Homeowners insurance provides compensation for events protected under the policy. Covered events can indemnify the policy holder against damage to the home, yard and other structures, personal belonging as well as personal liability if found legally responsible for damage or injury to another.
Although homeowner’s insurance is not mandated by law, lenders universally require a policy remain in place for the length of the mortgage to protect the investment. Encumbered properties are subject to force-placed insurance if their policy has lapsed, is cancelled, or has been deemed insufficient. Creditor-placed ‘force’ policies provide rudimentary coverages that protect the mortgagors interests alone and are charged to the mortgagee.
In the absence of a mortgage, property and liability coverages offered by homeowner’s insurance is almost always a wise purchase, giving both property and liability protections.
How Much Coverage Do I Need?
Establish and maintain homeowner’s insurance coverage based on the value of your home and the contents within. Evaluate your dwelling and personal property to accurately determine coverage requirements.
Consider current rates when determining the financial requirement to rebuild or repair the structure after sustaining fire damage. Determining reconstruction costs can be a daunting undertaking, enlisting the services of an appraiser to provide tangible values is an option. Emergency restoration services, reconstruction costs and home values fluctuate. Periodically reevaluating coverage limits to account for ever evolving market levels is essential to maintaining adequate protection.
Personal property coverage limits can be determined by cataloging belongings to establish an overall value. Photographs of and receipts for personal property would leave no doubt as to value in the event of a loss. Maintaining a running tally as possessions are accumulated may require increased personal property coverage limits to keep pace. Additionally, high end valuables such as expensive jewelry and fine art, may be best protected by purchasing a rider providing separate coverage in the event of a fire damage, water damage or other loss.
Homeowners insurance policy affordability can be marginally adjusted by the amount of the deductible. Although taking a higher deductible reduces monthly premiums, the result is often regret at the resultant excessive expense in the aftermath of a loss. Likewise, there is a reluctance to make a claim as the insured weighs the expense of a high deductible against the size of the loss. This seemingly frugal decision often plays to the advantage of the carrier.
Types of Policies
Offered Homeowners insurance policies can vary by company and state, however there are several typical types known as “policy forms” that offer different levels of coverage.
HO-3 Insurance Policy
Known as “special form,” HO-3 insurance policies are more frequently adopted than any alternative. Accounting for approximately 80% of policies in place and protecting owner-occupied homes, this level of security often satisfies minimum indemnification requirements by lending institutions. Generally, HO-3 insurance policies cover damage from any cause except those specifically excluded.
HO-3 insurance policy contents coverages are commonly limited to 16 “named perils” including fire damage or lightning, smoke damage, windstorms and hail, explosions, riots, aircraft strike, motor vehicle strikes, vandalism, theft, volcanic eruptions, falling objects, weight of ice, snow and sleet, water damage due to overflow or discharge, freezing household systems, power surge as well as Sudden tearing, cracking or bulging of a hot water system, steam system, air conditioning or fire protective system.
HO-5 Insurance Policy
Providing the most extensive homeowners coverage, HO-5 insurance policies are not offered by all providers and typically are available only for well-maintained homes in low-risk areas. Adopted by approximately 13% of homeowners, HO-5 coverage pays for damage from all causes except those specifically excluded.
Commonly known as “comprehensive form”, HO-5 insurance policies may also be referred to as “premier” coverage. It should be noted that some HO-3 policies may also be labeled “premier”, without offering the expanded coverages offered of an HO-5 policy.
HO-1 & HO-2 Insurance Policies
HO-1 and HO-2 homeowners’ insurance are the least popular policies offered and only cover damages caused by named perils listed in the policy. Encompassing approximately 8% of the homeowner’s insurance market, HO-2 policies typically cover 16 named perils and is more commonly adopted than H0-1 coverage. HO-1 coverage is the most limited type of homeowners insurance, covering losses from an even shorter list of perils than the HO-2 form.
Other policy types include HO-4 insurance for renters, HO-6 for condominium owners, HO-7 for mobile homes and HO-8, a rarely used type that provides limited coverage for older homes.
Actual Cash Value Vs. Replacement Value
Understanding the difference between actual cash and replacement value coverages is important in choosing a policy. Actual cash value finances the replacement of your home and/or possessions, less a deduction for depreciation, up to the limit of your policy. Conversely, replacement cost pays the current cost of replacing your home and/or possessions with no deduction for depreciation, up to the limit of your policy. It should be noted that most standard homeowners policies offer actual cash value protection, as it costs 10 percent more, on average to buy replacement cost coverage.
Additional Living Expenses
Independent of the monies available to rebuild your home and replace belongings in the event of a loss; Additional Living Expenses (ALE) carries the cost of temporary housing, meals and various other expenses incurred while living away from home. It should be noted that ALE coverages have financial limits, and some policies include time restrictions.
Emergency Restoration Services
Property Recovery 911 specializes in emergency restoration services that include water damage mitigation, fire damage restoration, mold remediation, biohazard elimination and emergency board up. Our certified specialists are committed to assisting victims of disaster protect their interests by quickly removing the source of damage and starting the recovery. Serving residential, commercial, municipal, and industrial clients; we are constantly striving to provide the highest level of professionalism, exemplary customer service and rapid response time when called upon to assist in an urgent situation. If your property has sustained damage requiring emergency restoration, Property Recovery 911 is the clear choice to deliver outstanding results. For more information, Contact us at (267) 808-7200.