What to look for in a homeowners policy
February 24, 2017
Most homeowner's policies cover damage caused by fire.
To protect their home from any unexpected dangers, people often invest in homeowner's insurance. This is often required if people have a mortgage. With so many options available, however, it can be challenging to know what to look for. Here are some must-have elements policies should include:
The appropriate coverage
It's not uncommon for homeowners to have a budget to consider when attempting to find the right insurance. To avoid paying more than they need, people need to understand not only the various levels of coverage, but the disasters they protect against. The Insurance Information Institute listed protected perils as such:
- Fire or lightning.
- Windstorm or hail.
- Riot or civil commotion.
- Damage caused by aircraft.
- Damage caused by vehicles.
- Vandalism or malicious mischief.
- Volcanic eruption.
- Falling object.
- Weight of ice, snow or sleet.
- Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire-protective sprinkler system, or from a household appliance.
- Sudden or accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system.
- Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance.
- Sudden and accidental damage from artificially generated electrical current.
U.S. News and World Report listed the most common categories of coverage as follows:
- HO-2: Basic policy that safeguards against all 16 standard perils.
- HO-3: A broader choice that protects against all disasters except those excluded in the policy.
- HO-5: Premium option that tends to protect newer and more maintained homes. It also covers all perils except those outlined in the policy.
- HO-6: This selection is specifically for co-ops and condominiums. It covers personal property, liability and improvements to the owner's unit.
- HO-7: Similar to HO-3 policy, but for mobile homes.
- HO-8: This insurance option is specific to older homes but it only covers actual cash value.
When examining different homeowners policies, people should inquire about possible cost-savings. Some insurance companies will provide discounts to interested parties over the age of 55
, according to ABC News. These promotions range in percentages, so homeowners should be sure to complete research into their options.
"The suggested action may not be what people may have thought.”
The size of the deductible
Homeowners have to consider the cost associated with an insurance policy. As a result, comparing the rates and coverage is an important element of the selection process. When it comes to the deductible, the best choice may not be the most obvious one.
“It's recommended to opt for the highest deductible you can afford because most people only file a claim every eight to 10 years,” said Loretta Worters, vice president of communications for the Insurance Information Institute.
Look out for hidden clauses
While there are important things to make sure policies include, there are also elements homeowners have to keep an eye out for. Certain insurance documents may incorporate additional clauses that increase the potential for reduced or denied claims in the future. For example, if an anti-concurrent-causation provision is included, people may not be covered if their property is damaged by two risks at the same time
—one of which is covered and another that is not, like flooding, according to the Consumer Federation of America.