Want to buy a new home insurance plan but unsure of what coverage you should get? To ensure you are adequately protected, it’s important you choose the right amount of coverage. Here’s a quick guide to the types of coverages offered and what limitations you can expect to find.
What Is Home Insurance?
Home insurance covers damage to your home and loss/damage to the contents. It also offers liability coverage for injuries/damage to the belongings of a third-party while at your home. It may also pay for your living expenses like hotel stay if your home becomes uninhabitable due to damages caused by an insured peril.
Choosing the Right Home Insurance Plan
As a first step, you need to know what you want to insure. Apart from your home, your plan will also cover the contents of your home. For this, you need to make an inventory of your possessions with their purchase prices and their respective current replacement costs. Once you do this, you can start looking for a home insurance plan. Always approach an independent agent to understand your options, because they will give you rates and features of policies from different insurance companies.
In most states, there are a few standard home insurance policies called “forms.” The HO-3 is the most common form. It covers all risks that can damage your home except for specific exclusions. The HO-3 also pays for the loss of your named possessions and also covers visitors to your home against loss/damage to their belongings and bodily injuries. The HO-5 is a “wider cover” policy as it covers all your personal property except those specifically excluded. At any time during the term of your policy, you can make additions, deletions, or changes to the items already covered.
Major perils like floods and earthquakes are generally not covered by home insurance policies. You will have to buy separate policies to cover these perils. The other excluded risks include damages or losses caused due to war, nuclear risks, government actions, power outages, wear and tear of equipment, and rust/corrosion.
Home insurance can cost quite a bit, based on where you stay. So, ensure you do your due diligence before settling on a plan.