Types of home policies and what do they cover

ASIDE from your cars, you also want your other properties to be protected. Properties can be personal properties or real properties. Personal properties are movable while real properties are fixed.

Examples of personal properties in a house include furniture, clothing, books, electronic gadgets, arts, jewelry, etc. Examples of real properties can be your singlefamily detached home, condo or investment properties. The kind of real property you own or live in and whether you own the personal properties inside determine the appropriate type of home policy needed. If you are renting and therefore your primary concern is protection of your personal property, you don’t need a policy that covers the dwelling. A renter’s policy or HO4 is what you need. Keep in mind that most personal properties depreciate over time. A piece of furniture you bought for $5000 before can be worth only a few hundred dollars today. The worth today is called actual cash value. The better, very important option is to have replacement cost coverage. When you experience a loss, you want to be made whole again without shelling out any penny if possible. If you are unaware that your policy only pays cash value, you’d surely feel infuriated during claims!

If you own an investment property and it’s for multifamily use, you may need a commercial policy. If it is a singlefamily detached home, you need a landlord policy or DP3. This type of policy is like the opposite of a renter’s policy in that it offers very little personal property protection as a landlord is presumed not to have his personal stuffs in his home being rented out. The focus of protection of a DP3 is more on the dwelling. If you are renting out a condo, you should get an HO6, but make sure to tell the agent or the insurance company that the condo is for tenants to occupy.

If you own and occupy a condo, your policy type is also HO6. A condo policy in this case should cover both the dwelling and your personal properties. How much of personal properties? Depends on how much you own. How about how much of dwelling? This can get tricky. As you know condos are units normally with common areas and have master policy covering the building. You may want to check with the HOA the extent of the coverage of the master policy first before estimating how much dwelling you need. Normally, master policies only cover the common areas, exterior of the building and energy equipment. The Dwelling Coverage of your HO6 is needed to cover the interior walls, drywall, wallpaper, paneling, flooring, carpeting, or builtin cabinets of the unit you own. This is the coverage you need to cover YOUR PART of the building. But rare, allin master policies may cover even the individual condo units.

If you own and occupy a singlefamily home, you need an HO3 or HO5. The main difference is how the personal properties are covered. HO3 covers those losses on personal properties only as long as the cause of loss is among those enumerated causes or named perils. HO5 on the other hand covers those losses on an open perils basis. This means any cause of loss unless specifically excluded. Also, HO5 automatically covers the personal properties using replacement cost coverage. In HO3 policies, replacement cost coverage is a selected option, not automatic.

Therefore, HO5 is a better homeowner policy than HO3. In most scenarios though, HO3 is good enough and cheaper and thus more popular than HO5. Dwelling in HO3, HO5 or DP3 means the replacement cost needed to rebuild the structure of the house. You can also buy Additional Dwelling Replacement Cost to cover misestimate or demand surge in case of total loss. The Other Structures that are separate and not attached to the house may also be covered normally it’s 10% percentage of the Dwelling coverage. While your house is being rebuilt and you can’t live there, your HO3 or HO5 policy may also have Loss of Use, which helps pay for you to live somewhere else. While your house is rebuilt and your tenant can’t live there, your DP3 may also have Loss of Use or Fair Rental Value, the funds you will have for your tenants to rent somewhere else.

A coverage common to all these types of home policies is the Liability coverage, which is typically needed in an accident happened in your home, especially if proven that you’re negligent. The Liability coverage can be used to pay for the medical bills, like injuries arising from a slippage or fall; pain and suffering; wages lost due to inability to work caused by this accidentlegal cost, whether you’re found responsible for this accident or not. If you’re away from home and you accidentally cause damage somewhere else like a hotel lobby and the hotel is seeking reimbursement from you, your liability coverage may cover that.

Most home policies exclude earthquake and flood coverage. If you live in a flood prone area, get a flood policy. If you are in California, consider getting an earthquake policy.

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For more information, please contact Joseph Doratan at 855-955-1800 or [email protected].

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