy differences is key to obtaining suitable homeowners insurance coverage. In other words, understanding homeowners insurance coverage and policies can allow you to make more informed decisions when consulting with an insurance provider.

Types of homeowners insurance policies:

The difference between homeowners insurance coverage and a homeowners insurance policy is coverage is what’s included in the policy. Not all policies provide the same coverage and this is particularly evident in the standard industry classes of homeowners insurance. These classes are referred to by the letters ‘HO’ followed by a dash and a number. For example HO-3 is a common type of homeowners coverage.

HO insurance policies are for permanent residences in which the resident is not away for more than 60 days. The HO series of home insurance generally provides less coverage for the lower numbered policy types. Even a homeowners insurance policy that covers multiple perils may still have exclusions that are considerable risk to your home. HO-4 and HO-6 policies are for renters and condominium owners.

Coverage included in homeowners insurance:

Homeowners insurance policies may cover 1) hazards, 2) casualty, and 3) additional property protection. Just what these mean and which homeowners insurance policies provide them is good to know. Hazards are acts of nature such as floods that cause damage to a home; casualty coverage includes human related accidents and claims arising from such; and additional property coverage includes hazards, but may also include personal belongings.

If real hazards exist that aren’t covered in your home, they may be insurable under a Federal program such as the Federal Flood Insurance Program administered by the Federal Emergency Management Administration (FEMA). Alternatively, other types of homeowners insurance coverage, specifically those illustrated below, may include coverage for items, events or casualty not covered by a standard homeowners insurance policy.

Other types of homeowners insurance policies:

1. Co-operative Insurance: For jointly held properties, a co-operative insurance policy, as distinct from a co-operative insurance company may be needed in addition to the main homeowners insurance policy. This is because there is likely to be joint property that needs to be insured by all the owners.

2. Alternative ‘Dwelling’ Insurance Policy: Another type of homeowners insurance policy is a dwelling policy that differs from standard HO polices. These policies can be used for vacation homes, mobile homes, 2nd homes, and rentals that’s insurance may cost more than a typical homeowners insurance policy.

3. Umbrella Insurance: Umbrella insurance policies cover what the rest of your insurance doesn’t and are important if your assets are inadequately insured by a policy’s limited coverage terms. This type of coverage can pay for damages in excess of a typical policy’s financial ceiling.

4. Business Insurance: For homeowners that also run a business out of their home additional coverage may also be needed. For example, loss of business income from damage to a home would not be covered by an HO-3 policy but can be covered by a business insurance policy.

Two additional types of insurance that pertain to home owners and their homes but don’t’ directly insure the home itself are 1) errors and omissions insurance and 2) property mortgage insurance (PMI). These types of insurance are designed to protect against damages not identified during the inspection phase of home buying and in the case of PMI, the home owners inability to pay for a mortgage.

A.W. Berry -HomeownersInsurance.org Expert A.W. Berry is a published personal finance writer with an interest in all kinds of money matters. His professional background in finance, marketing and sales directs his reporting to pertinent local issues.