Austin, who occasionally writes here at PT Money, is in his 2nd year of teaching English in western Japan. With the Japan Tsunami fresh on his mind, he generously offered to write a couple of pieces on preparing for major disasters. You can check out his personal finance site for 20-somethings at Foreigner’s Finances.
This is part 2 of a short series about insurance for your living area. Part 1 covered renter’s insurance for condos and apartments.Buying a house is the biggest, most expensive, and time-consuming purchase of your life.
The idea of home-owning has been romanticized because it’s good for the country if many people own homes. But if you talk to someone going through the process of buying a house, they’ll tell you it’s not so fun because of the huge amount of decisions you have to make (e.g. how much house you can afford).
One of these decisions is also the type of homeowners insurance you want for your new home.
When you purchase a home and have a mortgage, the mortgage lender will require a certain amount of insurance to be purchased. You have some choices when it comes to the extent of coverage you want to buy.
The Different Types of Homeowners Insurance Policies
Like I said in the insurance for renter’s post last month, insurance is not an area of your life where you want to try to save a few bucks by cutting some corners. With that said, here’s some of the most popular homeowners insurance packages available to you.
HO-1 Basic Form Homeowner Policy: This package has limited capabilities and only covers a short list of perils (serious or immediate damages) like fire, vandalism, explosion, smoke, and personal liability. Most notably missing from this coverage is flood and earthquake coverage.
HO-2 Broad Form Homeowner Policy: This package includes 16 perils including all from HO-1 as well as perils like broken pipes and hot water heaters.
HO-3 Special Form Homeowner Policy: This is the most popular type of coverage for home owners. This is the insurance you want to get for your home if your considering purchasing a home soon. Still, events like earthquakes and floods are usually excluded from HO-3 so you’ll have to contact your insurance provider for special insurance for these perils if you happen to live in an endangered area.
HO-5 Premier Homeowner Policy: This is the most comprehensive coverage and if you are a very cautious person is the type of homeowners insurance for you. This coverage lists the perils not covered by HO-5 and anything not listed is insured.
HO-8 Older Homes: This coverage is pretty basic and for homes that are much older. Perils covered by the HO-8 are fire, smoke, vandalism, theft, as well as some others.
When you talk with a company or agent about the type of homeowners insurance you will need, be sure to discuss all of the details. Don’t rush the process for any reason. Make sure you understand exactly what insurance you’re getting, what’s covered, what’s NOT covered, and exact pricing.
The right homeowners insurance can save you hundreds of thousands of dollars someday.
What type of policy do you have?
Photo by N1NJ4