• About
  • Mortgage Basics
  • $40K Challenge
  • Aunt Doris
  • Grandfather Says
  • Privacy
  • Archives

Len Penzo dot Com

The offbeat personal finance blog for responsible people.

A Homeowners Insurance Primer for Newbies

By Sabado Domingo

house damageMost people understand the necessity of purchasing homeowners insurance to protect one of the largest investments they will make during their lives. But it is also vital to understand the types of coverage that are available, what is — and is not — covered under the policy, and important add-ons that should be considered.

There are three basic types of homeowners policies: HO1, HO2 and HO3.

An HO1 policy is the most basic way to manage financial risk; in fact, some states have outlawed these bare minimum policies. HO1 covers you in case of theft, vandalism, fire, windstorms and seven other situations.

HO2 policies includes seven additional situations such as damage from frozen pipes or heavy ice and snow as well as damage from electricity.

An HO3 policy is the most comprehensive and covers virtually all situations except floods, earthquakes and a couple others. Depending on where an individual lives, additional flood protection can be added.

Additional Coverage Considerations

Homeowners insurance policies can include a variety of other additions for an increased monthly premium. One of the most common add-ons is valuables coverage. This is particularly important for those with costly antiques, jewelry or furs, but it should also be considered for those with expensive audio recording, musical or sports equipment.

Others who should consider additional coverage include gun owners, people with stamp and coin collections, and even those who have a pedigreed dog.

Depending on the amount of possessions to be covered, the additional insurance coverage may only cost a few extra dollars each month.

Insurance agents have knowledge of the most up-to-date laws and can advise homeowners on the policy that is best for them. New homeowners should speak to a local insurance agent for the most in-depth information. Insurance agents will also be able to make recommendations regarding additional coverage for valuables and deductibles based on a family’s belongings and financial status.

Photo Credit: US Fish and Wildlife Service

May 17, 2017

Comments

  1. 1

    BillyBob says

    You didn’t cover HO5.

    • 2

      Len Penzo says

      You’re right, BillyBob. That is covered in the advanced course … but since you asked, here is an explanation from Investopedia:

      “The most common policy, HO3, regards all risk to the actual building structure of your home, meaning you’d be insured for any peril that could happen to the outside of your home. All risk is also called “open peril,” because unless a specific peril is excluded you are covered. However, your personal property, the contents of your home, i.e. your stereo, computer and furniture, are only covered by named perils in an HO3 policy. In an HO5 policy, both personal property and your home are covered under an open perils policy. Thus, if you have a claim due to anything that causes damage to your personal property within your home, you wouldn’t have to prove that it happened because of a named peril. For instance, if your roof develops a water leak and your property is damaged, you do not have to prove that it happened based on a reason covered by your policy, such as hail. If the peril is not specifically excluded, you are covered.”

The Question of the Week:

What rate are you currently being paid on your cash savings?

View Results

Loading ... Loading ...

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. In fact, making investment decisions based on information published here, or any other website for that matter, is more than unwise; it is folly. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Sometimes, an article may also include affiliate links, meaning, at no additional cost to you, this blog earns a commission if you click through and make a purchase (for example, as an Amazon Associate I earn from qualifying purchases). Remember, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.

Sign up for the weekly Len Penzo dot Com newsletter
Len Penzo dot Com Delivered Weekly
Join more than 40,000 readers and fans who enjoy personal finance and macroeconomics with an offbeat twist!
Invalid email address
Thanks for subscribing!
My 13-Year-Old Daughter Shares Her Financial Fears
Black Coffee: It Ain’t What It Used to Be
How Thinking Outside the Box Can Save You a Fortune
The Pros and Cons of Higher Interest Rates
Five Frugal Ideas for Fall Season Family Fun
I’m Not Rich, But I’m Financially Free; Here’s How I Got There
Black Coffee: Account Overdrawn
Grandfather Says: The Continuing Chronicles of Elaine, Part 23
How to Get Promoted by Working Like a Politician
The Best Way to Sell Your Timeshare

All-Time Most Popular:

  1. 1. 19 Things Your Millionaire Neighbor Won’t Tell You
  2. 2. Dear Friend: Here Are 41 Reasons Why I’m NOT Lending the Money
  3. 3. Why Your Expensive Luxury Car Doesn’t Impress Smart People
  4. 4. If You Can’t Live on $40,000 Annually It’s Your Own Fault
  5. 5. 21 Reasons Why Corner Lots Are for Suckers
  6. 6. 4 Smart Reasons Why College Isn’t for Everyone
  7. 7. 18 Fast Facts About Social Security Numbers
  8. 8. My Ketchup Taste Test: Upset! Guess Which Brand Topped Heinz
  9. 9. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  10. 10. Here’s a Simple Trick for Getting Credit Card Interest Charges Waived

Popular Now:

  1. 1. My Personal Journey to Financial Freedom
  2. 2. Why I Run My Household Like a Business (and Why You Should Too)
  3. 3. 5 Ways You Can Save Money on Groceries This Week
  4. 4. My 15th Annual Cost Survey of 10 Popular Brown Bag Sandwiches
  5. 5. 5 Frugal Tips for Family Fun During the Fall Season
  6. 6. Expensive 401k Mistakes People Make Every Day
  7. 7. 10 Ways to Get Fit for Little of No Money
  8. 8. The Ethics of Found Money: Should You Keep It?
  9. 9. Historical Gold & Silver Benchmarks for Wages and Commodities
  10. 10. 4 Good Reasons Why Some Quarters Are Painted Red

Copyright © 2023 Len Penzo dot Com · All Rights Reserved · Designed by Nuts and Bolts Media

© Len Penzo dot Com 2008–2023