Do You Have the Right Home Insurance?

NORFOLK, VA, May 06, 2013—Buying a home is a wonderful feeling. But now that you’re a proud owner, are you also a safe one? Do you have adequate home insurance? Below, Louis Eisenberg, Associate Broker REALTOR ABR SFR of Prudential Towne Realty guides us through the ins and outs of several different types of home insurance.

HO-1
This is bare-bones policy, and has actually been discontinued in several states. This policy offers liability insurance, hazard insurance and a list of “named perils”— fire or lightening, volcanic eruption, explosions, and more.

“This protects against several natural disasters and catastrophic events, as well as your personal belongings,” explains Eisenberg. However, it will not guard against earthquakes, floods, war, and nuclear accidents.

“Often, your lender may require that you purchase flood or earthquake insurance if the house is in a flood zone or a region susceptible to earthquakes,” says Eisenberg.

HO-2
This is an expanded version of HO-1, and includes any structure on your property, like that shed or pool house. “The list of perils in HO-2 is longer than HO-1, and includes things like falling objects, freezing, and the weight of ice, snow or sleet,” says Eisenberg.

HO- 3
“HO-3 is the most commonly used coverage,” notes Eisenberg. “This is most likely because it protects homes against any damage, so long as it is not specifically excluded.” This coverage is also called the special form policy.

“It’s important to read your policy thoroughly,” Eisenberg reminds us. “With HO-3, while your home is covered against anything that is not excluded, your personal belongings are only covered for the listed perils.” Be sure to understand what this means, as well as have a grasp on what exactly is excluded.

Cash Value
“A cash value policy pays owners the original purchase price of whatever was damaged, but cannot exceed the original purchase price, even if the home is valued at more,” says Eisenberg.

Replacement Value Policy
This type of policy covers the cost of repairing a house and its belongings, regardless of the original purchase price. However, it cannot exceed the policy limit, meaning that a $250,000 policy, will pay for repairs and replacements up to $250,000.

Guaranteed Replacement Cost Coverage
If you want something more extensive, then Eisenberg notes that the most comprehensive insurance policy is guaranteed replacement cost coverage.

“This kind of coverage will pay to rebuild your home even if the cost to rebuild is more than your policy limit,” explains Eisenberg.

Replacement cost coverage is more expensive and can cost from about $400 to $1,000 a year or more, depending on the area and the price of the home. However, even if you can afford it, this insurance is not available everywhere or for every property. For example, older homes may not be eligible. And some big insurance companies have begun to limit the amount they will pay to 120 percent of the policy's face value.

For more information on home insurance, please contact Louis Eisenberg, Prudential Towne Realty at leisenberg@prudentialtownerealty.com, 757-572-7244, or www.LouisEisenberg.com