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Homeowners insurance policies come in several different forms, ranging from HO-1 to HO-8. The homeowners insurance policy that’s right for you depends on the type of home you live in and the level of coverage you need. An HO-3 policy is the most common type of homeowners insurance and provides fairly comprehensive coverage.
Here’s what HO-3 insurance covers and how it compares to other home insurance policies.
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What is HO-3 insurance?
HO-3 insurance protects your home and other structures on your property, as well as your personal belongings, against various perils: events that cause loss or damage to your home, such as a break-in or fire. This type of insurance also provides protection against personal liability claims and additional living expenses if you have to temporarily move (more on this later).
East homeowners insurance coverage the structure of your home based on open risks and your personal belongings based on named risks. An open perils policy covers all perils unless something is stated as an exclusion. By contrast, a specified perils policy covers only the perils listed in your policy.
HO-3 insurance generally covers your home against the following 16 perils:
- Wind storm or hail
- fire or lightning
- Damage caused by aircraft.
- Vehicle Damage
- Vandalism or malicious mischief
- falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water from HVAC or appliances
- Sudden and accidental tearing, cracking, burning, or bulging of systems
- Freezing of appliances and systems, like your heater or air conditioner
- Sudden and accidental damage from an artificially generated electrical current
- Volcanic eruption
Why do you need HO-3 insurance?
For starters, if you have a mortgage, your mortgage lender will likely require you to buy some kind of home insurance to protect your interest in your property. If you don’t have a policy or it expires, your lender will buy one for you, often at a much higher rate than you would receive on your own, until you get insurance.
Even if you own a home without a mortgage, home insurance is still essential because it can protect your home and personal belongings against a variety of unpredictable events. This can safeguard your hard-earned money by limiting your out-of-pocket expenses for covered damages.
WHAT IS EXTENDED REPLACEMENT COST FOR HOMEOWNERS INSURANCE?
HO-3 Insurance Coverages
An HO-3 policy generally gives you coverage in these six areas:
- Housing coverage — If a covered peril damages the structure of your home, your insurance company will help cover the cost of repairs.
- Coverage of other structures — Your policy also protects against damage to other structures on your property, such as a fence or shed.
- Personal Property Coverage — HO-3 insurance covers your personal belongings from covered events.
- Coverage of additional living expenses — If a windstorm or other covered peril makes your home uninhabitable, your insurance provider will help pay your additional living expenses, such as hotel and food bills.
- Personal Liability Coverage — If someone is injured on your property, or if you or someone else on your policy accidentally damages someone else’s property, your insurance may be able to help if the person files a lawsuit against you.
- Medical payments coverage — This coverage helps pay a certain amount of medical expenses for a guest who is injured on your property, regardless of whether legal action is taken against you.
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What does HO-3 insurance not cover?
Although an HO-3 insurance policy protects your home against a wide range of unfortunate events, it does not cover everything.
Here are some events that standard home insurance often excludes:
- Flood – Floods are one of the most common natural disasters across the country, but standard home insurance does not provide flood coverage. However, you can purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or a private insurer. If you have a federally backed mortgage and live in a high-risk flood area, your lender will require you to purchase this type of insurance.
- Earth movement — If an earthquake, mudslide or sinkhole damages your home, your insurance provider will not pay for the damage. But you can purchase a separate earthquake insurance policy for added protection.
- Normal wear and tear – As time passes, it’s common for your home’s systems or materials (such as air conditioning and roofing materials) to need repair or replacement. If normal wear and tear is the reason you have to repair or replace these items, your insurance company will not cover the costs.
- act of war — If an act of war destroys or damages your home, your insurance provider won’t pay the bill.
- Sewer rupture — Generally, your insurer will not pay to repair a sewer overflow or any damage it causes.
The average cost of HO-3 homeowners insurance in the US in 2019 was $1,272 per year, or $106 per month, according to data from the National Association of Insurance Commissioners.
But the price you’ll pay for HO-3 insurance varies based on many factors, such as:
- Crime rate in your neighborhood
- age of your house
- deductible amount
- The replacement cost of your home
- Distance from a fire station
- Your home security features
- Your credit history (if your state uses credit-based insurance scores)
- Your claim history
- Coverage amount
Your policy will also have a deductible. Your deductible is the amount you pay before your insurance kicks in. For example, let’s say your deductible is $2,000 and a heavy snowfall collapses your roof, causing $10,000 worth of damage. In this scenario, you would have to pay $2,000 out of pocket and your insurance provider would only pay $8,000 when file an insurance claim.
If you choose a lower deductible, your insurance premium will be higher, but you will pay less out of pocket. To lower the cost of home insurance, you can increase your deductible. But the downside is that you will have to pay more if something happens to your home.
How much HO-3 insurance do you need?
how much does home insurance cost what you need depends on several factors, such as the cost to rebuild your home, the cost to replace your personal belongings, and how much personal liability coverage you need.
It’s a good idea to purchase enough coverage to completely rebuild your home in case a fire or other covered peril destroys it. You should also consider making a list of your personal belongings, such as furniture, jewelry, and clothing, to determine how much coverage you need to replace those items. If you have valuables, consider getting insurance riders (policy riders) for additional coverage.
To find out how much personal liability coverage you need, first calculate your net worth. This is the total of all your assets. Consider getting enough coverage to protect the value of all your assets in case someone sues you as a result of bodily harm to your home or property damage. You may want to get coverage of at least $300,000 to $500,000, depending on the Insurance Information Institute.
How is HO-3 insurance different from other policies?
Home insurance comes in eight different forms. While HO-3 insurance is a fairly comprehensive form of insurance, it does not offer as much coverage as an HO-5 policy.
Here’s a closer look at what each form generally covers:
If you’re ready for buy home insurancefollow these steps:
- Find out what kind of coverage you need. Choose the right home insurance option for the structure of your home. For example, if you own a condominium, you must select HO-6 insurance.
- Calculate how much coverage you need. Estimate how much coverage you’ll need to replace your home and belongings if your home is destroyed. Also remember to get enough personal liability coverage to protect your assets. To easily estimate the replacement cost value of your home, multiply the total square footage of your home by the cost per square foot to rebuild a home in your area. An insurance agent or adjuster can help you get a more accurate number.
- Shopping around. To find a policy that fits your needs and budget, get quotes from at least three to five insurance providers. When comparing quotes, make sure they are for similar coverage.
- Choose and buy your policy. Once you’ve found the right insurance company, select the amount of coverage you need and continue shopping for your policy.
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