Best Home Insurance

Key Terms

Claim: When damage occurs to your home or belongings, you can file a claim with the insurer to receive a payout to help cover repairs or the loss.

Deductible: What you have to pay out-of-pocket for repairs before the insurer will start making payments.

Limit: The maximum your insurer will pay on claims for your policy. You can set the limits for your policy as you decide how much of each type of coverage to buy.

Premium: The monthly fee you pay for coverage.

Types of Home Insurance

There are eight types of home insurance. These policies are designed for specific types of homes or offer different levels of coverage.

Four types of homeowners insurance are for single family homes:

• HO-1 or basic form — Covers named circumstances or perils (e.g. explosion, fire, smoke, riot/civil commotion, etc.) and only offers the actual cash value of the home.
• HO-2 or broad form — Includes coverage for additional named circumstances beyond HO-1 (e.g. freezing, weight of ice, etc.) and offers replacement cost coverage for the home.
• HO-3 or special form — Covers all perils except those listed in the policy (e.g. water damage, neglect, war, etc.) and offers replacement cost for dwelling and actual value for belongings.
• HO-5 or comprehensive form — Similar to HO-3 but offers replacement cost for dwelling and belongings and offers higher coverage limits for itemized valuables

The other types of homeowners insurance are for specific types of homes or living situations.

• Condo insurance (HO-6 or unit-owners form) — Designed to cover additional needs specific to condos and are customizable based on what's already covered with HOA fees.
• Mobile or manufactured home insurance (HO-7 or mobile home form) — Designed for trailers, travel trailers, fifth-wheel trailers, single-wide or double-wide manufactured or mobile homes, sectional homes, modular homes, park model homes, and RVs.
• High-risk homes (HO-8 or modified coverage form) — Generally for older homes that would have expensive repairs and covers specific circumstances listed in policy at actual cash value.
• Renters insurance (HO-4) — Covers personal property, liability, and additional living expenses if you have to leave due to a natural disaster.

Types of Coverage

Home insurance includes several different types of coverage. Understanding each type of coverage will help you determine what you need as you shop for a homeowners insurance policy.

• Dwelling coverage — Covers home's structure including attached structures.
• Contents coverage — Covers personal belongings. You may need to add coverage for specific, valuable items.
• Personal liability coverage — Offers protection if someone not living with you is injured on your property. You can also get additional liability insurance by purchasing an umbrella policy.
• Additional living expenses — Covers expenses like rent or hotel costs while home is replaced if home is destroyed or unlivable.

Keep in mind that you won't find flood or earthquake coverage in a typical homeowners insurance policy. If there are situations that you'd like insurance coverage for that are not included in your policy, like earthquakes, you can buy flood insurance or earthquake insurance separately.

Coverage Levels

You can have different levels of coverage within your home insurance policy. These coverage levels include the policy's coverage limit, which is the most the insurer will pay on claims. 

The type of coverage also makes a difference to your policy. Your homeowners policy can include the following levels of coverage:

• Actual cash value — Covers the actual value of your home and belongings and takes depreciation into account.
• Replacement Cost — Covers the cost of replacing your home and belongings. These costs are higher than the actual value coverage because replacing your home involves rebuilding.
• Guaranteed or Extended Replacement Cost — Increases the policy's coverage limit for replacement cost.

Discounts

You can find discounts with most insurers to save on your homeowners insurance rate. Bundling discounts are common, so buying home and car insurance from the same insurance provider can help you save.

It's common for the home insurance industry to offer discounts for having a new roof or a discount for having a good quality roof. You can find discounts for home security since these systems reduce the risk of theft. Some insurers also offer discounts for being claims-free for a certain number of years. 

Some insurers offer more uncommon discounts with its homeowners insurance coverage. For example, Farmers offers career-based discounts for doctors, teachers, firefighters, engineers, and more. AAA offers discounts to its members for having AAA membership and maintaining it.

There are many ways to lower your home insurance rate through discounts. Keep these savings opportunities in mind as you consider companies.