The most basic policy insures the property against damage due to 11
factors or perils of nature. Some of these factors are: fire,
lightning, smoke, vandalism, theft, ice, snow, windstorm hail, riot, and
volcano eruption. The popularity of this policy, better known as HO-1,
has diminished over the years, since the policy does not protect against
loss or damage to property on account of plumbing issues as a result of
freezing. Loss on account of heating system malfunction is, again, not
covered by this policy. HO-2 is also a basic policy, but with a wider
scope of coverage. HO-2 protects the property from damage on account of
17 factors, and hence, it is a marginal improvement over HO-1.
It's evident that both HO-1 and HO-2 provide only minimal coverage. For people who live in areas that are not prone to floods or earthquakes, HO-3 is a good policy, since it provides peace of mind to the homeowner on many fronts. For instance, this policy provides protection to the homeowner who may get sued by people who meet with an accident on his/her turf. Damage to the residence and personal property are also covered by this policy. As far as damage to the home is concerned, the insurance company agrees to pay the price that is equal to the cost of replacing the property (replacement cost). In case of personal property, the homeowner is entitled to receive the actual cash value of the property. For people living in flood prone areas, flood insurance should be purchased in addition to HO-3.
Actual Cash Value = Cost of Replacing the Property - Depreciation of the Property
Most Comprehensive Policy
The HO-5 policy or Comprehensive Form Policy, is equivalent to purchasing an HO-3 policy with a 'Special Personal Property' endorsement. This would help protect unscheduled personal property from all possible risks, except those that are specifically excluded. It's no wonder that the cost of this policy is 15% more than the cost of the most popular coverage provided by HO-3.
Insurance Policy for Older Homes: In case of older homes, the cost of replacing the property is usually more than the market value of the property. This is on account of depreciation. Hence, for older homes, insurance will not cover more than the actual cash value of the property. This is where the HO-8 policy, which is a modified version of the HO-1, assumes importance.
It's evident that both HO-1 and HO-2 provide only minimal coverage. For people who live in areas that are not prone to floods or earthquakes, HO-3 is a good policy, since it provides peace of mind to the homeowner on many fronts. For instance, this policy provides protection to the homeowner who may get sued by people who meet with an accident on his/her turf. Damage to the residence and personal property are also covered by this policy. As far as damage to the home is concerned, the insurance company agrees to pay the price that is equal to the cost of replacing the property (replacement cost). In case of personal property, the homeowner is entitled to receive the actual cash value of the property. For people living in flood prone areas, flood insurance should be purchased in addition to HO-3.
Actual Cash Value = Cost of Replacing the Property - Depreciation of the Property
Most Comprehensive Policy
The HO-5 policy or Comprehensive Form Policy, is equivalent to purchasing an HO-3 policy with a 'Special Personal Property' endorsement. This would help protect unscheduled personal property from all possible risks, except those that are specifically excluded. It's no wonder that the cost of this policy is 15% more than the cost of the most popular coverage provided by HO-3.
Insurance Policy for Older Homes: In case of older homes, the cost of replacing the property is usually more than the market value of the property. This is on account of depreciation. Hence, for older homes, insurance will not cover more than the actual cash value of the property. This is where the HO-8 policy, which is a modified version of the HO-1, assumes importance.
No comments:
Post a Comment