There are 7 basic types of policies. Every company recognizes these policy types. The differences are primarily what types of perils (for example, fire, explosion, etc.) are insured against, what coverage is provided to personal property, and whether the structure is owned or rented.
Insurers all have their own names for these policies, but they all fall into one of these types.
HO-1 protects against 11 types of perils and only the specific personal property itemized.
HO-2 covers 17 perils. Also called a “named perils” policy.
HO-3 is the most typical policy sold. It protects the HOME against anything NOT specifically excluded (exclusions are things like flood, earthquake, etc.) , and protects CONTENTS against specific named perils.
HO-4 is a renter’s policy and covers personal property like HO-3, with liability coverage as well.
HO-5 is like an HO-3 but the contents are covered against anything not specifically excluded.
HO-6 is for condos.
HO-8 is for older homes where replacement cost is greatly in excess of the home market value. Typically HO-8 coverage is for actual cash value only, not replacement cost.
Each policy has 5 areas of coverage...
Dwelling: this covers the value of the dwelling itself – not the contents, not the land it sits on.
Other structures: this is for things like sheds, etc. on the property but not part of the house.
Personal property: the contents of the house. There are limits to the coverage on certain things like jewelry and cash.
Loss of use: if a covered event makes the house unlivable, this pays for the expense of having to live elsewhere until the home is repaired.
Additional coverage: lots of things like downed tree removal, landscaping damage, etc. Can vary all over the place.
If there are any exclusions (like you would have in an HO-5 policy) they are also spelled out.
My suggestions:
Get an HO-5 policy as it has the most coverage. When I was getting quotes, some were less than half of what I’m paying now. I might have jumped on that deal, but it turns out they were quoting an HO-2 (less coverage) and never mentioned it. I had to ask specifically about a HO-5 policy quote.
Make sure your policy has replacement cost coverage.
It costs very little to raise your liability coverage from $300,000 to $500,000 – in my case, it was an extra $25 a year. I took the higher coverage.
Document your possessions – walk through your home with a camcorder and take photographs of the home itself. Store that information offsite – at a relative’s home, perhaps. If you ever need to make a claim, having that record will make a huge difference in getting things settled.
Ways to save money:
Raise your deductible. The worst thing you can do is have a tiny deductible that will entice you to file small claims. All insurers have access to the CLUE database that has a record of all claims, and if you get dropped for filing claims, everywhere else you shop will see that same record and you’re going to pay a lot for insurance. If you could handle a $1,000 loss, raise your deductible to $1,000. You’ll avoid filing small claims and will save a bundle on insurance. We saved 25%.
Before buying a house, ask your agent to check the CLUE database for that property. You’d probably want to know ahead of time if previous owners had multiple claims.
Make sure you are getting all the discounts you are entitled to: multiple policy discount, smoke detectors on each floor, burglar alarm, security system, fire extinguisher, being close to a fire hydrant, being close to a fire department, having updated heating systems, etc. Some companies give discounts to homeowners over 50, and to retirees.
If you even call your insurance company about a potential claim, they make a record of it. Even if you end up not filing the claim, it's still there in the system. Think before calling. Water damage is the worst thing from the insurer's point of view because they fear having a mold claim. People have gotten dropped because they called to ask about a possible claim from water leaks and never filed the claim.