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The Right Fit: Which Type of Homeowners Insurance Policy Meets Your Needs?

When it comes to homeowners insurance, not all policies are exactly alike. Your options depend on the type of home you own (single home, condo, etc.) and the type of coverage you want.

It all starts with what's covered: Standard homeowners policies cover different "perils" or "events" that can damage or cause loss to your home. A named perils policy insures only against the causes of loss specifically named in the policy. An open perils policy insures against all causes of loss except those that are specifically excluded:

Many policies cover the 10 basic types of perils:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Damage caused by aircraft
  • Damage caused by vehicles
  • Smoke
  • Vandalism or malicious mischief
  • Theft

Other policies include coverage for 16 perils, which include the 10 basic perils plus these additional six:

  • Falling objects
  • 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 and 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 an artificially generated electrical current (does not include loss to a tube, transistor, or similar electronic component)

What Types of Dwellings Can Be Covered?

Before you seek out quotes, get a better understanding of the various types of policies that are available for the different types of dwellings that you may want to insure.

Homeowners Policy Special Form 3 (HO-3) is the most common form of coverage because it provides a broad range of protection with relative affordability.

Standard Single-Family Homeowners Insurance

You can purchase standard homeowners insurance if you have a single, unattached house or a townhome. Standard homeowners insurance covers dwellings for which the owner is responsible for both the interior and exterior of the home because they own the land on which it's built.

When shopping for homeowners insurance, you'll find different policies described as "forms." A form serves as a standardized industry template or starting point for your policy and covers certain perils. The details of your form are individualized to accommodate your personal circumstances and preferences, the guidelines of your insurer, and/or any legal requirements of your state.

Standard homeowners insurance forms include:

  • Homeowners Policy Basic Form 1 (HO-1): Minimum, less expensive coverage for only the 10 basic perils, though not available in most states because of the bare-bones protection it provides (typically without coverage for personal property or liability)
  • Homeowners Policy Broad Form 2 (HO-2): Broader coverage for the 16 named perils, sometimes with coverage for personal property and liability
  • Homeowners Policy Special Form 3 (HO-3): Coverage for your home for all perils except those specifically excluded; coverage for your personal property only for the named perils; includes personal liability. This is the most common form of coverage because it provides a broad range of protection with relative affordability.
  • Homeowners Policy Comprehensive Form 5 (HO-5): Coverage for both your home and personal property for all perils except those specifically excluded, providing the broadest type of coverage including liability up to the limits you choose
  • Homeowners Modified Form (HO-8): Coverage for the 10 basic perils for older homes (typically over 40 years old) or homes constructed of unique materials in which the replacement cost could be much higher than its market value; covers personal property and liability; often used for landmarks and historic homes. This policy typically allows the insurer to provide less expensive replacement materials than those that were originally used.

Condo/Co-op Insurance

You can purchase this type of insurance if you own a unit in a condominium or an interest in a cooperative building. Condo/co-op owners are usually only responsible for the interior of their homes, while the condo or co-op association insures the exterior structure, common areas, and land on which the structure is built. Condo/co-op insurance includes:

  • Homeowners Policy Unit Owners Form 6 (HO-6): Covers the interior of your home for all perils except those excluded and your personal property only for named perils; similar to HO-3, it also provides liability coverage
  • Homeowners Association Master Policy Form (HOA): Purchased by the HOA (not individual homeowner) or co-op association with membership dues to cover physical damage to exterior and shared spaces and liability in the structure's public places

Other Types of Homeowners Policies

If you have a standard homeowners policy but also own a mobile or manufactured home, you might be able to add mobile home insurance to your existing policy. However, if you use your mobile or manufactured home as your primary residence, you may need stand-alone mobile home coverage. Insurers vary the extent to which they cover other living options, such as RVs, under this type of policy:

  • Mobile Home Form (HO-7): Coverage of the mobile home when it's stationary, with options comparable to a homeowners policy that include personal property and liability; mobile homes or RVs that are driven (versus those that are towed) typically require minimum liability coverage in line with auto insurance minimums in your state

The type of insurance you need for a houseboat depends on whether you use it for transportation on the water, where you keep your houseboat, and a wide range of coverage considerations specific to marine craft.

If you have a homeowners policy for a land-based residence, your insurer may add your houseboat as an endorsement to your existing policy, though not every company covers houseboats. If that's not possible, you might benefit from seeking a houseboat policy from a marine insurance company that specializes in covering the unique needs of homes on the water.

If you rent your home or a second home to one person or a family for a long-term lease, you'll need landlord insurance.

  • Landlord Policy: Coverage of the dwelling, your personal property, liability, and reimbursement for loss of rent that results from a covered peril

Landlord insurance doesn't cover a tenant's possessions while they're leasing a property. Your tenants must purchase their own renters insurance to protect their belongings.

  • Renters Insurance Form (HO-4): Coverage for a renter's personal property, living expenses in case the property is unlivable due to a covered event, and optional liability 

If you own a vacation home or other type of home that isn't your primary residence, dwelling fire insurance, also known as dwelling property coverage, may be more appropriate than standard homeowners insurance. Since many vacation homes are built in areas that are riskier to insure (near beaches, mountains, etc.), the price for protecting a vacation home with traditional homeowners insurance could exceed the coverage you pay for your primary residence.

While you're not prevented from purchasing an HO-3 to cover a vacation home, many vacation-homeowners opt to insure their getaways with one of the following types of policies. These policies may also be appropriate for a non-owner-occupied property that you rent out:

  • Dwelling Fire Insurance Basic Form (DF-1)/Dwelling Property Coverage Basic Form (DP-1): Minimum coverage of dwelling damage only for named perils, typically fire, lightning, and internal explosion
  • Dwelling Fire Insurance Broad Form (DF-2)/Dwelling Property Coverage Broad Form (DP-2):Coverage of dwelling damage for a broader list of causes, often the 16 perils
  • Dwelling Fire Insurance Special Form (DF-3)/Dwelling Property Coverage Form (DP-3):Coverage of dwelling damage and structures on all risks, personal property, and liability with an open perils policy

Dwelling fire insurance, also known as dwelling property coverage, may be more appropriate than standard homeowners insurance if you own a vacation home.

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