Types of Coverage

You will have several types of home insurance from which to choose when you purchase a policy. We'll explain your options here.

About Home Insurance Policies

Obviously, someone who rents a home would have a different policy from someone who owns a home. Additionally, policies also differ in the amount of coverage they offer. The more extensive the coverage, the higher your home insurance rates will be. The various kinds of home insurance policies available are pretty much the same across the country. Some states and insurers might offer policies that are slightly different or refer to policies by other names, such as "standard" or "deluxe." Also remember that there is a difference between actual cash value coverage and replacement value coverage. Actual cash value coverage will replace your belongings for what they are worth presently, meaning depreciation is subtracted from their original value. Replacement coverage reimburses you for the cost of replacing the item brand new today.

Four Basic Policies

If you own a home, you can choose from four basic types of policies. Each policy will have different home insurance rates and different levels of protection.

• HO-1: Limited Coverage Policy. This is bare-bones protection that protects you against basic types of disasters, but excludes things like water damage and damage from the weight of snow or ice. Limited coverage has very low home insurance rates, but it is not available in most states anymore.
• HO-2: Basic Policy. This policy protects you against all of the disasters covered by HO-1 and more. Mobile home owners may also purchase a version of this coverage.
• HO-3: Most Popular Policy. This "deluxe" policy protects your home from all disasters except for flood, earthquake, mudslides, sinkholes, war, nuclear accidents, and other events specified in your policy. HO-3 coverage is the most popular type of policy and usually has the highest home insurance rates of all three types of policies.
• HO-8: Older Homes. This policy is designed for older homes, for which full replacement coverage might not be available. HO-8 coverage will pay for damages on an actual cash value basis that factors in depreciation.