Home insurance

Home insurance, or homeowners insurance, is an insurance policy that combines insurance on the home, its contents, and, often, the other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home.

The cost of homeowners insurance scales upward depending on what it would cost to replace the house, and which additional "riders", meaning additional items to be insured, are attached to the policy. The insurance policy itself is a lengthy contract, and names what will and what will not be paid in the case of various events. Typically, claims are not paid due to earthquakes, floods, "Acts of God", or war (whose definition typically includes a nuclear explosion from any source). Special insurance can be purchased for these possibilities.

Most insurers charge less if it appears less likely the home will be damaged or destroyed: for example, if the house is situated next to a fire station, or if the house is equipped with fire sprinklers and fire alarms.

In the United States, most home buyers borrow money in the form of a mortgage, and the mortgage lender always requires that the buyer purchase homeowners insurance as a condition of the loan, in order to protect the bank if the home were to be destroyed. In most mortgage agreements, the lender "impounds" the homeowners insurance payments, meaning that although the insurance payments are due every six months, the homeowner must send the lender one-sixth of the money every month along with his mortgage payment. Then every six months, the lender pays the premium to the insurance company. This "impounding" is a scheme to ensure that the homeowner never misses a premium payment, and therefore will be sure to have insurance for the length of the mortgage.

Types of Homeowners Insurance

There are six kinds of homeowners insurance in general and consistent use. Of these HO-3 is the most common policy followed by HO-4 and HO-6. Others that are less used, though still significant, are HO-1, HO-2 and HO-5. Each is summarized below:

HO-1

A limited policy that offers varying degrees of coverage but only for items specifically outlined in the policy. These might be used to cover a valuable object found in the home, such as a painting.

HO-2

Similar to HO-1, HO-2 is a limited policy in that it covers specific portions of a house against damage. As above, these factors must be spelled out in the policy.

HO-3

This policy is the most common written for a homeowner and is designed to cover all aspects of the home, structure and it contents as well as any liability that may arise from daily use as well as any visitors who may encounter accident or injury on the premises. Covered aspects as well as limits of liability must be clearly spelled out in the policy to insure proper coverage. This policy is always required by a mortgage lender.

HO-4

This is commonly referrened to as renters insurance. Similar to HO-6, this policy covers those aspects of the apartment and it's contents not specifically covered in the blanket policy written for the complex. This policy can also cover liabilities arising from accidents and injuries for guests as well as passers-by up to 150' of the domicile.

If your child left a toy out by the pool that someone else slipped or tripped on, you would be covered. Very low in cost and high in coverage, this is a highly recommend policy for anyone renting an apartment.

HO-5

This policy, similar to HO-3, covers a home (not a condo or apartment), the homeowner and it's possessions as well as any liability that might arise from visitors or passers-by. This coverage is differentiated in that it covers a wider breadth and depth of incidents and losses than an HO-3.

HO-6

As a form of supplemental homeowner's insurance, HO-6, also known as a Condominium Coverage, is designed especially for the owners of condos. It includes coverage for the part of the building owned by the insured and for the property housed therein of the insured.

Designed to span the gap between what the homeowner's association might cover in a blanket policy written for an entire neighborhood and those items of importance to the insured, typically the HO-6 covers liability for residents and guests of the insured in addition to personal property. The liability coverage, depending on the underwriter, premium paid, and other factors of the policy, can cover incidents up to 150' from the insured property, all valuables within the home from theft, fire or water damage or other forms of loss.

As in HO-4 above, if you left something out by the pool that someone else slipped or tripped on, you would be covered. Very low in cost and high in coverage, this is a highly recommend policy for anyone owning a condo.