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| TYPES OF POLICIES |
Home Insurance Policy Types:
This is where a home insurance policy depends on the type of dwelling you are in and whether or not you own the contents. It's also where it gets complicated.
Home insurance companies tend to group the types of coverage’s, into a number of fairly standard policy types, based on the types of 'perils' covered and the type of dwelling. These home insurance policy identifiers are known across the industry and may be referred to by your agent or broker:
HO-1: limited coverage policy which covers you against only certain perils. Generally, the home insurance policy only covers a limited number of disasters over the course of the policy. It's not advisable to get this kind of policy, even if it's available to you. Note that this kind of home insurance policy has been phased out in many parts of the US.
HO-2: A basic policy provides protection against all 16 disasters and the coverage levels will be more generous. You can obtain a version of this policy designed for a mobile home.
HO-3: The most popular policy that will cover all perils on the buildings themselves, but generally only specified perils on your contents. You are covered for all perils unless specifically noted by the home insurance policy. The excluded perils will usually include floods, earthquakes, wars and nuclear accidents (which are all special perils requiring separate endorsements - and more money in premiums).
HO-4: Created specifically for those who rent. This home insurance policy covers the contents for renters without covering the building itself or structure of the unit. It will have limited liability coverage included.
HO-6: A policy for those who own a condominium or co-op and it provides coverage for your belongings and the structural parts of the building that you own. The home insurance policy will also include liability.
HO-8: Policies designed for older homes. The insurer reimburses you for damage on an actual cash value basis. In plain terms, this means replacement cost less depreciation. Since you will not be paid full replacement cost it will mean money out of your pocket if you want to build or repair your home to its 'original' state. However, full replacement cost home insurance policies may be difficult or impossible to get for some older homes.
What you need for to meet your home insurance needs is a combination of the type of home you have, your budget, your tolerance for risk, and the "perils" that you are seeking home insurance coverage for.
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Renters Insurance (HO-4)
Renters insurance provides financial protection against the loss or destruction of your possessions when you rent a house or apartment. While your landlord may be sympathetic to a burglary you have experienced or a fire caused by your iron, destruction or loss of your possessions is not usually covered by your landlord’s insurance. Because in most cases, renters insurance covers only the value of your belongings, not the physical building, and the premium is relatively inexpensive.
By purchasing renters insurance, your possessions are covered against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and water damage (not including floods). Like homeowners insurance, renters insurance also covers your responsibility to other people injured at your home or elsewhere by you, a family member or your pet and pays legal defense costs if you are taken to court.
Renters insurance covers your additional living expenses if you are unable to live in your apartment because of a fire or other covered peril. Most policies will reimburse you the difference between your additional living expenses and your normal living expenses but still may set limits as to the amount they will pay.
A standard renters policy offers only limited coverage for items such as jewelry, silver, furs, etc. If you own property that exceeds these limits, it is recommended that you supplement your policy with a floater. A floater is a separate policy that provides additional insurance for your valuables and covers them for perils not included in your policy such as accidental loss.
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Condo Insurance (HO-6)
If you are a condo owner, you have a unique situation. You will need to have your own condo insurance, but you will also need to be sure that your condominium corporation also has insurance. You will insure your belongings and the structural parts of the building that you own (like the kitchen cabinets that you installed). Your condo board will need to have a policy to insure the overall building, including your unit.
Your needs for condo insurance are similar to the homeowners - with some special limitation because of the unique ownership relationship that you have with your condominium corporation.
To be sure that you adequately insure the structural components which belong to you, check with your condominium corporation and read the corporation's insurance policy. This area - what you own versus what the corporation owns - can be a very grey area.
So be informed about your condo insurance before something happens. The more you know about the condo corporation's insurance the better you can tailor your unit's coverage.
Condo owners can get a special type of condo insurance coverage against "unit assessment". Let's say there is a fire in the lobby of your condo building. Condo insurance for the condominium corporation will pay for most of it. But if the policy is only for 'actual cost' as opposed to replacement cost there will be an amount that must be covered by the corporation. At this time, you may be required to pay a unit assessment which is in addition to your regular condo fees. This 'special assessment' could be a very large amount. Condo unit assessment coverage will protect you in the case of this occurring.
Condo owners will also need coverage for their contents, and liability coverage.
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