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What to Consider When Purchasing Home Insurance

According to the Insurance Information Institute polls, 49% of homeowners said that they prepared an inventory of their possessions to help insurers document their losses. This is evidence that home insurance is being taken seriously by many of the U.S. population.

You should be doing the same.

But what should you consider when purchasing home insurance?

Getting the right home insurance is key to ensuring your claims get settled satisfactorily in case of any loss. You should consider the claims process, the amount insured, deductible amounts, and policy discounts.

Let’s dive into the specifics of these considerations and help you decide what will be great for your home.

Types of Home Insurance Policies

There are about eight different types of home insurance policies in the U.S. However, there are some slight variations in the details and names of the policies in some states or companies.

For instance, some states or companies may use the terms “standard” or “deluxe” to refer to the most common home insurance policies.

The most popular policy is HO-3. It provides coverage for the home structure and personal belongings, including personal liability coverage. It offers one of the broadest coverages of all policies.

The state of Texas is an exception. The Texas Insurance Department offers somewhat different policies, clearly outlined on its website.

Understanding Named Peril vs. Open Peril Policies

Home insurance policies explain coverage using two common vocabulary – named peril and open peril.

A peril is an incident or problem resulting in damage to your home, belongings, or yourself.

All hazards covered by the home insurance policy are specifically listed or named in a named peril policy. Anything not named or listed is not covered.

In an open peril policy, only hazards not covered are listed in the policy as exclusions. Anything not listed is therefore covered by the home insurance policy.

Home Insurance Policy Types

These are the types of home insurance policies.


This is the most basic and limited type of home insurance policy. It covers single-family homes, with the home and personal belongings getting coverage based on their actual cash value. An HO-1 home insurance policy only protects against ten named perils. These include:

  • Fire or lightning

  • Explosion

  • Windstorm or hail

  • Riot or civil commotion

  • Vehicles

  • Aircraft

  • Smoke

  • Theft

  • Vandalism

  • Falling objects


HO-2 is a slight upgrade from HO-1. They are more common than HO-1 policies and cover the dwelling or home structure at its replacement cost value and your personal property at its actual cash value. HO-2 adds six named perils to HO-1’s policy. These include:

  • Weight of snow, sleet, or ice

  • Sudden and accidental cracking, tearing apart, bulging, or cracking of a built-in appliance like a centralized air conditioner, heating system, or water heater

  • Accidental discharge or overflow of stream or water

  • Freezing

  • Volcanic eruption

  • Sudden and accidental damage from power surges or any other artificially generated electric current


The HO-3 home insurance policy is the most common type of home insurance policy. It has broader coverage than HO-2, with an all-risk coverage for your personal property and home. It also covers the same named perils in HO-1 and HO-2.

HO-3 is an open perils coverage, meaning every other risk is covered except those explicitly excluded in the open perils list.

Some of the most commonly excluded perils include:

  • Nuclear hazard

  • Neglect

  • Intentional loss

  • Government action

  • Theft to a dwelling under construction

  • Wear and tear

  • Mechanical breakdown and

  • Earth movement


HO-4 insurance policy is specifically for renters. It’s also called renters insurance. It covers personal property inside the rental property and anywhere globally at its replacement cost. For instance, your laptop is covered if damaged or stolen in the rental apartment or while traveling.


This is the most comprehensive type of home insurance policy. It is also the second most common type for single-family dwellings. Some of the most striking differences between it and HO-3 are:

  • Dwelling and personal property are insured at the replacement cost

  • The home and personal belongings are covered by all-risks coverage

  • High coverage limits for expensive types of property


This home insurance policy is designed for condo owners.


This home insurance policy is designed for mobile or manufactured homes



HO-8 is a special type of homeowner’s insurance covering older homes that don’t meet the insurer standards for other policies.

Factors to Consider When Purchasing Home Insurance

There are some vital considerations you should make before purchasing home insurance. These include:

Amount of Coverage

You should aim for the best value for your money. That means balancing between the type and amount of coverage you need.

In most cases, you can pay for more than you need. For instance, the HO-5 home insurance policy may be the most comprehensive, but you may not need some of the coverage provided. That’s why HO-3 is the most popular option.

Going for a rock-bottom price may also give you less value due to inadequate coverage.

Deductible Amounts

A deductible is the amount of cash you have to pay out of pocket before your insurance kicks in. Lower annual premium insurance policies often have higher deductibles.

With higher deductible amounts, claims worth a few hundred dollars may be mostly absorbed by you instead of the insurance company. If they add up, it can become quite expensive.

Claim Process

This is perhaps one of the most stressful processes in insurance. You must ensure that the claim process for the insurance company and insurance policy is transparent and direct. You want to be able to access your claims as soon as possible to start the repairs.


Several insurance companies offer generous discounts such as 10% or more to customers with other insurance contracts such as auto and health. Thus, consider asking your insurance company if they offer other insurance types, such as health and auto, to save on one or two premiums.

Get Proper Home Insurance Today

It is not rocket science to settle on the right insurance policy for your home or personal property. You just need to know the right type of home insurance you need and the other factors you should consider for the best value for your money.

Also, don’t be shy about getting the help of a professional for a more comprehensive discussion. Contact us today for your home insurance needs.


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