Homeowners Insurance: What Policy Is Right For You?

The easiest way to figure out the right type of homeowners insurance and coverage you need is to understand the several different insurance policies that exist and the perils they cover.

Once you start shopping for homeowners insurance or renters insurance, you may be surprised by the several different terminologies the insurance industry has on its menu.

Trying to memorize all the difference between one terminology and the other may not be the best way to understand all the different policies.

Rather, having a good knowledge of what perils they cover and exclude can help you figure out the best protection for your home.

First, you have to understand the types of perils most homeowners’ insurance cover.

Homeowners Insurance: What Risk Does It Cover?

Once homeowners insurance companies start sending you quotes, ask about the precise coverage provided by each company’s policy.

Although most companies have a similar benchmark of coverage for most homeowners, they have several differences that set them apart.

According to Insurance InformationInstitute (III), many homeowners insurance service providers offer protection for the following:  

  1. Wind storm or hail
  2. Explosion
  3. Riot or civil commotion
  4. Damage caused by vehicles
  5. Weight of snow, sleet or ice
  6. Smoke
  7. Volcanic eruption
  8. Theft
  9. Falling object
  10. Fire or lighting
  11. Damage caused by aircraft
  12. Vandalism or malicious mischief
  13. Unexpected and accidental damage caused by artificially generated electrical current (excluding loss to a tube, transistor or other electrical tools).  
  14. Fire protective sprinkler system, freezing of a plumbing, heating or air conditioning or of a household appliance.
  15. Unexpected discharge or excess flow of water or steam from a plumbing system or other household appliance that use water one way or the other.
  16. Unexpected and unplanned burning, tearing, cracking an air conditioning or automatic or even bulging of a steam or hot water heating system, or fire-protective system.  

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Disasters that are excluded from Homeowner’s Insurance  

Not all potential disasters makeit to homeowners’ perils list. Some of the ones that are excluded from homeowners’insurance policies are:

  1. Sinkholes
  2. Nuclearaccidents
  3. Mudslides
  4. earthquakes
  5. War
  6. Floods
  7. Landslides

Homeowners Insurance: Standard Types of Policies

The precise terms of an insurance coverage may be different by state and by service provider within a state.

Nonetheless, the following are the standard coverage types:


The HO-1 is a limited insurance coverage that only protects 10 risks in comparison to the 16 risks protected by other similar affordable standard insurance plans.

The HO-1excludes personal liability for injured individuals on your property and your possessions are not automatically protected.

This is why many mortgage firms disagree that the HO-1 policy doesn’t not provide adequate coverage.

As a result, the HO-1 insurance policy is not a popular one and is not widely used. 


This type of home insurance policy generally covers all 16 risks.

However, this insurance plan is a basic policy with lower coverage levels as well as lower premiums.

The HO-2 is described as a “named-peril” coverage. This indicates that all other incidents other than those listed in your policy will not be protected.


According to III, the HO-3is the most common level of home insurance policies.

It protects all disasters except those that are precisely exempted.

That indicates that you’re covered against any and all risks except your policy precisely mention them as an exemption.

Besides your home, the HO-3 protects attached structures, for instance, a garage or deck and your possessions.

The HO-3 also covers personal liability coverage in the event that you mistakenly injure someone or cause damage to their property.

What’s not protected in your HO-3 depends on the precise details of what is listed on the policy you opt for.


This insurance policy is a renters’ policy that protects your possession against all 16 risks.

This insurance policy only covers your personal belongings and not the building because that’s the responsibility of the landlord.

Many HO-4 insuranc provides liability insurance in the event that an individual is injured while in your home.

The plan also provides money for cost of living in the event that you have to reside somewhere else temporarily while the rental building is undergoing renovation.   


The HO-5 insurance policy is an all-inclusive version of the HO-3 policy.

This insurance policy is often only available to homeowners who own a new home that is well maintained and within a short distance to fire protection services.

Similar to an HO-3, the HO-5 policy will cover all risks except your policy precisely exempt them in writing.

What makes the HO-3 different from the HO-5 is that the latter offers better protection for your personal possessions.

An HO-5 protects your possessions against all possible events of loss that aren’t precisely exempted.

Meanwhile, an HO-3 only protect against causes that are precisely listed.


This insurance policy is similar to renters’ policy but it is for a condominium or co-op insurance coverage.

The HO-6 protects the personal belongings of condo owners against all16 risks and usually include liability insurance.

Typically, condo insurance will spread to the walls, ceilings and floors of your residence, while the building itself is covered by the condo association.

Specifically, the type of policy your condo association has may determine what you will list on your HO-6policy.


This home insurance policy is similar to the HO-3.  But the HO-7 was created precisely to protect manufactured or mobile homes.


This insurance policy was specifically created to protect older homes.

The protection plans of this insurance policy is similar to the ones of an HO-3 but it has been modified to make it suitable for older buildings. 

III clearly states that sometimes, older buildings do not qualify for replacement cost insurance.

As such the compensation for damages to belongings or the property would be determined by the replacement cost subtracted from depreciation. 

Williams Oleije

Williams Oleije

Williams Oleije is an Inbound Marketer, and a pop culture enthusiast. He's an avid researcher about how digital media is transforming marketing in several industries.

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