Chapter Overview: New Homeowner's Policies
For new homeowners—whether you’ve just finished building, rebuilding, or buying a home—understanding the various types of insurance policies available is crucial. This chapter provides an in-depth look at the different types of Homeowners Insurance policies designed to protect your home, Personal Property, and financial security.
Each article will help you understand specific coverages, Policy features, and potential gaps, enabling you to make informed decisions about safeguarding your new investment.
Key Topics Covered in This Chapter
This chapter covers a variety of policy types, including general homeowners policies, specialized coverages, and additional options that new homeowners should consider:
1. Homeowner Policy Types (HO1, HO2, HO3, HO5, HO8)
Understanding the basic forms of homeowners insurance is essential for new homeowners. This article will break down the differences between HO1 (basic), HO2 (broad), HO3 (special), HO5 (comprehensive), and HO8 (modified) policies, covering what each policy protects, its benefits, and who it’s best suited for.
2. Fire Insurance and the CA FAIR Plan (Other State Examples)
Homeowners in fire-prone areas may need to consider additional fire insurance, particularly in states like California, where options like the FAIR Plan provide coverage when traditional insurance is unavailable. This article will explain how these plans work, their limitations, and examples from other states with similar programs.
3. Flood Insurance and the NFIP
Standard homeowners insurance does not cover flood damage, making flood insurance essential for homes in flood-prone areas. This article will explore the National Flood Insurance Program (NFIP), private market options, and what to consider when purchasing flood insurance.
4. Windstorm & Hurricane Coverage
For homeowners in hurricane-prone areas, standard homeowners insurance may not cover windstorm damage. This article will explain how to obtain separate windstorm and hurricane coverage, including common requirements, deductibles, and exclusions.
5. Earthquake Coverage and the CEA
In earthquake-prone regions, standard homeowners insurance does not cover earthquake damage. This article will cover earthquake insurance, the California Earthquake Authority (CEA), and other state-specific options, explaining how to obtain coverage and what it protects.
6. Service Line & Sewer Backup Insurance
Service line and sewer backup insurance cover damages caused by underground service line failures or sewer backups, which are not typically included in standard homeowners policies. This article will detail how these coverages work, their costs, and why they are valuable for new homeowners.
7. Mobile Homes
Mobile Home Insurance offers specialized coverage for owners of manufactured or mobile homes. This article will cover what mobile home insurance protects, including structure, personal property, and additional options for comprehensive coverage.
8. Condos
Condo insurance differs from standard homeowners policies, as it covers personal property, interior walls, and liability but excludes exterior structures. This article will explain how condo insurance works, what to look for in a policy, and how it interacts with the condo association’s master policy.
Learn More
By exploring each of these topics in detail, this chapter aims to provide new homeowners with the knowledge needed to navigate the complexities of homeowners insurance. Each article offers practical advice, policy comparisons, and considerations to ensure your home is well-protected from potential risks.
An insurance policy that provides financial protection iin the event of a disaster which covers damages to your home, personal property and other assets. These policies can also provide liabiltiy insurance, cost of living expense reimbursements and more.
Also sometimes referred to as Coverage C in your policy. This bucket of coverage includes everything NOT permanently attached to your home or other buildings on your property. This generally includes items such as clothing, furniture, toys, jewelry, household appliances and artwork as well as some more subtle things such as cash, food and even your identity.
This is the legal contract between you (the insured) and your insurance company (the insurer). The primary purpose of this contract is to make your accidental loss financially palatable in exchange for a pre-determined fee (your premium).
The most basic homeowners insurance policy. Coverage for your home includes 10 of the 16 basic “perils”: Aircraft (striking the property), Civil Commotion or Riot, Explosion, Fire or Lightning, Hail and Windstorm, Smoke, Theft, Vandalism and Malicious Mischief, Vehicles (striking the property), Volcanic Action or Eruption. Generally speaking, if your home is damaged by something that is not one of those aforementioned perils, than you probably won't be covered.
A step up from the HO1. Coverage includes the 16 basic “perils": Accidental Discharge or Overflow of Water or Steam, Aircraft, Civil Commotion or Riot, Explosion, Falling Objects, Fire or Lightning, Freezing, Hail & Windstorm, Smoke, Sudden or Accidental Tearing/Cracking/Burning/Bulging, Power Surges, Theft, Vandalism & Malicious Mischief, Vehicles, Volcanic Action / Eruption, Weight of Ice/Snow/Sleet. This does not cover other structures, personal property or loss of use.
An HO3 policy includes the 4 primary buckets: Coverage A - Primary Dwelling, includes everything permanently attached to the home. Coverage B - Secondary Structures, includes things like fences and barns. Coverage C - Personal Property, such as housewares & furniture. Coverage D - Loss of Use (Additional Living Expenses) covers basic living expenses such as hotels / rent & food. This policy also provides both personal liability & medical expenses for OTHER people.
Structurally similar to an HO3 policy, the two primary differences are why an event is covered and how lost personal items are calculated. First, an HO5 includes Open Perils Coverage. Meaning, it covers all reasons behind the damage to your home unless it's specifically excluded (like earthquakes). Regarding personal items, an HO5 policy provides coverage based on Replacement Cost Value vs. Actual Cash Value. (See those terms for more info)
An HO8 policy is sometimes referred to as a Modified Coverage Form and is designed for older homes where the actual cash value of the home is less than the current costs to repair damages. These policies typically cover the 10 named perils in the basic HO1 policy as well as the personal liability coverage and medical payments from an HO3 policy.
Fair Access to Insurance Requirements - These are state agencies that provide insurance to homeowners when they are unable to obtain policies through traditional means.
The California FAIR Plan to obtain fire insurance is a good - and high profile - example.
Separate insurance policy covering dwellings and personal property and generally used when flooding is not covered by a homeowner's primary policy.
A federally subsidized flood insurance program administered by the Federal Emergency Management Agency (FEMA) and under the National Flood Act of 1968. This offers coverage to residents in flood prone regions and is an alternative to private flood insurance.
Property coverage for losses resulting from a sudden shaking of the earth, often including volcanic activity. Resulting events caused by the shaking - such as fire, tidal waves or flooding are excluded.
Coverages are similar to a typical homeowner's policy including the replacement costs for the mobile home was well as personal property.