Building and content insurance is the perfect way to protect your most valuable asset, your home and everything inside it. Of course, these types of policies, often referred to as homeowner’s policies do more than just protect your house and contents, they protect you from losses you might incur if a tree falls on your garage. The policies also protect you from the cost of a suit if your neighbor falls in the garage. Building and content insurance on your home or place of business is one of them most important investments you’ll make.
Because building and content insurance varies by the type of policy you select, you need to investigate all policies offered by companies. Most homeowner’s opt for policies that include coverage for almost every peril. These are top of the line policies called HO-3 policies. All homeowner’s policies begin with the letters HO and standardized throughout the industry. This allows you to compare the building and contents insurance coverage without having to read all the fine print.
The policies for building and contents insurance start at HO-1 and go through HO-8. Of course, just to make it interesting, there is no HO-7. HO-1, HO-2, HO-3, HO-5 and HO-8 are traditional coverage for homeowners. HO-1 gives you only coverage against fire and lightening damage so if you have a theft, you’re out of luck. HO-2 policies expand the coverage. These are broad building and contents insurance policies.
You’ll note the coverage for the HO-2 policies includes building and contents insurance against named perils such as fire, lightening, windstorm, theft, explosion, smoke, vandalism, damage occurring from aircraft of vehicles and malicious mischief. It also covers damage from building collapse, civil commotion or riots, collapse due to snow or ice and water damage from plumping.
The broad coverage in this building and contents insurance policy is good but the HO-3 is far better. This policy covers everything not specifically named in the exclusion sections of the policy. The common exclusions for HO-3 policies include water damage from flooding or sewer backup, loss due to ordinance or law, such as losing a house to demolition because it’s not up to code, earthquakes or natural ground movement like sinkholes, loss from war, nuclear hazard, neglect or power failure. However, often you can purchase a rider to cover your frozen items in the event of power failure. Of course, the policy won’t cover you if you set a fire to your house or did other intentional damage just to collect. If you lose your home to governmental action such as seizure of property, they won’t pay either. The last item not paid by insurance companies is damage that came from faulty maintenance, bad workmanship on repairs or improper zoning.
While the HO-3 building and contents insurance covers the building for all but the named perils, it doesn’t cover the contents. In order to make certain you have complete coverage on those items, you have to purchase an HO-5, which offers open coverage on not only your building but also the contents. The HO-3 only covers the contents for perils named in the policy.
Even though there’s another policy for building and content insurance that has a higher number, it doesn’t mean that it’s better. The HO-8 is not necessarily better or worse than the others are. This building and contents insurance policy is for older homes. While you can easily evaluate the replacement cost of newer homes by the amount of cost per square foot, you can’t evaluate the older homes the same way. Some of these homes are huge but old. To replace the structure would cost thousands of dollars more than the worth of the home. The policy cost would be outrageous and the thought of getting those huge dollars for a loss would tempt many homeowners to take rash actions. To avoid both problems, the insurance companies created the HO-8. The policy uses the true market value of the home for the amount of coverage.
The other types of homeowner’s insurance don’t necessarily cover buildings and contents. The HO-4 is a renter’s policy that specifically covers the contents of someone that rents their living quarters. The HO-6 is a policy for condominium owners and covers items the association doesn’t cover. Regardless of the type of policy you get, you need coverage for you home and valuables. Not only do homeowner’s policies provide building and content coverage, they also provide liability coverage to protect you in the event someone injures himself at your home and then files a suit against you. It only takes one accident, fire or major storm to wipe out that valuable asset you call home. For just a few dollars a day, you can rest well at night knowing that you have the insurance company protecting you from losing everything.