Real Estate Insurance
Real estate is often the single most valuable thing any person can own. With that said, it should be obvious that real estate is also one of the biggest parts of the insurance market. We'll run through the different types of real estate insurance.
Nearly every homeowner or renter has some kind of insurance to protect the real estate, or the items they have stored within the home or other buildings and facilities on the same, or different lot. There are eight different homeowners insurance policies that are standardized throughout the home insurance business. The standardization of policies allows homeowners to easily comparison shop between different companies, and be sure that one policy is the same from one broker to the next.
HO1 Basic Homeowner Policy
The HO1 is a basic insurance policy that protects the homeowner from 11 different perils, each of which are named in the policy. These include fire or lightning, vandalism or malicious mischief, theft, explosion or civil commotion, smoke, volcanoes, personal liability, damage from vehicles, wind or hail, or broken glass.
HO2 Broad Homeowners Policy
The HO2 provides coverage against all the named perils in an HO1 policy, but adds six additional perils including falling objects, water damage from plumbing, fire, electrical damage, bodily injury, and medical liability. This policy is more costly, but the allowance for bodily injury can be a lifesaver should an accident cause injuries that require serious medical attention.
HO3 Special Homeowners Policy
Where HO1 and HO2 homeowners policies carry protection against only perils that are named, the HO3 is an “all risk” policy. Such “all risk” policies provide protection against all problems, damages, and liability excluding those specifically listed. Most commonly, earthquakes and flooding are excluded, while home contents coverage is offered on valuable items listed directly in the policy language. This is the perfect insurance for ultimate peace of mind for your home, since only two perils—earthquake and fire—are excluded from coverage.
HO4 Renter's Insurance
Renter's or tenant insurance is purchased to protect personal belongings and property stored within a building that is not owned by the policy holder. These can be purchased with the same named perils format of the HO2, or in the “all risk” format of the HO3.
HO5 Premier Homeowner Policy
The HO5 is essentially an HO3 redrawn to include coverage for all contents not specifically exempted from the policy. Thus, an HO3 policy with no exemptions protects all home contents and the home itself from all perils not listed on the policy.
HO6 Condo Policy
HO6 policies are written with specific language and risk adjustment to fit the needs of condominium renters or owners. Since each unit is connected, there are additional insurance risks as the actions of a neighbor can directly affect your own condo.
HO7 Hybrid or Mobile Home
HO7 policies are hybrid homeowners policies that cover the home and the contents. Very much like an HO3 with the difference that HO7s are on a named peril basis.
HO8 Old Homes
The HO8 is known as a modified form. It exists solely for homes that have depreciated to the point where the cost of replacement for a similar sized house is greater than its actual current market value.
“Riders” are language that can be added to a policy for a fee. Usually, riders are written to include more protection for certain items or for other property. A homeowner may choose to insure a detached garage or barn from the same perils as his or her house, adding the building's protection on as a “rider” to an original homeowners policy. Likewise, a homeowner with a limited HO1 policy may insure specifically high value items—jewelry, for instance—against named perils, or even all risks.
Landlords have different needs than both homeowners and renters, and have a whole selection of policies that are designed specifically for their needs. Landlord insurance can protect landlords from a whole slew of problems, helping to even out their cash flow and allow their rental businesses to run smoothly without concern.
A typical landlord policy is written to protect both the structure of the home, other detached buildings, personal property including furniture or appliances that are used by tenants. Most commonly, each product is sold as “rental dwelling” insurance for single-family homes up to small apartment buildings, or rental condo insurance for rental condominium units.