Buying a home is a big decision in itself, and with so many things to think about and take care of, many people tend to forget about insurance.
But, here’s the thing: your house may be exposed to different risks, from natural disasters and extreme weather conditions to home accidents, fires, burglaries, and so on. Various scenarios could leave you entirely responsible for the damage control, which can easily be more than what you can afford.
The most effective and affordable solution for these unexpected situations is to get homeowner insurance.Let’s see what the main types of homeowner insurance are and what exactly they cover.
HO-1: Minimum Hazard Insurance
This insurance policy is the bare minimum you can buy. It covers the most common damage causes for your house, including fire, explosions, storms, theft, vandalism, damage caused by vehicles or civil riots. Although it’s pretty basic, it’s the least type of policy you should get. Not having any insurance can be much more expensive and damaging.
HO-2: Multiple Lines of Coverage
While the basic policy only covers damage to the building itself, the broader version includes damage to your belongings as well. Since damage to your belongings is highly probable if the building is affected and it can lead to considerable expenses in itself, start considering an update from the basic policy plan as soon as you can afford it.
Besides the common events covered by the basic plan, the broad version also covers broken pipes, frozen appliances, falling objects, and electricity-related damage. You also get protection for your belongings, but you need to put them in an inventory first.
HO-3: Special form Insurance
More commonly chosen than the previously mentioned plans, this type of insurance policy lists the events that are excluded from coverage, instead of those that are covered. That ensures coverage for a wide range of events, but do pay attention to your policy’s terms to see when exactly you’re supposed to pay out of your pocket.
There is no such thing as a policy that covers anything. There will always be exceptions, even with comprehensive form policies. If your insurance plan is your best choice, but you still worry about frequently occurring events in your home that the policy doesn’t cover or if you have valuables, such as art that you need to protect, then you can add rider insurance.
Ultimately, the balance between an affordable rate and proper coverage is tricky, with policies getting more expensive with each passing year. But even the cheapest plan is better than no plan.
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