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Know Your Home Insurance

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The most important part of homeowners insurance is the degree of coverage. Avoid getting caught in a situation your insurance can’t handle.

Here are the most common levels of coverage:

HO-2 – Open policy that protects against a finite amount of common perils that are named in the policy.

HO-3 – Even more open policy that protects against all perils except those excluded by the policy.

HO-5 – Premium policy that typically protects newer, well-maintained homes; it covers against all perils except those specifically excluded by the policy.

HO-6 – Insurance for co-ops/condominiums, which includes personal property coverage, liability coverage and coverage of improvements to the owner’s unit. Insurance for the actual structure usually comes through the association related to the structure or grounds.

HO-7 – Similar to an HO-3 policy, but for mobile homes.

HO-8 – Policy specifically for older homes, with similar coverage to an HO-2 policy. However, it only covers actual cash value.

4. Understand the details of your policy. It’s not enough to get the right policy level. Before you make a decision, understand these homeowners insurance terms:

Deductible – This refers to the amount you must pay out of pocket before your insurance kicks in; the higher the deductible, the lower the annual premium.

Liability Coverage – This is coverage that will pay medical or legal bills if someone is hurt on your property, usually due to negligence.

Personal Property – Sometimes called the contents of you home, this is tangible property such as furniture, electronics and clothing.

Premium –  This is the price you pay, usually annually, bi-annually, or monthly.

Replacement Cost – This is the kind of insurance that pays the full cost of replacing your dwelling or personal property, up to a maximum dollar amount. Most standard policies offer replacement cost, but you want to be sure the maximum amount is high enough.

Actual Cash Value – This type of policy gives you the current cash value (with depreciation) for personal property or your dwelling. It’s possible to have actual cash value dwelling coverage (as with an HO-8 policy), but to get replacement cost coverage for your contents.

Sub-Limits – Homeowners insurance policies will include limits, but they’ll typically also have sub-limits. For instance, the sub-limit on personal property for a $600,000 policy would typically be $300,000, or 50 percent of dwelling coverage.

Riders – These are policies you can include on your overall insurance policy to cover specific items. For instance, expensive antiques, jewelry and artworks are often covered under their own rider because they’re too valuable to be covered as regular personal property. Some HO-8 policyholders also may get additional riders for things like heating, ventilation and air-conditioning systems, which are part of the home and expensive to replace.

Be sure you understand how all of these terms work together in your homeowners insurance policy. Ask questions, we can’t stress this enough, Scautub Agency LLC is here to help.

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