What to Know About Renter's Insurance Policies: Do I Need One?
Do you rent instead of own your home? About 34% of households are renter-occupied, so you're not alone.
You don't need a homeowner's insurance policy since you don't own the structure.
But you do need to protect your personal belongings in case of a natural disaster, break-in, fire, or other damage.
Figuring out what to know about renter's insurance isn't easy, especially if you're moving out on your own for the first time.
We've put together a guide for renter's insurance to help you understand what it is and why you need it.
What Renter's Insurance Covers
Renter's insurance is similar to homeowners insurance, but it's designed to cover your personal belongings and liability only.
It doesn't provide coverage for the structure since you're not the owner and aren't responsible for it.
Policies typically cover three things: possessions, liability and alternative living arrangements.
The policy covers the cost of your belongings if they're damaged, stolen, or vandalized by covered events.
You'll receive compensation up to your policy limit for loss of property.
It also usually covers damage to other people's homes when it comes from your home.
If your plumbing breaks and leaks into your neighbor's apartment, your policy usually provides coverage.
Covered events may vary slightly by policy, but they typically include weather-related damage, fire, theft, vandalism and damage from appliances.
Renters policies usually cover the cost of your possessions if they're stolen from your vehicle.
It won't cover any damage to your car from the break-in.
That would fall under your auto insurance policy.
You'll also have coverage for your belongings when you're away from home if they're damaged or stolen by covered events.
If your laptop is stolen from your hotel room, it should be covered.
The liability portion covers you if someone gets hurt while at your apartment.
If you're at fault for that injury, the injured person can file a claim and get the injury costs covered by your renter's insurance.
The liability part also covers you if you're sued because of an injury.
Alternative living arrangement compensation pays for you to live somewhere else if your rented home becomes uninhabitable due to a covered event.
If a natural disaster of fire damages your home so you can't live in it, this part of the policy will cover your alternative living arrangements.
The compensation you receive depends on how much coverage you choose and the nature of the loss.
What Renters Insurance Doesn't Cover
When learning what to know about renter's insurance, it's important to know what's covered, and what's not.
Not every type of damage falls under the coverage.
While weather-related damage is covered, any natural disasters aren't.
That includes flooding, earthquakes and sinkholes.
You can purchase a separate flood or earthquake insurance policy to receive compensation for those damages if you live in an area at a higher risk for them.
You may also need extra coverage for belongings of very high value.
This includes high-value art, jewelry and antiques.
Most policies have a limit on individual items. If you own anything that's worth more than the limit, you'll want additional coverage in the form of a rider.
Why You Need It
Your landlord carries insurance coverage for the building structure, but that policy doesn't provide any coverage for your items.
Say your neighbor starts a kitchen fire while cooking dinner that spreads to your apartment.
The landlord's policy covers damages of the building's structure, but it doesn't cover any of your belongings that burn or have smoke or water damage.
Some landlords require renter's insurance.
If yours doesn't, it's still a smart decision.
If you don't take out a policy, you have no coverage for your belongings.
Your landlord's insurance policy won't cover your damaged or stolen belongings if a loss happens.
You'll simply be without everything you lose.
When you start calculating the cost to replace everything in your home, you realize how financially devastating that would be.
Furniture, kitchenware, electronics, appliances and clothes are just the basics and would cost thousands of dollars to replace.
You're also providing yourself financial protection for liability claims.
It covers your legal defense, which gives you peace of mind should a liability issue happen.
Calculating Your Insurance Needs
You get to decide how much coverage you want to purchase through your policy.
Remember, the policy only pays up to the limit even if your belongings are worth more.
Most people have over $20,000 worth of belongings.
You may have much more than that.
Do an inventory of your belongings to estimate how much you own.
Go through each room and write down everything you have along with an estimated value for it.
You also must decide how you want to value your property for the policy.
Replacement cost means the policy will pay you for the amount it would cost to replace the items now.
Actual cash value takes into consideration depreciation based on how old the item is.
You won't get as much to replace a 5-year-old TV as you would a 1-year-old TV because the older TV has lost value.
You'll pay more for a replacement cost policy, but it may be worth the extra cost.
If your belongings are older, you may not get enough money to replace everything at today's cost if you have an actual cash value policy.
Discount Options
Renter's insurance rates vary by state.
The rates also vary depending on the amount of coverage you need.
On average, a policy only costs around $16 per month.
Statistics show that the average premium rates for renters insurance decreased by 2.7% in 2017.
It also decreased the two years prior to that.
Rates fluctuate, but renter's insurance is generally an affordable coverage and well worth what you pay if you need to file a claim.
You can make it more affordable with discounts.
Most insurance companies give you a discount for having multiple policies with them.
If you also have auto insurance, an umbrella policy, or other types of insurance, see if you can get a lower rate by moving all the policies to one company.
You may also get a discount if your rented home has certain security and safety features.
That includes deadbolt locks, smoke detectors and security systems.
What to Know About Renters Insurance
With what to know about renter's insurance under your belt, you're ready to protect your home and belongings adequately.
The right coverage helps cover the costs of your lost belonging and protects you with liability coverage.
Do you need help getting the correct coverage in place?
Contact us today and we can help you get covered.
Neither Here Nor There: Should I Have Home Office Insurance?
Whether you work from home part-time or you run your entire business out of your home, you may want to consider getting a separate insurance plan to cover any potential losses.
You may wonder if you need home office insurance, or if your current homeowner's policy covers everything you need.
Read on to learn more about this specific type of insurance and whether you need it.
It's crucial to know that your important information and assets will safe in an emergency.
Homeowners Insurance Basics
Most insurance companies will cover your home's structure and will pay for repairs for specific types of damages.
Yet, if you use part of your home to work or run a business, there are definitely some limitations.
Each policy is different, but most policies will offer you very limited coverage to any of your property used for business purposes.
In fact, this coverage limit is usually as low as $2,500 and could be even lower for specific items such as computers.
If you use a separate structure such as a garage or shed for your business, traditional homeowner's insurance likely won't cover damages.
And, when it comes to sensitive information or business records, that won't be covered either.
For many business owners, lost revenue can be detrimental.
If you lose revenue as a result of your home becoming damaged or uninhabitable, traditional homeowner's insurance will not reimburse you.
It's also important to note that you won't get liability coverage for your business under a traditional homeowner's policy.
If there's bodily injury or property damage, it won't be covered unless you have a separate home office insurance policy.
What Home Office Insurance Covers
When you get a separate home office insurance policy, it will cover a variety of things for your business.
Most importantly, it should cover things like your business equipment.
Equipment refers to anything from computers and copy machines to your smartphone.
Most standard homeowner's insurance policies have a monetary coverage limit on the contents of your home.
If you have vital business equipment that you use at home, we recommend a separate policy.
It's important to note that your business equipment will only be covered when it's used inside your home.
For example, if you take your laptop with you and it gets damaged on a job site, your policy may not cover it.
You may be able to add a supplemental policy to cover the things you take off-premises.
As a business owner, you should also have a form of general liability coverage.
If someone comes to your home and gets injured, this should help to cover their medical expenses and protect you from a lawsuit.
Perhaps you use your vehicle to conduct business.
If you do, you must make sure that your vehicle is also covered under a separate business policy.
And, if you sell a physical product from your home, consider opting for product liability coverage.
This insurance will protect you if customers claim the product has what's known as "nonperformance."
It may also cover you if someone gets injured because of using your product.
Other Important Things to Consider
While your property and your liability are both crucial to a good home office insurance policy, there are a few other components you may want to add.
These items can be optional, or they may be required depending on several factors.
If you have a large business or live in a specific jurisdiction, you may have to enroll in these other coverages.
The coverage you need may also depend on how much revenue you get from your business.
When you offer services, you must have some professional liability coverage.
This protects you and your clients and can be a real life-saver for many business owners.
Professional liability insurance protects you if a client says they've suffered damages through your actions as a professional.
This insurance protects your personal assets and can also help to pay for your legal defense.
Make sure you go in-depth with your agent to make sure you have the right level of coverage and limitations.
You may also need errors and omissions insurance.
This applies if you're getting paid to give someone professional advice. If someone says that they suffered damages because of your advice, this insurance should protect you.
Disability insurance is another important aspect of home office coverage.
If you become disabled and cannot work or lose income, the policy may provide you with some compensation.
And finally, business interruption coverage is another thing to consider.
This covers any lost revenue if you have to suspend business activities due to flooding, a fire, or other forms of disasters.
Protect Yourself and Your Business
Now that you're aware of what is covered by a home office insurance policy, it's easy to see why it's a crucial part of working from your home.
Whether it's your laptop or a customer complaint, having separate insurance will keep you protected.
Talk to an insurance agent who understands the nuances of this specialized insurance.
When you enroll in a policy, you'll have the peace of mind you need to operate your business in confidence.
For all your business insurance needs, be sure to contact us today for more information and we'll be happy to provide you with a quote.
Do I Need Homeowners Insurance? A Guide For New Homeowners
Every year, 5% of households file a homeowners insurance claim.
This suggests that you'll use homeowners insurance at least once during a 20-year period.
But if you're a new homebuyer, you may not know if homeowners insurance is worth the cost.
Do I need homeowners insurance?
And what does homeowners insurance cover, anyway?
You'll want to know the answers to these questions to make the insurance decision that's right for you.
Do your due diligence and read our insurance guide for new homeowners.
It could save you from home-related financial difficulty down the road.
What Is Homeowners Insurance?
Your home is your most prized and expensive possession.
If anything ever happened to your property, it could cost tens of thousands of dollars in repairs.
That's why homeowners insurance is there to help.
Homeowners insurance offers a financial safety net that protects homes, homeowners, and possessions.
At a base level, it's similar to auto or medical coverage.
But since homes are more comprehensive than vehicles, the insurance is more comprehensive too.
In short, homeowners insurance covers damage to your home.
If high winds tear shingles off the roof, your insurance policy should cover the claim.
Homeowners insurance also provides liability coverage to people injured on your property.
Since there are some exceptions, we'll want to inspect the overall coverage package.
What Does Homeowners Insurance Cover?
There are eight different types of homeowners insurance packages.
These all include unique coverage plans.
The average homeowner will use an HO-3 policy, also known as a special form policy.
An HO-2 policy provides coverage for 16 types of perils.
The HO-3 policy is a bit beefier, insuring almost anything that isn't explicitly excluded in the contract.
Let's start by looking at the peril coverage of an HO-2 insurance policy.
- Weather: Wind, hail, ice, snow, sleet, eruptions, and lightning.
- Vandalism: Theft, riots, smoke, and explosions.
- Home issues: Electrical malfunction, freezing systems, structural damage, and water overflow.
- Collisions: Damage caused by automobiles, aircraft, and falling objects.
For reference, wind and water damage are responsible for almost 50% of homeowners insurance claims.
Most insurance packages also include family liability insurance.
This kicks in if you're sued over an injury that happens on your property.
For example, homeowners insurance will cover the medical and legal fees if someone slips on your icy walkway.
With an HO-3 policy, you have additional coverage for most things.
There are, as mentioned, a few exceptions. Homeowners insurance does not cover:
- Landslides, earthquakes, and floods
- Pollution and nuclear contamination
- Mold and pest damage
- Wear and tear
Many of these exceptions are covered by other types of insurance coverage.
You should know the weather and home risks in your surrounding area, so you can buy enough coverage for common risks.
For example, you can pay extra for an endorsement (also known as a rider) that adds earthquake coverage to your policy.
For more information, check out our guide on different homeowners insurance policies.
Do I Need Homeowners Insurance?
While auto insurance is required by law, the same cannot be said of homeowners insurance.
So do you need homeowners insurance?
If you're going through a mortgage lender, the answer is yes.
There isn't a legal requirement, but mortgage lenders won't work with you without homeowners insurance.
It mitigates potential risk, like if your home loses value as the result of severe damage.
Lenders will take out a homeowners policy and add it to your mortgage should you stop paying for your own.
Once you've paid off your home, it's your choice if you want homeowners insurance.
It's often worth the cost alone just for peace of mind.
Personal liability is also a large factor.
Let's say you have tree cutters on your property.
If the company is not insured, they could seek financial recompense should an injury occur.
How Much Homeowners Insurance Do I Need?
Mortgage lenders have their own insurance requirements.
It's impossible to give an exact estimate of how much you need since the expectations vary wildly.
Just know that you'll at least need to satisfy the bare minimum to take out a mortgage on any home.
But the minimum requirements only cover so much.
A good rule of thumb is to get enough coverage to rebuild your entire home.
Some homeowners make the mistake of insuring for its market value, which is often far less than an entire rebuild.
To come to this answer, figure out home construction expenses in your area.
With this information, you can calculate how much it would cost based on the square footage of your home.
Homeowners insurance also covers your possessions within the home.
Take inventory to estimate how much your personal assets are worth.
Usually, this is somewhere around 50% of your home-rebuilding coverage.
How To Buy Homeowners Insurance
Treat homeowners insurance like any other type of insurance coverage.
The quality of your insurer will have a massive impact on what's ultimately covered.
Start your search by looking at the reviews of insurers in your area.
Of course, you'll also want to get the best bang for your buck.
As you search, consider your overall budget.
You may have to raise or lower your deductible to find the premium you're looking for.
Looking For Homeowners Insurance Coverage?
Do I need homeowners insurance?
The answer is an unequivocal "yes!" if you're working with a mortgage lender.
But even without a lender, homeowners insurance safeguards your home, finances, and peace of mind.
If you're in the market for a home, homeowners insurance is a must-have.
At Central Jersey Insurance Associates, our professionals can give you the homeowners insurance policy that best fits your needs.
Contact us and get in touch with our expert insurance brokers.
The Costs of Flood Damage to Your Home in New Jersey
How much will flood damage to your home in New Jersey cost you? The numbers might alarm you, particularly if you don't have adequate insurance coverage.
Whether or not you live in a floodplain, flooding happens... and an inch of water can cost you thousands of dollars in damages!
It's also important to note that most flood insurance policies don't include flood coverage, so you'll need a separate policy to cover your belongings. If not, you'll be paying a substantial amount out of pocket to replace damaged belongings.
In this article, we'll highlight some key factors that will impact your flood damage costs, how you can prevent flood damage and how to find the right insurance coverage to protect your biggest assets.
Estimated Flood Damage Tables*
Average One-Story 2,500sqft Home With $50,000 In Possessions
| Interior Water Depth (Inches) | Cost to Home | Cost to Personal Property | Combined Loss Potential |
|---|---|---|---|
| 1" | $23,645 | $3,172 | $26,817 |
| 3" | $24,370 | $4,917 | $29,287 |
| 5" | $31,370 | $13,914 | $45,284 |
| 7" | $37,691 | $17,700 | $55,391 |
| 9" | $38,553 | $23,547 | $62,100 |
| 12" | $39,845 | $32,317 | $72,162 |
| 24" | $44,325 | $43,001 | $87,326 |
| 36" | $47,905 | $46,633 | $94,538 |
| 48" | $53,355 | $50,000 | $103,355 |
Small One-Story 1,000sqft Home With $20,000 In Possessions
| Interior Water Depth (Inches) | Cost to Home | Cost to Personal Property | Combined Loss Potential |
|---|---|---|---|
| 1" | $9,550 | $1,269 | $10,819 |
| 3" | $9,820 | $1,970 | $11,790 |
| 5" | $12,780 | $5,474 | $18,254 |
| 7" | $15,508 | $7,019 | $22,527 |
| 9" | $15,925 | $9,335 | $25,260 |
| 12" | $16,550 | $12,810 | $29,360 |
| 24" | $19,500 | $17,160 | $36,660 |
| 36" | $21,100 | $18,731 | $39,831 |
| 48" | $23,400 | $20,000 | $43,400 |
Large One-Story 5,000sqft Home With $100,000 In Possessions
Interior Water Depth (Inches) Cost to Home Cost to Personal Property Combined Loss Potential
1" $47,110 $6,344 $53,454
3" $48,620 $9,828 $58,448
5" $62,500 $27,996 $90,496
7" $74,662 $35,512 $110,174
9" $76,265 $47,247 $123,512
12" $78,670 $64,849 $143,519
24" $85,700 $86,075 $171,775
36" $92,580 $93,124 $185,704
48" $103,280 $100,000 $203,280
*Source: National Flood Services. Estimated based on national FEMA flood loss tables of cash value loss.
Basic Factors that Impact Costs
There are several factors that will impact the costs of flood damage. In this section, we'll highlight them to make sure you are taking the threat of flooding seriously.
Size of Your Home
Flood damage costs will vary based on the size of your home. For example, a small home is considered one-story, and spreads across 1,000 sq ft, while a large home is multi-story and amasses 5,000 sq ft.
The larger the home and the greater the square footage, the more opportunity there is for flood damage. Costs can range anywhere from around $9,000 to upwards of $100,000 based on the size of your residence.
Value of Possessions
Are you a collector of fine art or sports memorabilia? If so, your personal possessions might have a high value, meaning you're at a greater risk of expensive flood damage costs.
It's important to have the value of your personal possessions assessed, that way if an event such as a flood occurs, you'll know what to expect in out of pocket or insurance coverage costs.
We also recommend taking pictures or videos and documenting all items and saving backups to the cloud so you have additional evidence of what you own.
Interior Water Depth
The first component to assess when looking into flood damage costs is the interior water depth, or how deep the water accumulation is, which should be measured in inches.
The deeper, or higher the water, the greater the flood damage costs will be. Water damage can occur at as little as one inch of water depth, all the way up to 50 inches or more.
Flood Costs
The two main flood damage expenses you'll encounter are the costs of repairing your home itself and the costs for replacing personal items within.
Costs to Home
The primary expense you'll encounter is the costs to your home. This can include ceiling, floor, wall and roof repairs, along with broken built-in fixtures, burst pipes and leaky plumbing that may have caused the flood in the first place.
Depending on the severity, you'll also need to pay for water and debris removal, ventilation and decontamination to prevent mold and mildew. One of the most expensive home damages can be basement repairs, as they are tougher to get down to and impact the foundation of your home.
Costs to Personal Property
The next largest flood damage expense relates to your personal property and possessions. Personal property includes, but is not limited to, laundry machines and dryers, portable AC units, ovens, and microwaves, curtains, rugs.
Also included are any personal belongings such as clothes, furniture, electronics, and collectibles, which might be subject to certain limits.
Additional Factors
Other factors that will impact the costs of flood damage to your home in NJ include:
- Where you are located (Your city/state and whether you are in a floodplain)
- Cost of labor and materials
- Type of water damage (Whether it is clean, grey or black)
- Cause of water damage (natural disaster or system failure)
- The type of insurance coverage you have
Prevention Tips
While some floods from natural disasters or faulty equipment in your home can't always be prevented, there are several measures you can take to minimize risk.
They include:
- Keep your basement dry
- Clean your gutters
- Slope the landscape
- Get your plumbing and roof inspected
- Install a sump pump
- Look for water stains and mold growth
- Store valuable items above ground
- Direct downspouts away from your home
- Know how to shut off electricity, gas and water
- Get flood insurance
Coverage Options
If you're a homeowner, you're required to already have homeowner's insurance coverage. But will that cover flood damages?
The answer is simply, "No".
Regardless of the water source (a hurricane, a burst pipe, a lake overflow, etc.), your homeowner's insurance will not cover any flood damage, so you'll need a separate policy.
As mentioned above, there can be flood damage to your home and its contents, each of which can be covered under separate insurance policies.
It's important to note that there are several exceptions to flood coverage. If there is damage from mold and mildew that you as the owner could have been prevented, you won't be covered.
Valuable papers and the currency lost in the home will also not be covered, along with property outside of your home such as pools and fences.
Lastly, there is often a 30-day waiting period from the date of purchase for your policy to take place. So if you know a big storm is coming over the next few days, it might be too late to get flood coverage. There are a number of exceptions to this rule, so it's important to discuss your options with your insurance agent.
If you're looking for coverage for flood damage to your home in New Jersey, you've come to the right place. Speak with an agent at Central Jersey Insurance Associates to find the right coverage to protect your home and assets.
How Much Life Insurance Do You Really Need?
Life insurance policies range from tens of thousands to tens of millions of dollars. The average death benefit paid out each year in the U.S. is $163,000. But is that enough?
There's no hard and fast answer to the question. The amount of life insurance you need depends on your health, your family, your debts, and your assets. Your goal should be to cover outstanding debts and funeral expenses without eating into any retirement income for your spouse.
So how do you decide how much life insurance you need? We answer the question right here.
Watch our video summary:
Why You Need Life Insurance
Life insurance benefits anyone who has dependents (a spouse and/or children) and debt. It covers your back so that if you die, the cost of getting rid of your debt and holding your funeral doesn't fall on the ones you leave behind.
If you don't have debt and you have enough money put away for the cost of dying (including your funeral and an estate lawyer), then life insurance may be an extra cost with very little benefit.
Most of us will benefit from life insurance.
How Much Life Insurance Do You Need?
You have debt that you don't want to pass on to your children. So how much life insurance do you need? Enough to cover your liabilities? More?
It's impossible to identify the precise amount of coverage you need. But you can estimate it based on your current finances, your health, and the needs of your family.
At a bare minimum, subtract your liabilities from your current assets and get a policy that covers the gap. Here are some old and new strategies used to calculate the best life insurance recommendations:
Multiply Your Income
An old industry rule says new policyholders should multiply their income by 10 to find the right death benefit.
This rule is the most basic of the strategies, and it doesn't reflect the financial situation many people face today. With the combination of interest rates and the rise in inflation, it may not help you down the line.
It also leaves behind your family's needs and the rest of your financial picture, and doesn't apply if you're a stay-at-home parent or have a variable income.
You can use this rule, but compare the calculation with your financial reality before settling on a policy.
Use the DIME Formula
The DIME formula stands for:
- Debt (and final expenses)
- Income
- Mortgage
- Education
The DIME formula is more precise than the 10x rule. It considers what your family needs, any liabilities you have and considers the substantial costs of your mortgage and education on their own.
Again, it doesn't take into consideration your assets and savings, but if you don't have any (and 21 percent of Americans don't), then this formula can be accurate.
Use a Calculator (or Two)
Do you hate math as much as you dislike thinking about life insurance? Not a problem.
Several providers offer helpful life insurance calculators to help you find how much life insurance you need.
The Bankrate life insurance calculator isn't attached to any policy provider. So, you can trust that you won't get a million emails after using it. It asks:
- How much money you need for burial expenses
- How many years of income you want to replace
- How much your dependant survivors will need
- How much you have in savings and assets
- How many children you have
- How many one-time expenses you want to fund
A click of a button gives you an estimated answer. However, even these are inaccurate unless you know precisely what your survivors' needs are.
Consider using a personal budget software to estimate your monthly needs. Your life insurance won't do much to provide for dependents if you don't know how much they'll need.
Remember that the lump sum payout need not be just cash. If you choose a significant payout, like $500,000, your family can invest it and earn money on it while drawing yearly income.
For example, if you choose $500,000, they can invest it to earn 5 percent a year. Then, they can withdraw $25,000 a year. However, $25,000 is a small amount, and given the continued rise in the cost of living, it could be a pittance by the time they need it.
Finally, remember that life insurance isn't supposed to replace your income for the rest of your life. It's only supposed to replace what you'd earn until age 65 when you retire.
By that time, you should have enough saved in retirement and investment funds to live on and have passive income. The amount you need is lower because there are fewer years left that you need to carry your dependants.
When Should You Buy Your Life Insurance Policy?
Traditional wisdom says that life insurance policies provide the most benefit when you're young.
Why? Because young, healthy people pay premiums over a more extended period, which makes them the best customers for insurance companies profit margins. Buying a good policy when you're young can get you a better plan in the long run because you might be forced into an adverse risk category later.
There is a myth that you can't buy life insurance when you reach a certain age. While insurance premiums after 50 or 60 are more expensive, it's rare for a provider to refuse you coverage as long as you accept a plan within your risk category.
Ultimately, buy insurance if you need it and when you expect you'll need it. A healthy 20-year-old won't benefit from paying monthly premiums—and it will get expensive as they get older.
What Life Insurance Policy is Right for You?
For most of us, life insurance is the right decision because it adds an extra layer of protection against debt and funerary costs without eating into your savings.
However, life insurance is not meant to be a big payday for your survivors. Your life insurance should only replace your income up to age 65. After that, you should rely on your savings, investments and passive income.
What would happen to your family if you were to pass away unexpectedly? Give yourself some peace of mind by considering life insurance as an option. Click here to learn more about how much life insurance you need and what policies may be right for you.
Your Complete Guide to the Different Types of Homeowners Insurance Policies
What if you doomed your new home by saying a single word?
Most of us say "no" to many extra kinds of homeowner's insurance. It's tough to understand the benefits and drawbacks of all the types of homeowners insurance that are available.
That's why we put together this complete guide. Keep reading to discover if your home needs some additional protection!
Versatile: HO-3
We figured it's best to start with the most common form of homeowners insurance. That form is known as HO-3 or "special" insurance.
What makes this insurance so special? It encompasses everything in the HO-2 (more on that in a moment) and protects against any perils not named.
For example, a policy may specify that it does not protect your home from flooding. If an HO-3 policy does not mention flooding and your house gets flooded, then you are covered.
This insurance protects things attached to your home (such as a garage). And it offers liability insurance against accidental injuries while still protecting all of your possessions inside the home.
While it is not as thorough as comprehensive insurance, HO-3 is relatively affordable. These factors combined are why it is so popular nationwide.
Simple: HO-1
While the HO-3 is the most popular form of home insurance, it's not the most basic form. That honor belongs instead to the HO-1.
Remember how the HO-3 protects against any perils not named? The HO-1 is the exact opposite: It protects only against named perils.
While the exact perils may vary, this insurance typically protects against things like fire, vandalism, theft, and hail. However, you'll quickly notice some limitations.
For example, it may protect against lightning and hail, but not against flooding. So while this policy is the cheapest, you must weigh whether those limitations will mean you must pay more in the long run.
Broader: HO-2
It's easy to describe the HO-2 insurance plan. We like to call it "simple plus."
It covers everything that was already covered in the HO-1 policy, then adds items including protection from freezing, water discharges and accidental electrical damage. You even get protection from more exotic threats such as falling objects.
Sometimes, you may receive additional perks such as personal liability protection, but it ultimately shares the limitation that you have no protection against anything not named.
Comprehensive: HO-5
If the HO-2 is "simple plus" insurance, then the comprehensive HO-5 plan is "special plus." This means you are getting all the benefits of HO-3 along with some extra bells and whistles.
For example, you get better protection for your possessions, and you can get personal liability insurance as comprehensive as you need, though you will pay for this enhanced coverage.
Keep in mind that "comprehensive" insurance still has limitations. You typically aren't protected against floods, settling, mold and water damage, along with neglect or other self-caused problems.
Renter's Insurance: HO-4
So far, we have focused only on homeowners insurance. However, those who rent shouldn't feel left out, as they have their own special form of insurance.
HO-4 insurance is designed for those who rent. It only offers coverage for personal liability and personal belongings.
If you rent, the actual owners are responsible for major repairs in the event of sudden damage, but they don't cover liability or possessions, so this insurance gives renters more peace of mind.
Condo Insurance: HO-6
Nobody wants insurance redundancy. You don't want to pay twice for coverage if you don't have to.
That's why HO-6 insurance is available for condo owners. This form of insurance covers liability, belongings and possibly interior elements like floors and walls.
You typically get the incidental coverage offered by an HO-3, but because your homeowner's association policy typically covers the rest of the structure, an HO-6 lets you only get the level of protection you need.
Older Home: HO-8
Older homes are like older bodies. Over time, they face many unexpected issues that a newer home rarely faces.
That's where the HO-8 insurance comes in. Unlike other insurance plans, this is designed specifically to protect older homes.
This kind of insurance is like the HO-3, but the HO-8 offers special protections that older homes may particularly need.
There is a reason that many historical buildings are protected by this kind of policy. If you live in an older home, then it's in your best interest to check this out!
Mobile Home: HO-7
All of the policies listed so far have been designed for standing structures such as single-family homes and condos. However, there is a type of home we haven't addressed yet: the mobile home.
The best form of insurance for mobile homeowners is HO-7. Similar to the HO-8, it is another modified HO-3 policy.
As you'd expect, you get all the protections offered by the standard HO-3, but you also get special coverage intended to protect mobile homes from the unique threats they encounter.
Optional Insurance
All the forms of insurance we have listed are the most basic ones available. You have probably noticed that all of them have at least some limitations in what they cover.
This is where optional insurance comes in. Do you live in an area prone to flooding or earthquakes? Your insurance won't cover these things, but you can take out an optional policy that does.
Obviously, extra policies add to your overall expenses. Therefore, it's important to check out resources like FEMA flood charts and determine how likely you are to need coverage such as flood insurance.
Types of Homeowners Insurance: The Bottom Line
Now you know about the different types of homeowners insurance, but do you know how to find the affordable and comprehensive coverage you need?
We specialize in insuring individuals and businesses against just about every kind of threat. To see how we can protect your home, contact us today!