Your Guide to Protecting Your Most Important Investment

Home insurance coverage isn't just for traditional homeowners. In reality, this is only one type of property insurance. Property policies can also provide coverage to renters and condo dwellers. In general, property insurance protects the possessions stored in your dwelling and, with some policies, the physical structure of your dwelling.

As with most types of policies, we tend to only buy the amount of protection that is absolutely required of us by law. For most people, we're not thinking about how much house protection we need when applying, we're thinking about how much our home is going to cost us and how we can avoid adding any additional cost to it. Besides, who really thinks that a major fire or natural disaster will ever strike their home? Few if any; which is why we don't usually think twice about having the minimum levels of protection. However, if you really want to look after yourself and your family, you'll almost certainly need a better plan as most minimum coverage offerings only look after the cost of the mortgage, and home warranties generally only take care of small repairs to systems and appliances that were installed in your residence when you bought it. That means if your house suffers major damage or is destroyed, there may not be money to rebuild or repair it. It also means the contents inside your house probably won't be fully replaced, if at all.

Understanding Coverage Types

Your plan will look after any home that is on the property as well as any detached homes that reside on the property. All the items within your residence will also be covered, so make the effort to provide your insurer with a list of your personal belongings so they can determine a replacement cost. There will be some boundaries in regards to physical injury, property damage and medical expenses. Also, if you are ever forced to leave your house, you will be provided with living expenses. The coverage varies on each item, so make the effort to work with your provider to determine how much protection you need. So what kind of plan will you need if you want to be covered for your dwelling and everything in it? We've summarized the various types of property policies below:

  • HO-1 (Basic Protection): a homeowners policy that looks after basic specified perils in the event of direct damage to the insured property. An HO-1 policy also typically provides personal liability and medical payments coverage. In most states, this form of coverage has been discontinued because homeowners prefer broader plans.
  • HO-2 (Broader): this plan insures the policyholder's dwelling, structures connected to the dwelling, and personal belongings stored on and off the property. HO-2 policies also provide reimbursement for loss of use, meaning the plan takes care of living expenses while the home is repaired. The list of perils covered by an HO-2 policy is more extensive than that of an HO-1 policy.
  • HO-3 (Special Form): the most common type of plan, HO-3 policies protect the dwelling, related structures, personal property, and loss of use. Liability and medical payments coverage are also included with this offering. This shelters homeowners from a long list of named perils.
  • HO-4 (For Renters): also known as renters insurance, HO-4 protects tenants from direct damage to unscheduled personal belongings on a named-perils basis. Personal liability and medical payments coverage are also included with this option.
  • HO-6 (For Condominiums): this policy is intended to coordinate with the plan purchased by the condo association that looks after the physical structure and common areas of the community. An HO-6 policy insures condo owners for direct damage to their personal property on a named-perils basis. A condo insurance policy also provides personal liability and medical payments protection.
  • HO-8 (Older Home): HO-8, or modified home coverage, offers traditional named-perils coverage for damage to property in addition to personal liability and medical payments. This type of plan is similar to HO-1, but it allows the customer to change the replacement cost provision to a repair-cost basis. In some cases, the replacement cost option can also be converted to an actual cash value basis. HO-8 is ideal for older homes or homes that would not be replaced if they were destroyed.

How You Can Save Money

There are two basic offerings to choose from - actual cash value insurance and replacement cost coverage. An actual cash value policy is less expensive, but insures your home at the face value. This means it will typically not look after the cost to rebuild your residence or replace your belongings at the depreciated value. Replacement cost will come with a higher premium, but it is designed to replace your dwelling and all of the items inside it at an equal value to what you paid.

There are a variety of ways you can lower your premium with little effort. Protecting your most valuable asset is extremely important to you, and providers will try to take advantage of that fact. Below are all of the ways you can save money without sacrificing the quality of the plan you have.

Raise the Deductible

If you increase your deductible then you are taking on more responsibility for the damages to your house. This will result in lower monthly payments for you. However, you want to ensure you can afford to pay the deductible if major damage occurs.

Install an Alarm System

Providers will also like to see that your house is safe and secure. Install an alarm system into your residence for peace of mind. If you already have an alarm, then make sure that it covers the entire house - including the windows. Security is important because you want to be positive that your family is safe, but it will also save you money because you have additional protection for your home. The same discounts are offered with auto policies for installing a car alarm.

Do Not Insure the Land

You do not need to insure your land when your dwelling is covered. The cost to repair damage to your land is not nearly as costly as damage to your home. This is an extra cost that carriers will often try to sell, but is rarely necessary for homeowners.

Bundle for Maximum Savings

If you have multiple policies from different insurers, you can combine them all and receive great savings. Insurers will reward you with much lower premiums for giving them more of your business. If you have an auto, home and life insurance policy all with the same company, you will pay much lower premiums for each. Ask your agent about the discount before you purchase your plan.

Compare Quotes Online to Save Time and Money

In theory, one insurance policy is similar to another. But in reality, there are small variances between carriers, and those differences could matter to you. Take the time to review your quotes side-by-side. Look at all elements, not just the premium. Compare the deductibles, the maximum coverage, and whether there are any limitations to the plan. If anything looks confusing, ask about it. As you get competitive quotes, you'll also need to think about the company. Look at consumer reviews and research the company's history. Find out whether you can add your auto policy/policies with this company. If online billing and payment, and payment flexibility are ideal for your family, find out if they are options.

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