A Primer on Homeowners Insurance: Policy Types and Coverage Levels

Written by Tracy Paige on January 12, 2010 & Posted in Home Insurance

Homeowners insurance has a variety of policies and coverage levels to choose from. When shopping for homeowners insurance it is important to learn about your policy and coverage options.

Here are the different types of homeowners insurance:

  • HO-1: This is a limited coverage policy that is offered in only a few places because the coverage is very limited
  • HO-2: This policy is fairly common and covers damage from 16 different perils and disasters. With HO-2 the burden is on the homeowner to prove that a claim is covered by the policy
  • HO-3: This is the most popular homeowners insurance policy. HO-3 covers everything except what is specifically excluded in the policy. With HO-3 the burden is on the insurance company to prove that an incident is not covered by the policy
  • HO-6: This is condo or co-op insurance. This policy covers your belongings and the portion of the building that you own
  • HO-8: HO-8 is a policy for older homes, which pays claims based on the cost of replacement less the amount of depreciation

To see rates on these differences policies, fill out the form above to be matched with home insurance companies.

Levels of Homeowners Insurance

The levels of homeowners insurance coverage determine how much you are reimbursed for a claim. If the damage or loss is covered by the policy then the insurance company pays you for the home, portion of the home, or item.

Choosing a lower level of coverage may result in more affordable homeowners insurance. Although rates are an important consideration, make sure you also provide yourself with adequate coverage.

The amount that the insurer pays you for a claim is determined by these levels:

  • Actual Cash Value: This means that the insurance company reimburses you for the actual cash value of the item less the depreciation amount
  • Replacement: The reimbursement amount is determined by the replacement value of the item and deduction are not made for depreciation
  • Guaranteed Replacement: This level of coverage pays whatever it costs to replace or rebuild regardless of policy limits
  • Extended Replacement: This is similar to guaranteed replacement, but the company specifies a percentage above the policy limits that it is willing to pay to replace a home or item

Now that you know what the policies are available and what each of the levels of coverage are, fill out the form above to find affordable homeowners insurance today.



About the Author

Tracy Paige is the Treasurer of a non-profit organization. She is also a multimedia specialist for an e-learning company. Tracy's experience includes banking and years of business management. She holds a bachelor's degree in Business, specialized in Finance.


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