November 11, 2020

Choosing the Right Home Insurance Policy

Securing the homeowner’s insurance is a significant item in your home-buying checklist. Your purchase might be contingent on purchasing a home insurance policy, depending on whether you have a mortgage provider. But once you start looking into it, there are a ton of options to choose from. It can be a challenge to wade through all the information to figure out which policy is right for you.

We’re going to try to make that a little easier by breaking down the eight different types of home insurance policies out there.

Basic H0-1 Coverage

This is a great starting place for homeowners looking for affordable coverage. H0-1 policy type is the most basic coverage on the market and protects against common threats like:

  • Fire
  • Hail
  • Explosions
  • Vandalism
  • Lightning
  • Theft
  • Damage from vehicles or aircraft

This policy does not protect you if someone is injured on your property, however, and it does not cover your belongings. For most homeowners, this type of policy isn’t available because mortgage providers often don’t view it as adequate coverage.

H0-2 Coverage

This type of insurance provides supplemental coverage on top of what is included in H0-1 coverage. H0-2 offers protection from frozen water pipes, power surges, steam, falling objects, and water heaters. This policy is more acceptable to mortgage providers as it protects your dwelling and personal property.

H0-3 Coverage

Here’s where we get to the most common and recommended insurance policy type for homeowners. H0-3 covers your home’s main structure and other buildings on your property, such as a storage unit or woodshed. All kinds of damages are covered except floods, landslides, nuclear accidents, mold or fungus, and earthquakes unless otherwise included in your policy.

Plus, H0-3 does cover you if someone is injured on your property as well as limited personal property coverage.

H0-4 Coverage (Renter’s Insurance)

This insurance policy is for renters and covers belongings, not the house or apartment building itself. So, in the case of flooding or fire damage, a renter would be insured for their belongings. The one exception is if a renter damages property, this insurance could be used to cover repair costs.

H0-5 Coverage

The best, most comprehensive insurance policy type is H0-5. This policy type protects against the same damage as H0-3, but it also includes coverage for your belongings. The heightened coverage does come with much higher premiums, but of course, in the event of a catastrophe, your out-of-pocket expenses will be much lower.

The benefit of an H0-5 insurance policy is it will reimburse you for how much it would cost to completely restore the destroyed item, rather than just provide the “actual cash value” of the item.

H0-6 Coverage (Condo Insurance)

Do you own a condo? This coverage is probably right for you. The coverage in this policy is similar to the standard H0-3 coverage, but it doesn’t extend to the entire condo building. Just the owner’s unit is protected under this policy.

H0-7 Coverage (Mobile Home Insurance) 

This insurance policy protects homeowners living in mobile homes or manufactured homes (RVs do not quality). The coverage is the same as an H0-3 policy and can include personal liability protection. Like the H0-3 policy type, this covers your dwelling, other structures, personal property, and liability.

H0-8 Coverage

The final type of policy is a special one designed to protect homes older than 40 years. Since these types of homes have different needs than modern homes, they require different protection. This insurance policy is designed to cover price discrepancy when repairs cost more than the house’s actual value.

Which Policy is Right for You?

As you can see, there are a lot of home insurance policy types to choose from. But don’t let that overwhelm you. If you’re buying a house and not a mobile home or condo, you can eliminate several policy types right away. That means really, you’re left with just a few home insurance options that cover you for a variety of different disasters.

The primary consideration is budget. Not just how much you’re willing to pay in monthly premiums, but also how much financial coverage you will want in the event of a catastrophe. Would you settle for actual cash value, or would you prefer a replacement cost value? Are you in an area that suffers from high winds, wildfires, or other weather-related issues? As long as you can afford the coverage – and it doesn’t affect your ability to secure a mortgage – it’s a question of peace of mind. How much coverage can you afford, and how much coverage are you comfortable with?