For homeowners who want basic protection, an H03 policy will suffice. But for homeowners looking for the most protection and the highest coverage limits, a premium H05 policy is the best bet.
With most home insurance, such as an H03 policy, you are required to prove that your personal property claim happened due to one of the named perils (insurance-speak for specific dangers) listed on your policy. However, with a premium policy, such as an H05, the onus is on the insurance company. The only way you won't get reimbursed for personal property damages is if the peril is specifically exempted from your policy.
- The difference between the H03 policy and the H05 policy for homeowners is what perils or dangers to your home are covered.
- A basic H03 policy covers all risks to the building structure, including the outside of the building; personal property, including everything in your home, is only covered if it falls under the policy's named perils.
- With a premium H05 policy, all risks to the building structure and personal property are covered, but all personal property, or everything in your home—unless it falls under the list of perils that are specifically excluded.
- H03 policies are less costly than H05 policies because they cover less, and put the burden of proof of a claim on the homeowner.
- For most homeowners, H03 policies are sufficient. HO5 policies benefit those with a lot of high-value belongings and expensive personal property.
Basic H03 Policy vs. Premium HO5 Policy
The most common sort of homeowners insurance, an HO3 policy, 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. Peril, in terms of insurance coverage, is defined as something that could destroy or cause damage to your property. A burst pipe, fire, hurricanes, or tornadoes are all perils.
Perils Covered With an HO3 Policy
There are 16 named perils that are generally insured against in a typical H03 (traditional) policy. This covers most incidents that can happen and is good enough that most people end up with this policy in order to avoid higher insurance premiums. Some of the perils that may be included in H03 are vandalism, damage from thawing ice, mold, theft, and volcanic eruption.
Types of HO3 Coverage
Coverage by HO3 insurance policies usually falls into five basic categories: A, B, C, D, and E.
- Coverage A: This refers to the actual physical building you live in and any attached structures, like a porch, deck, or garage. Your home is usually covered on an open peril basis.
- Coverage B: This covers other structures on your property, such as things that are unattached to your home: detached garages, sheds, fences, swimming pools, and tennis courts. Typically, these other structures are insured for up to 10% of your Coverage A amount, though you can increase it.
- Coverage C: This applies to the contents of your home—your furnishings, appliances, and other personal property. Unlike your home, which is covered for open perils, your contents are covered for named perils only—occurrences specifically listed on the policy. If it’s not listed, it’s not covered.
- Coverage D: Commonly referred to as "loss of use" coverage, this applies if your home becomes uninhabitable. It covers the costs of staying in a hotel and any additional living expenses you incur. This coverage is usually on a named peril basis and is either limited to a certain period of time or 10% of Coverage A.
- Coverage E: This is the personal liability portion of your policy—protecting you if something happens to someone else or someone's property, or other situations where you’d be deemed at fault. Typically, it covers any legal fees or court costs paying the damages you’re responsible for.
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- Uninsured motorist coverage (UM) is an add-on coverage for auto policies that will pay for injuries and damages caused by an uninsured driver.
- Hit-and-run drivers are also considered uninsured motorists.
- Uninsured motorist coverage usually adds only a small cost to an auto insurance policy but provides beneficial coverage.