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 is a guide that will help you navigate through the ins and outs of several different types of home insurance.


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. 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.


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.

HO- 3

HO-3 is the most commonly used coverage. 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. 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.

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 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. 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.

As a Member of the Top 5 in Real Estate Network®, I have a wealth of real estate and homeownership information that may be of help to you. Feel free to contact me any time and be sure to forward this article on to any friends or family that may be interested as well.