Homeowner's insurance offers financial protection against damages or personal losses that are the result of a peril.
While many situations are covered by homeowner's insurance, it is important for consumers to fully understand how their companies define a peril and what specific instances are actually covered by their policies.
The Two Main Considerations
Coverage can be provided on an open-peril or a named-peril basis. An open-peril policy often covers a broad range of instances, and rather than listing those that are looked after, the policy will note which ones are excluded. A named-peril offering will list those specific aspects included in the plan.
Homeowner's insurance falls under the category of package coverage, meaning that it provides protection for multiple hazards. Policies for disasters such as earthquake or flood are known as peril-specific plans and are available for situations that are excluded from most offerings.
Types of Policies
There are six types of homeowner's policies:
- HO-1 Policies: This type of plan provides the most basic protection for your home and personal property and looks after these 11 hazards:
- Windstorm (includes tornadoes and hurricanes)
- Riot or Civil Commotion
- Damage from Aircraft or Vehicle
- Vandalism or Malicious Mischief
- Glass Breakages
- HO-2: This type of plan provides broader protection and includes the previous 11 hazards included in an HO-1 offering as well as six additional ones:
- Falling Object
- Weight of Ice, Snow or Sleet
- Building Collapse Caused by Named Perils
- Pipes Bursting from Heat or Cold
- Overflow of Water from Hot Water Heater
- Heating and Air-Conditioning System Malfunction
- HO-3: This is referred to as extended or all-risk protection and covers all except those specifically excluded in the policy. Commonly excluded from homeowner's plans are:
- Nuclear Accident
- HO-4: This is referred to as renter's insurance and only looks after personal property damaged or lost as the result of the 17 listed perils.
- HO-6: This provides coverage for condominiums and includes personal property plus interior walls damaged or lost as the result of the 17 listed perils.
- HO-8: This type of policy concerns older homes that might not be meet the standards of current codes. This type of plan looks after your home and personal property that is damaged or lost as the result of the 11 aforementioned hazards listed included in the HO-1 policy. A key difference in an HO-8 plan is it will not take care of the cost to rebuild the home because the total rebuilding costs are likely to exceed the market value of the home.