Dwelling coverage provides funds to repair or rebuild your home if you experience a loss due to a covered peril.
Personal property coverage pays when your possessions or the contents of your home are damaged by a covered peril or are stolen.
Liability coverage handles your legal expenses and compensates someone else for damages or injury sustained while on your property. Liability also covers accidental damage or injuries caused by you, your family or your pet.

See Terms To Know for more information.

Homeowners Policies

Homeowners policies are numbered to indicate the type of coverage they provide, each starting with the letters “HO.” HO simply stands for “homeowners.” Here are the most common types of homeowners insurance offered today, along with a description of what they cover.

HO-2 — This policy is available to owners of traditional homes, as well as to owners of mobile homes. It covers 16 basic perils:
- Fire or lightning
- Windstorm or hail
- Explosion
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- Smoke
- Vandalism or malicious mischief
- Theft
- Volcanic eruption
- Falling object
- Weight of ice, snow or sleet
- Accidental discharge or overflow of heating or water from within a plumbing, heating, air conditioning or automatic fire-protective sprinkler system or household appliance
- Sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, an air conditioning or an automatic fire-protective system
- Freezing of a plumbing, heating, air conditioning or automatic fire-protective sprinkler system or household appliance
- Sudden and accidental damage from artificially generated electrical current (excluding loss to a tube, transistor or similar electronic component)
HO-3 — This type of policy is popular because it provides some of the broadest coverage. In addition to the 16 basic perils covered by an HO-2 policy (listed above), an HO-3 policy covers all perils except those specifically excluded, such as flood, earthquake, war, nuclear accident, landslide, mudslide, sinkhole and others specified in the policy.
HO-5 — This policy is considered the most comprehensive homeowners insurance option, covering a home and its contents for all risks, except those specifically excluded.
HO-6 — This policy is specifically designed for condominium or co-op owners and covers the 16 basic perils covered by an HO-2 policy (listed above) for the contents and structural portions of the building owned by the policy holder or improvements made to the policy holder’s unit. It is important to understand the provisions of an individual HO-6 policy and what is covered through the co-op or condominium association.
HO-8 — This policy is designed for older or historic homes and covers 10 basic perils for the dwelling and personal property: fire or lightning; windstorm or hail; explosion; riot or civil commotion; damage caused by aircraft; damage caused by vehicles; smoke; vandalism or malicious mischief; theft; volcanic eruption; falling object and weight of ice, snow or sleet.

Levels Of Coverage

Named-Risk Vs. All-Risk Policies

Named-risk policies pay only for perils listed within the policy, while all-risk policies cover all perils, unless they are specifically excluded. Since all-risk policies cover more than named-risk policies, they are more expensive.

Actual Cash Value Vs. Replacement Cost Coverage

Actual cash value coverage pays to replace your home or property, minus depreciation. For example, if your dishwasher shorted out because of a lightning strike and you owned an actual cash value policy, your insurance company would settle the claim based on the current value of the dishwasher, taking into account its age. Replacement cost coverage would pay you to replace the dishwasher at current prices, with no depreciation. For this reason, replacement cost coverage is more expensive than actual cash value coverage.

Deductibles

When your insurance company pays a claim, you participate in the loss by paying your deductible, which is an agreed-upon amount of money designated in your policy — often 1 percent of your dwelling coverage. For example, if your home is insured for $200,000 and your deductible is 1 percent, you would pay the first $2,000 before the insurance company would pay the rest of the claim.

Next: Personal Property And Liability Insurance

Updated Thursday, April 23, 2009

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