A Crash Course in the Levels of Homeowners Insurance

HO 1? HO 2? HO 3? Is this a Santa Claus training course gone wrong? No, it's a quick peek at the various levels of homeowners insurance you're going to have to choose from. Depending on which carrier you're going to be working with (and their fondness for labeling things with letters and numbers rather than words) a little primary knowledge of the different levels of coverage before signing on the dotted line will put you in a great position to negotiate the best coverage at the lowest premium possible.

HO1: This is the rough equivalent of a basic liability policy for your car that protects your home from the basics: fire, smoke, wind, hail, vandalism. Basically, by buying an HO1 policy you're buying the bare minimum in homeowners insurance. Not every state offers an HO1 policy, however, due to its extremely limited coverage. Your insurance agent will probably encourage you to invest in a more extensive coverage policy.

HO2: The HO2 policy covers everything covered in the HO1 policy plus damages from six other hazards (which your insurance agent will be happy to spell out for you), including breaks in plumbing and home appliances, falling objects and damages caused by ice and snow during the wintertime. If you live in the north, where winters tend to be harsh, an HO2 policy is going to be a necessity.

HO3: This is a broad homeowners insurance policy that protects you from almost everything. These policies usually exclude damages from floods and earthquakes but is the most commonly purchased across the U.S. If you don't live in a high risk area, such as California or the Gulf of Mexico, an HO3 policy may be sufficient for your coverage needs.

HO4: Also known as renter's insurance, an HO4 insurance policy covers the renter's personal property when they're living in a rental property. Most landlords have their buildings insured, but this doesn't cover damages to the tenant's possessions in the event of a theft, fire, broken water pipe or any other catastrophe that might come along.

HO5: An HO5 policy closely resembles the HO3 policy; however, an HO5 policy allows the owner to have an all perils policy on the contents of their home rather than just the structure. This protects the contents of their home from the unforeseeable and soundly secures their financial future regardless of what else might pop up along the way.

HO6: This is a unit owners policy, known as condominium insurance, intended for owners of condos that includes full coverage for both the part of the building owned by the policy owner and the contents of their personal coverage, and it spans the gap between the neighborhood and/or building's blanket policy and the actual value of the owner's personal property.

Some insurers offer additional levels of coverage based on your personal needs, but knowing these six will prepare you to make the best choice when the time comes to sign on the dotted line for your homeowners insurance policy.