Lenders require homeowners with mortgages to buy home insurance. You may think that the policy terms required by your lender are acceptable, but that might not be the case. Remember, lenders are only concerned that you cover the risks to your property they have financed.
You'll want to look at two factors - protection and price. The proper home insurance coverage consists of buying the right type of policy and having the proper levels of protection within that policy. Don't forget to include special provisions for jewelry, your computer, and any other personal items with a high value. Review with your advisor any high ticket items and ask what supplemental coverages might be necessary. There are also supplemental options for special protection against natural disasters that are not covered in your basic policy.
Review the basic home insurance types below. You will also want to review information dwelling rate factors and how they affect the prices you pay. You can extend your liability coverage using an umbrella policy.
You may also be carrying PMI insurance when you don't need it. Be sure to review your current mortgage payment. If you are paying it, find out if it's still needed.
HO-1: Basic homeowner. Covers your dwelling and personal property against losses from 11 types of perils: fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, theft, damage by glass or safety glazing material that is part of a building, and volcanic eruption.
HO-2: Basic homeowner plus. Covers dwelling and personal property against 11 perils plus six more: falling objects, weight of ice, snow or sleet, three categories of water-related damage from utilities or appliances, and electrical surge damage.
HO-3: Extended or special homeowner. Covers the 17 stated perils plus any other peril not specified in your policy, except for flood, earthquake, war, and nuclear accident.
HO-4: Renters coverage. Covers only personal property from 17 listed perils.
HO-5: All risk coverage for building and personal property. This isn't sold very often now.
HO-6: Condominium owner coverage. Covers personal property from 17 listed perils along with certain building items in which the unit owner might have an insurance interest.
HO-8: Basic older-home coverage. Covers dwelling and personal property from 11 perils. Differs from HO-1 in that it covers repairs or actual cash values � not rebuilding costs. This is for homes where some historic or architectural aspects make the home's replacement cost significantly higher than its market value.
There are variations on these policies as well. For example, landlords can buy coverage that insures a building only and not personal property (which would be covered by a tenant's renter's policy). And you can get special policies to cover mobile homes (a.k.a. manufactured housing). Most homes are covered by HO-2 and HO-3 type policies.