Choosing an insurance policy of any kind can be an overwhelming process. Not only can coverage options be difficult to understand, but because many are so similar and each have their pros and cons, finding one that truly fits your needs can feel like a fool’s errand. If you’re looking into the types of homeowners insurance options available to you but are finding you’re a bit overwhelmed, our brief guide can help clear up some confusion and may give you a better idea of what kind of homeowners insurance policy will work best for you.
In terms of standard policies, there are actually eight different types of homeowners insurance. They’re often referred to as “HO-1” through “HO-8.” While that may make it easier for insurers to keep track of, it doesn’t do much to inform homeowners of what they’re getting. Each of these types of homeowners insurance covers different situations, or perils. Some are very basic, covering only damages to your home’s structure or your belongings. Other plans may include liability insurance or may be geared specifically towards those who rent or own an older home.
To add to the confusion, some types of homeowners insurance policies mention only the perils not covered by the plan. But other policies won’t mention situations that aren’t covered. This explains why so many people operate under the assumption that flood damage will be included in their policies. Unfortunately, those situations require a separate policy completely. That’s why it’s so important to understand the terms of your agreement and ask your insurance agency to clarify anything you aren’t sure about.
Here’s what may be covered in your homeowners insurance policy.
- Dwelling coverage: This refers to protection for your home’s structure (i.e., floors, walls, ceilings, built-in appliances, attached buildings). In situations involving fire, theft, vandalism, explosion, hail, wind, smoke, lightning, or volcanic eruption (believe it or not), even the most basic plans will cover you and can help rebuild the home you’ve lost due to these disasters.
- Contents coverage: In a similar fashion, this part of your policy protects the belongings (such as furniture and clothing) in your home, should one of the aforementioned incidents occur. You’d receive compensation to cover the value of the items you lost as a result.
- Personal liability: Some plans, but not all, may help cover you in case of bodily injury. This pertains to situations wherein you have a guest staying on your property. Be sure to read the fine print about whether it’s outlined in your own policy, should you want this kind of protection to be included.
Here’s what’s included only in certain or additional policies.
Some policies provide coverage for incidents involving falling objects, snow/ice weight, freezing, electrical currents, earthquakes, war, nuclear hazards, collapse, governmental action, mold, smog, pests, neglect, or water damage. But you may require a higher-level policy or an additional plan to get this type of coverage. If these incidents are of concern to you or are common in your area, you’ll want to talk to your insurer about your options.
Unfortunately, purchasing homeowners insurance is never going to be totally straightforward. You’ll have to weigh the positives and negatives of each kind of plan before moving forward. But most importantly, you need to have a thorough understanding of the plans available to you. The worst thing you can do is to simply pick a policy just because it’s the cheapest one or because you want to get the process over with. Make sure your insurance agent takes the time to explain the finer points of your plan to you and don’t be afraid to ask for clarification when needed.