Homes are different from cars because you can own a home and not have to purchase homeowner’s insurance. However, the difference is if you finance your home with a mortgage, then that changes things. The lender will most likely require you to purchase homeowners insurance. This not only protects the lender’s interest in the property, but it also can benefit the homeowner in the event of a sudden disaster.
Shopping for Insurance and Compiling a Home Inventory
When you go shopping for homeowners insurance, you don’t need to purchase from a specific insurance company. This means you are going to need to do a little research to determine what company you should go with. One of the key factors that you should pay close attention to is customer reviews. If disaster does strike, you will want to deal with an insurance company that has excellent customer service.
The other task you should start doing is compiling an up-to-date home inventory. In the event of a disaster, having a current home inventory will allow you to expedite the process. List all big-ticket items such as antiques, artwork, jewelry, etc. Take photos of all of your rooms, as well as videotape a walkthrough of your home with you explaining the contents in each room. Make sure to back up everything on a USB thumb drive or an external hard drive. You can take these records and put it in a safe deposit box for greater security.
Different Kinds of Insurance Policies
There are nine different kinds of home insurance. HO-1 is the most basic form and protects against ten threats: fire or smoke, explosions, lightning, hail and windstorms, theft, vandalism, damage from vehicles, damage from aircraft, riots and civil commotion, and volcanic eruptions. However, floods and earthquakes aren’t covered, as well as personal liability insurance for someone that gets hurt on your property. These aren’t as common anymore since there are other plans out there that get you more for your money.
HO-2 is the “broad form” of insurance policy that covers everything that HO-1 covers as well as falling objects, weight of ice, snow or sleet, freezing or household systems such as AC or heating, sudden and accidental tearing apart, cracking, burning, or building pipes and other household systems, accidental discharge or overflow of water or steam, sudden and accidental damage from an electrical current. HO-2 typically will also cover personal belongings and personal liability. But any peril not listed on your policy will not be covered.
HO-3 is even broader than HO-2 for it can cover any and all perils as long as there are no exclusions listed on the policy. This is more common than the previous two since it gives you more comprehensive coverage. However, you will probably have to purchase flood and earthquake insurance separate. You may also come across HOB insurance, which is similar to HO-3 but protects against water damage in coastal areas.
HO-4 is for tenant’s and covers belongings and personal liability. If you want something even broader than HO-3, you can go with an HO-5 policy, however, these policies are typically more expensive. HO-6 is for condo owners and covers personal belongings, personal liability, walls, ceilings, and floors of the unit. The structure itself is usually covered by a policy purchased by the homeowner’s association. HO-7 is like HO-3, but for mobile homes. And HO-8, which is also similar to HO-3, but is designed to cover older homes.
Keep in mind that as you are shopping for insurance policies, insurance companies might take the best aspects of these different types of policies and put them into one to offer more comprehensive coverage. After determining what company has great customer service, then you should shop for the best value rather than what is the cheapest. If disaster does ever strike, you will be happy that you did not go dirt cheap on your policy.