What Are Homeowner’s Insurance Tiers?

Not all home insurance coverages are identical. The type of coverage you have on your home can vary based on the category of property you own and the aspects that the policy covers. It’s important for you to know now that you have the right coverage for your needs; otherwise, you could find yourself in bigger trouble than you expected when life gets messy.

Esurance outlines the eight types of home coverage and what distinguishes each one.

Insurance policy types for traditional homes

HO-1: This is the bare-bones level of coverage for your house. It covers damage to the structure itself, with possession coverage typically costing extra. HO-1 insurance covers destruction resulting from fire, lightning, hail, wind, theft, vandalism, damage from vehicles, riots, volcanoes and a handful of other similar disasters. HO-1 insurance isn’t very common because greater coverage isn’t much more expensive.

HO-2: Homeowners wanting a minimal amount of home insurance often choose HO-2. In addition to HO-1 perils, HO-2 policies repay for destruction caused by heavy snow, ice, falling objects and the accidental failure of systems like the HVAC, plumbing and electrical. It’s very strict on which specific situations it covers.

HO-3: The majority of homeowners have HO-3 insurance coverage because it’s the most thorough and flexible. Unlike HO-2, which abides by a named list of perils, HO-3 is more intuitive. It accounts for all kinds of perils, as long as they’re not ones defined in the exclusions. This means other structures on your property and your belongings can be covered, too.

HO-5: This insurance tier is structured similarly to an HO-3 policy but it has fewer exclusions. It covers damage from practically anything except natural disasters common in some areas (like floods and earthquakes), structural deterioration, animal infestations, war, pollution, foundational disturbances and similar hazards. There is still some leeway in HO-5 policies that allows you to receive compensation for such perils depending on how quickly or unexpectedly they occur.

If you want coverage for particular threats that are excluded from an HO-5 policy, such as flood insurance, you’ll have to pay for it as an add-on for an extra fee or negotiate a customized policy.

HO-8: If your home is significantly older than most houses, insurance companies will treat that antique structure differently than modern homes, thus giving it its own form of coverage. HO-8 is similar to the defined list of coverages of an HO-3 but with a couple distinctions due to the age of the property.

Insurance policy types for non-traditional homes

If you’re a property renter, you don’t need to pay for insurance covering natural perils, as the structure isn’t your responsibility. All you have to worry about are your belongings and any damage you personally cause, which is what HO-4 insurance addresses. More commonly, we call it “renter’s insurance.”

Just like the exceptions of rental properties, so too do condos not require the same insurance coverage as full standalone houses. An HO-6 policy, or “condo insurance,” covers personal liabilities and belongings, as well as basic protection of the bare walls.

Mobile homes are also different from traditional houses and have their own property and maintenance needs, so insurance companies offer HO-7 coverage as a version of HO-3 coverage for mobile homes.

Read the terms of your home insurance carefully to ensure you have the coverage you want, and talk with your insurance agent if you believe you need to change policies.

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