The Basics of Homeowners Insurance

For many people their home is the biggest investment they will ever make, which means protecting it should be a big priority.

Maintaining your home can protect it from many dangers but some risks are unavoidable, which is where insurance comes to play. Homeowners insurance is a form of property insurance that covers loss and damages to an individual’s assets in the home.

The first step is deciding how much coverage you need. In some cases, your lender decides how much coverage you need but it will be up to you if you need any additional coverage for risks such as flood and earthquakes.

Most common levels of home insurance coverage:

• HO-2 – Broad policy that protects against 16 liabilities that are named in the policy.
• HO-3 – Broader policy that protects against all perils except those specifically excluded by the policy.
• HO-5 – Premium policy that typically protects newer, well-maintained homes; it covers against all threats except those specifically excluded by the policy.
• HO-6 – Insurance for co-ops/condominiums, which includes personal property coverage, liability coverage and coverage of improvements to the owner’s unit. Insurance for the actual structure usually comes through the association.
• HO-7 – Similar to a HO-3 policy, but for mobile homes.
• HO-8 – Policy specifically for older homes, with similar coverage to a HO-2 policy. However, it only covers actual cash value.

While homeowners insurance covers the belongings inside your home, renter’s belongings are not covered by the landlord’s insurance. Renters insurance can be purchased to cover your possessions and is fairly inexpensive.

After deciding how much coverage you need it’s important to compare prices and deductibles from different companies. The deductible is the amount you have to pay out of pocket on each claim. Lower monthly payments generally mean you will have a higher deductible.

Be sure to check with your agent annually to ensure your policy provides adequate coverage. Upgrades or additions to your home may increase replacement costs which should be reflected in your policy.