Protect your home with a Homeowners insurance policy, which provides coverage for your dwelling’s structure and your possessions against perils such as fire, lightning, hail, burst or frozen pipes, theft, and vandalism.
Homeowners insurance in Florida or Massachusetts is a package policy. This means that it covers both damage to property and liability or legal responsibility for any injuries and property damage policyholders or their families cause to other people. This includes damage caused by household pets.
Damage caused by most disasters is covered but there are exceptions. Standard homeowners policies do not cover flooding, earthquakes or poor maintenance. Flood coverage is provided by the federal government’s National Flood Insurance Program, although it is purchased from an insurance agent. Earthquake coverage is available either in the form of an endorsement or as a separate policy. Most maintenance related problems are the homeowners’ responsibility.
1. Coverage for the structure of the home
This part of a policy pays to repair or rebuild a home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in the policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. Most standard policies also cover structures that are not attached to a house such as a garage, tool shed or gazebo.
2. Coverage for personal belongings
Furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50 to 70 percent of the amount of insurance on the structure of a home. This part of the policy includes off-premises coverage. This means that belongings are covered anywhere in the world, unless the policyholder has decided against off-premises coverage. Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. To insure these items to their full value, individuals can purchase a special personal property endorsement or floater and insure the item for its appraised value.
Trees, plants and scrubs are also covered under standard homeowners insurance—generally up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease.
3. Liability protection
Liability covers against lawsuits for bodily injury or property damage that policyholders or family members cause to other people. It also pays for damage caused by pets. The liability portion of the policy pays for both the cost of defending the policyholder in court and any court awards—up to the limit of the policy. Coverage is not just in the home but extends to anywhere in the world. Liability limits generally start at about $100,000. An umbrella or excess liability policy, which provides broader coverage, including claims for libel and slander, as well as higher liability limits, can be added to the policy.
4. Additional living expenses
This pays the additional costs of living away from home if a house is inhabitable due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while the home is being rebuilt. Coverage for additional living expenses differs from company to company.
The different types of homeowners policies are fairly standard throughout the country. However, individual states and companies may offer policies that are slightly different or go by other names such as “standard” or “deluxe.”
- HO2 (Homeowners Broad Form) This form of insurance provides broad form coverage on your dwelling and other structures and insures against loss of use. To be specific, the broad form of coverage insures against windstorm, hail, aircraft, riot, vandalism, vehicles, volcanic, explosion, smoke, fire, lightening and theft , plus rupture of a system, artificially generated electricity, falling objects and freezing of plumbing.
- HO3 (Homeowners Special Form): This “special form” insurance offers coverage for more causes of loss than the HO2. It provides coverage for the structure of the home and personal belongings as well as personal liability coverage. Owners of multifamily homes generally purchase an HO-3 with an endorsement to cover the risks associated with having renters live in their houses. In any case, the HO3 policy provides the broadest coverage, protecting against 16 disasters or perils listed below.
- Fire or lightning.
- Windstorm or hail.
- Riot or civil commotion.
- Damage caused by aircraft.
- Damage caused by vehicles.
- Vandalism or malicious mischief.
- Volcanic eruption.
- Falling object.
- Weight of ice, snow or sleet.
- Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance.
- Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system.
- Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance.
- Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component).
- HO4 (Homewoners Contents Broad Form): This is a renter’s policy. Even if you don’t own your home, you should consider having this type of insurance. Your landlord’s insurance will not cover damage to your personal property or liability against you. Think about how much it will cost to replace all of your furniture, clothing etc. If you feel this isn’t a loss you could bear, consider buying this type of insurance.
- HO5 (Homeowners Comprehensive Form): This type of policy essentially combines the HO3 form with the HO5 endorsement into one comprehensive form to provide open perils coverage on personal property in addition to the dwelling, other structures and loss of use. The HO5 rider can only be combined with an HO3 policy.
- HO6 (Homeowners Unit Owners Form) : This is a condominium policy. This type of policy is different from a homeowners insurance policy in that it is designed for individuals who live in a unit structure owned and insured by a condo association, townhouse association cooperative, homeowner’s association, planned community or other similar type of organization. The insurance the association provides only covers the outside dwelling, not the contents of your unit, so it’s important to consider purchasing this type of insurance to protect against personal property losses and liability.
- HO8 (Homeowners 8, Modified Coverage Form): This form of insurance settles losses on an actual cash value basis and is usually only used to cover older structures where the cost of replacement far exceeds the value of the structure. This type of insurance is offered when insurers are not willing to offer HO2, HO3 or HO5 coverages because there may be an incentive to intentionally destroy the structure.
What is NOT covered under these types of insurance, are are known as “exclusions”. You may may be able to get coverage for losses that might normally be excluded by purchasing a special “Addition” (known as rider or umbrella policy). Your individual policy may exclude more items than just the ones we listed below, so please be sure to consult with your Econosurance of Cambridge agent, who is specially trained to determine your needs, and then make sure that they match up with what you eventually purchase.
- Ordinance or Law: If the dwelling does not comply with current local building codes, the insurance company will not be liable for the cost of improved construction to bring the structure up to code. Do you live in an older home? Here in Massachusetts, this may very well apply to.
- Various Earth Movements: This includes two distinct types of earth movements, including shifting earth (landslides, mudslides, and sinkholes come to mind) in the foundation of a home and earthquakes. These may be considered two separate coverage areas, so being covered for one may not mean being covered for the other.
- Water Damage: This includes floods from nature, water backing up in sewers or drains, as we ll as water seeping which might seep through basement walls etc.
- Neglect: Your policy will exclude losses from damages resulting from direct or indirect neglect and / or the failure of the policyholder to use reasonable means to protect and properly maintain the property.
- War: All damage caused by any type of war or nuclear weapons attack are excluded.
- Nuclear Hazard: This defined as any nuclear reaction, radiation, or radioactive contamination, (whether the condition is under controlled or uncontrolled circumstance). Loss by nuclear hazard is specifically not defined as loss caused by fire, explosion, or smoke, even if these perils are specifically named in your policy.
- Intentional Loss: Any damage that is intentionally inflicted to one’s own property is excluded – and for obvious reasons.
As with any type of insurance, it is critical that you read the insurance policy so that you know exactly what it will cover. The amount of coverage you should consider should be based on the replacement cost value of your home or property. Replacement costs on one’s dwelling provides that if, at the time of loss, the amount of insurance covers at least 80% of the replacement cost of the dwelling, the loss will be paid on a replacement cost basis. Keep in mind that this still leaves the homeowner on the hook for the remaining 20% in the event of a total loss.
Oftentimes, the bank or institution holding your mortgage will require that you maintain a specific amount of coverage. However, even if your home is paid off, you should still consider having the appropriate amount of insurance protection, which might include coverage for physical damage as well as liability protection for the owners.
There are three coverage options:
1. Actual Cash Value
This policy pays to replace the home or possessions minus a deduction for depreciation.
2. Replacement Cost
This policy pays the cost of rebuilding or repairing the home or replacing possessions without a deduction for depreciation.
3. Guaranteed/Extended Replacement Cost
This policy offers the highest level of protection. A guaranteed replacement cost policy pays whatever it costs to rebuild the home as it was before the fire or other disaster—even if it exceeds the policy limit. This gives protection against sudden increases in construction costs due to a shortage of building materials after a widespread disaster or other unexpected situations. It generally won’t cover the cost of upgrading the house to comply with current building codes. However, an endorsement (or an addition to) the policy called Ordinance or Law can help pay for these additional costs.
Some insurance companies offer an extended, rather than a guaranteed, replacement cost policy. An extended policy pays a certain percentage over the limit to rebuild the home. Generally, it is 20 to 25 percent more than the limit of the policy. For example, if homeowners take out a policy for $100,000, they can get up to an extra $20,000 or $25,000 of coverage. Guaranteed and extended replacement cost policies are more expensive; but they offer the best financial protection against disasters for a home. These coverages, however, may not be available in all states or from all companies. Replacement cost coverage is available for the structure of the home, but only actual cash value coverage is available for possessions.
Homeowners policies also include coverage for personal liability, that is, claims or lawsuits others make against you for injury or damage, whether in your home or elsewhere (when engaged in non-business activities).
With a Homeowners policy, your possessions are covered not only in your home but also anywhere else you take them.