Disclaimer: The information provided is not meant to be all-encompassing. Every insurance company and state is different. call your agent to make sure you are fully protected!
Every month we will be bringing you a week of Insurance Info packed with tips and things you need to know!
There are so many different types of insurance out there that this article could realistically be 10 or more pages long. (You already know this because you read your insurance policy cover to cover, right?) But we won’t bore you with all of that
junk, instead we’ve provided you with the most common types of insurance and the differences between them so you can fully understand what you’re being covered for or what you’re not.
Talk the Talk
Here is a quick rundown on some insurance terms and coverage types you’ll need to know!
Dwelling- This is the main structure of your home, such as the flooring, walls, windows and roof. Agents will run a replacement cost estimator (RCE) to determine the cost needed to rebuild it from the ground up.
Contents- This coverage basically insures everything that would fall out if you turned your house upside down; such as, clothing, electronics, and furniture. Most companies have specific limits for contents that typically include artwork, firearms and jewelry. If you have an expensive art collection, or any of these specialty items advise your agent so additional coverage can be added to your policy. (Don’t assume anything is covered just because you have insurance!) Contents coverage can typically be insured at actual cash value, or replacement cost.
Replacement Cost- If your house were to burn down there should be enough coverage in place to fully rebuild, including labor and materials. Replacement cost will allow your home, or contents to be replaced at today’s value exactly as it was; meaning, you cannot add major custom upgrades unless the home was originally in that state prior to the fire.
Actual Cash Value- This coverage is the opposite of Replacement Cost, meaning if you have a claim the things that need to be repaired, or replaced will be done at depreciated value rather than at today’s value. (Think about car’s blue book value, but concerning your personal belongings. Everything depreciates the minute you drive away from the store.)
Personal Liability- This coverage is to financially protect you if you are being sued, or are involved in a lawsuit due to an injury that happened on your property, or for damage you caused to another person’s property.
Medical Payments- This coverage comes in handy if someone injures themselves on your property. ( Example: If you have a children’s birthday party at your home and a child is hurt in any manner- trips, bumps their head, etc.- you as the homeowners are liable.)
Mold Coverage- This coverage is typically broken down to mold property and mold liability coverage to protect your home from damage cause by mold, or fungi. The mold could be caused by a leak, overflow of water, etc. Contact your insurance carrier at the first signs of mold! It can become EXTREMELY expensive!
Claim/ Loss – If your property incurs damage, or if you are being sued you would need to report a claim to your insurance company to determine if you have coverage on your policy to cover the cost.
TIP! Every insurance company has different policy limits, exclusions and guidelines. Your agent can usually quote your home with multiple companies to save money, but make sure you know what the difference is before choosing the lowest price.
Coverage for Dwelling & Contents
HO3- This is a standard policy meant to insure your home from most common hazards like fire, theft or mold at full replacement cost. A homeowner’s policy is meant for people who are occupying a home they own on a primary, secondary, or seasonal basis. This policy is not meant for people who rent their houses, or are leaving it vacant without security. These policies typically include contents, liability, medical and mold coverage unless they were specifically excluded. Additional coverage can be added for protection from wind/hurricane, sinkhole or flood damage, if necessary.
HO8- This is similar to the HO3 policy, but the structure of the home is only insured at actual cash value. Actual Cash Value is the opposite of Replacement Cost, meaning older homes that have a claim will be repaired at a depreciated value depending on the year of construction rather than at today’s value.
HW2- This a special wind only policy that does not include any hazard, or liability coverage. It is similar to an HO3 policy since it is meant to insure owner occupied homes, not rentals. (This policy is very popular in Florida. You know since its a peninsula and all…)
DP3 – This policy is meant to primarily protect the main house; such as, the walls, foundation, roof, plumbing, etc. These policies are made for homeowners who are renting their house to others since this policy insures the structure of the home and does not typically include coverage for the home’s contents. ( If you are renting your property work into the lease that the insured understands they are responsible for their personal belongings and it is recommended they obtain a renters insurance policy!)
TIP! Sometimes you can save money by separating your wind and hazard insurance between two different companies with a HW2 wind-only and a HO3 ex-wind policy.
Coverage for contents only
HO6- This policy is for condominium owners who are not responsible for repairing the exterior dwelling of the building. A HO6 policy provides coverage for the interior unit’s contents and provides the normal package of liability, medial and mold coverage most policies include. The condo association should have a ‘master policy’ in place that covers the entire building and roof, which is why this policy only provides coverage for the interior unit (or our favorite way of describing it “The Walls In”).
HO4- This is a renters policy, meant for tenants occupying an apartment, condo, or house that is owned by others. This policy provide contents, liability, medical and mold coverage for a low yearly cost.
Forced Placed Insurance – If you have a mortgage on your home, but do not provide them proof of homeowners insurance within a specified timeframe they will ‘force’ an expensive … like super expensive…. policy with lower limits. Since the mortgage company has an interest in keeping your home safe (they do technically own it until the mortgage is fully paid off) you are required to add them to your homeowners policy! Be careful though, if this happens call your agent as soon as possible to get a new policy, or to submit proof of your insurance policy.
Builder’s Risk Policy– If you are having major renovations, or construction done on your home then ask your agent about this policy type. Most homeowners policies do not insure homes that are under construction, so it is better to have a builder’s risk policy than to have a lapse in coverage. Companies can apply a surcharge if you have had a lapse in coverage and some companies will not insure a home that has had a lapse in coverage over 45 days!
TIP! If you are being cancelled by an insurance company set up a new policy to begin before your current policy cancels! Having a lapse in coverage can increase your premium, or make your home ineligible for coverage with some companies!