HO-1 insurance, also known as a basic homeowners insurance policy, is a type of home insurance that provides coverage for damages to a person’s home and personal property. It is typically required by mortgage lenders as a condition of a loan and is intended to protect homeowners from financial losses in the event of a covered loss. HO-1 insurance is the least popular policy with a market share of just 1.72%.
What does an HO-1 insurance policy cover?
An HO-1 policy generally includes the following types of coverage:
- Dwelling coverage: This coverage provides protection for the physical structure of the home, including the walls, roof, and foundation. It can also cover detached structures such as garages and sheds.
- Other structures coverage: This coverage provides protection for structures on the property that are not attached to the main dwelling, such as fences, sheds, and detached garages.
- Personal property coverage: This coverage provides protection for personal belongings inside the home, such as furniture, electronics, and clothing.
- Liability coverage: This coverage provides protection for the policyholder in the event that someone is injured on the property and sues for damages.
- Additional living expenses: This coverage provides reimbursement for expenses incurred if the policyholder is forced to temporarily relocate due to a covered loss.
It is important to note that the coverage provided by an HO-1 policy is limited to the specific perils that are listed in the policy. The policy typically provides protection against 10 “named perils”, which are specific types of losses that are listed in the policy. These typically include:
- Fire or smoke
- Hail and windstorms
- Theft/malicious mischief
- Damage from vehicles
- Damage from aircraft
- Riots and civil commotion
- Volcanic eruption
What does an HO-1 insurance policy not cover?
While this policy provides coverage for many common types of losses, it does not cover all types of losses that a policyholder may experience. Some of the things that an HO-1 policy typically does not cover include:
- Floods: Floods are not typically covered under an HO-1 policy, as they are considered a separate type of insurance. Policyholders must purchase a separate flood insurance policy to be protected against flood damage.
- Earthquakes: Earthquakes are also not typically covered under an HO-1 policy, as they are considered a separate type of insurance. Policyholders must purchase a separate earthquake insurance policy to be protected against earthquake damage.
- Sewer and Drain Backup: Sewer and drain backup coverage is not typically included in an HO-1 policy, but it can be added as an endorsement.
- Maintenance-related damage: An HO-1 policy does not cover damage that is a result of lack of maintenance, such as mold, rot, or insect infestation.
- Ordinance or Law coverage: Ordinance or Law coverage is not typically included in an HO-1 policy, it covers the additional costs that may be incurred to bring a damaged building up to code when local building codes have changed since the home was built.
How much does an HO-1 policy cost?
The cost of an HO-1 insurance policy can vary depending on a number of factors, such as the location of the property, the value of the property, and the coverage limits. According to the National Association of Insurance Commissioners (NAIC), the countrywide average yearly premium for an HO-1 insurance policy is $1654 and the monthly premium is $138. However, the cost can vary depending on the value of the property. Here is a table that breaks down the average yearly and monthly premiums by property value range:
|Insurance Range||Average Yearly Premium||Average Monthly Premium|
|$49,999 and under||$579||$48|
|$50,000 – $74,999||$764||$64|
|$75,000 – $99,999||$957||$80|
|$100,000 – $124,999||$1,170||$98|
|$125,000 – $149,999||$1,327||$111|
|$150,000 – $174,999||$1,400||$117|
|$175,000 – $199,999||$1,494||$125|
|$200,000 – $299,999||$1,660||$138|
|$300,000 – $399,999||$1,933||$161|
|$400,000 – $499,999||$2,246||$187|
|$500,000 and over||$2,972||$248|
It is important to note that these are just averages and the actual cost of an HO-1 policy will depend on a number of factors such as the location, coverage limits and additional endorsements, and discounts that the policyholder may qualify for.
Difference between HO-1 and HO-2 policies
HO-2 policies, also known as “broad form” policies, provide a broader range of coverage than HO-1 policies. On top of the 10 perils list on the HO-1 policy they typically provide protection against a wider range of “named perils” and also include coverage for losses caused by falling objects and weight of snow, ice, or sleet.
Difference between HO-1 and HO-3 policies
The main difference between an HO-1 and an HO-3 policy is that an HO-1 policy only covers specific perils that are listed in the policy, while an HO-3 policy covers all perils, except those that are specifically excluded. An HO-3 policy provides more comprehensive coverage and is typically more expensive than an HO-1 policy
Who is an HO-1 insurance policy for?
An HO-1 insurance policy is typically intended for homeowners who have a low-risk property, such as a single-family home in a safe neighborhood. It may also be a good option for homeowners with limited personal property or who are on a tight budget.
What are the components of a homeowners policy?
A homeowners policy typically includes coverage for the dwelling, other structures, personal property, liability, and additional living expenses.
What is the most important part of homeowners insurance?
This can vary depending on the policyholder’s individual needs and circumstances. For some, dwelling coverage may be the most important, as it provides protection for the physical structure of the home. For others, liability coverage may be more important, as it provides protection in the event that someone is injured on the property and sues for damages.
What is the 80% rule in insurance?
The 80% rule in insurance refers to the requirement that the policyholder must carry insurance coverage equal to at least 80% of the replacement cost of the property in order to receive full payment for a covered loss. This rule is intended to ensure that the policyholder has adequate coverage to rebuild or repair the property in the event of a loss.
What does “named perils” mean?
“Named perils” refers to specific types of losses that are listed in the insurance policy and for which the policyholder is covered. These typically include losses caused by fire, lightning, windstorm, hail, and theft. Named perils policies are typically less expensive than “all-risk” policies that cover losses from all causes not specifically excluded.