Whether you're interested in learning the home
insurance basics, looking to lower your homeowners
insurance rates, or just finding a home insurance
quote, we'll show you the way.
Homeowners insurance (HOI) as the name implies, is property insurance coverage that not only protects
you from the damage or loss of your property, but also provides liability protection for you, your family and
guests, should an accident occur. If you own a home, you need home insurance. Not only does home
insurance protect what's most likely your largest asset, but it's required by lenders when financing a
home, making it one of the most necessary and abundant forms of insurance available today.
Homeowners insurance, in it's essential form, covers the cost of rebuilding or repairing your home,
replacement or reimbursement of personal property, and liability or legal responsibility for injury to other
people caused by you or your family members. Home insurance provides protection from most
disasters, such as fire. The two exceptions include floods and earthquakes. Additional coverage must be
purchased when insuring against these natural disasters.
Types of Home Owner Insurance
Home insurance comes in a number of standardized forms. These forms were designed to eliminate the
burden of purchasing several separate policies such as fire, theft, liability, and so on. The HO-3,
sometimes called the "special policy" is the most commonly utilized form of homeowners insurance, as it
provides comprehensive coverage. The standardized forms are covered below:
HO-1 is a very basic policy, which covers specific risks outlined in the home insurance policy. These
might include such risks as fire or lightening, hail, explosion, vandalism, theft, and more. This is not
inclusive of personal property.
HO-2 includes coverage of HO-1, but adds additional coverage for specific perils. These perils are
named in the policy, but commonly include plumbing and heating issues. This is not inclusive of
HO-3 is the most common form of homeowners insurance, as it's designed as a blanket policy,
covering most common issues. The protection of structure, personal property, and liability are all
included. It is important for you to read your policy, however, as there are often exclusions. Common
exclusions are flood, earthquake, and nuclear.
HO-4 is renters insurance designed for those renting a home or an apartment. Renters insurance
policies will cover issues not outlined in the property owner's policy. The tenant receives liability and
personal property protection.
HO-5 is essentially a more comprehensive HO-3 home insurance policy.
HO-6 is condo insurance. This covers issues that aren't covered by the condominium/homeowners
association policy. Much like renters insurance, it provides liability insurance for residents and
guests, as well.
HO-8 is an “older home” policy. This allows homeowners to insure older homes at lower rates.
Rather than insuring the higher replacement costs associated with replacing an older home to its
originality, you're insuring for cheaper, more readily available, materials.
How Much Home Insurance?
You should insure your home for the total cost that it would take to replace it completely. This amount
would be the cost to rebuild your home, if it was totally destroyed. When determining this value you
should factor the quality of construction, custom features, square footage, and any other factors affecting
value. Remember that you're insuring your home, not the land it's built on. So, don't forget to subtract the
value of the land, as the land will always be there, regardless of disaster. Also, if your home is destroyed,
where are you going to go? You'll need coverage for additional living expenses, like relocation.
Purchase a guaranteed replacement homeowners policy. This will insure that
your house is rebuilt to replacement quality, regardless of rising construction or
material costs. This is important, as material shortages are common after
major disaster. It's not at all uncommon for home insurance companies to cap
these guarantees, limiting their risk exposure.
If you live in an area prone to flood, it's important to get flood insurance
coverage. Most homeowners insurance policies don't include flood damage
protection. Flood protection can be purchased through the Federal Emergency
Management Agency (FEMA). Similarly, if you live in earthquake prone
California, the California Earthquake Authority (CEA) provides earthquake
Don't forget your home's content. Most home insurance policies provide
minimal personal property protection. If you have items of value that you'd like
protected, this will most often require an additional rider. These additional
home insurance riders are purchased to protect expensive jewelry, art,
antiques, collectibles, and other items of sentimental or economic value.
What Determines Home Insurance Rates?
For obvious reasons, location plays a large role in determining your home
insurance rates. Certain high-risk areas prone to storm or disaster will always
come at higher rates, due to the higher claims associated with those areas.
What you might not know is that your sex, age, and marital status are all
contributing factors when your home owner insurance rates are determined.
Your credit score also plays a role in how much you'll pay. There is a direct
statistical correlation between low credit scores and high home insurance
claims. Basing your rates on sex, age, marital status, or even your credit score
may seem discriminatory, though that's not the insurance company's objective.
These demographics allow the home insurance company to balance the
statistical risks from an actuarial standpoint.
How to Save on Homeowners Insurance
You may not be able to change your demographics, but there are other ways you can save on your
homeowners insurance policy. Combining your insurance coverage has become a popular way to save
on insurance premiums. Some insurers will cut your rates as much as 20 percent by simply combining
your home and auto insurance policies. And just like raising your auto insurance deductible, raising your
homeowners deductible can help with the affordability of your policy. Certain safety equipment, such as a
monitored home alarm, might provide for additional reductions. If you fall in the bad credit category, it will
pay in more ways than one to repair credit. Be sure to check your credit record regularly to catch or
correct any errors. Keeping little or preferably no revolving credit card debt will not only help with your
credit score, but benefit your home insurance rates too.
Getting a Home Insurance Quote
When getting a home insurance quote, it's important to go with a quality company, one that will be around
when needed. Going with a fly-by-night company might provide cheap home insurance, but you'll often
pay in the end, through poor service or when making a claim. Insurance companies are rated by financial
strength rating services, such as Moody's or Standard & Poor's. It's always prudent to look into any home
insurance company you plan to rely on. One of the best ways to save, when it comes to choosing the best
homeowners insurance policy, is to get a multiple home insurance quote from a handful of quality
insurers. Thanks to the internet, it's relatively easy to get a homeowners insurance quote online that
compares several reputable carriers. This will allow you to go with the quality your looking for, but at a
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