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
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- Vandalism or malicious mischief
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:
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:
Other Types of Homeowners Policies
Dwelling fire insurance, also known as dwelling property coverage, may be more appropriate than standard homeowners insurance if you own a vacation home.