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Should I Get HO-1 or HO-3 Homeowner Insurance?

Should I Get HO-1 or HO-3 Homeowner Insurance?

While homeowners insurance is a vital aspect to protecting your property and family, it’s also an important line item in your household budget. The benefits of your insurance policy are sometimes tough to distinguish, which makes the cost of the policy something you regularly call into question.

It is a good idea to review your homeowners policy every one or two years to make sure you have the appropriate coverage for your property and risks. But it’s also important not to make major changes based only on lower premiums. Far too many homeowners find out after it’s too late that what they saved on premiums will cost them thousands of dollars in a lack of coverage. The two most common types of homeowner insurance have major coverage differences that might not always be worth the cost.

What is an HO-1 Insurance Policy?

The HO-1 policy is called the Basic Form, and it is the lowest level of homeowners insurance you can carry. Because the coverage is very limited, the premiums may appear to be the most affordable option. The problem is that if you actually have an insurance claim, the HO-1 policy will leave you financially responsible for most of your loss, damage, or liability.

The HO-1 policy covers fire, smoke, lightning, hail, explosions, vehicle or aircraft damage, theft, vandalism, and damage from riots or civil unrest. This type of policy covers the actual structure of the house. It does not cover your personal property inside the house, and it does not provide any liability protection if someone sues you. 

If you are applying for a mortgage, an HO-1 policy might not be sufficient to satisfy their homeowners insurance requirements. 

What is an HO-3 Insurance Policy?

The HO-3 policy provides for significantly more coverage, which makes it the standard homeowners policy type. An HO-3 policy offers “special form coverage” on the structure of your home, which means any kind of loss or damage that’s not specifically excluded from the policy is covered. 

Not only is the home’s structure covered, but your attached structures and personal property inside the house are also covered. However, those are covered under a “named-peril coverage”, meaning that the damage must be a result of one of the named causes in the policy.

Finally, an HO-3 policy includes liability protection, so you have coverage if someone sues you after being injured or having their property damaged at your house.

Your HO-3 policy includes coverage for your heating, air conditioning, plumbing, and electrical systems. Also, if you get water damage from a burst pipe inside the house, or damage from snow and ice on the house, you could make a claim. With an HO-1 policy, the cost of cleanup and repairs from this kind of damage would come out of your own pocket.

Flood and earthquake coverage are not covered under an HO-3 policy, which is common industry practice. These are separate insurance policies that need to be reviewed based on your risks.

Always Review Your Policy Carefully with Your Trusted Agent

When the daily costs of living are high, it’s natural to look for ways to save. Your homeowners insurance policy is an obvious place to consider making cuts. You may wonder if you are paying for more coverage than you really need. This is absolutely a valid question, but the answer takes some thought and evaluation. Policy comparisons are almost never apples to apples based on premiums alone. 

If you would like to take a close look at your current homeowners policy to see if there are some ways to reduce premiums, you need to be fully informed about what that means for your coverage. Freedom Insurance Group has been working closely with homeowners for over 20 years to make sure they understand their insurance and are able to maintain the right coverage for their property and budget.

Contact us to review your current homeowners policy and to request a quote for your needs.