There are many different terms that refer to household insurance. They include home insurance, house insurance and homeowners insurance. They all imply the same thing. If you own a house and want to get household insurance, there are a number of things that you must know to make an informed decision. You need to know about the different types of property and what household insurance policies apply to them and the clauses within them.
The Insurance Services Office (ISO) or American Association of Insurance Services (AAIS) has formed five different classifications for the coverage of houses and belongings within them against potential causes of damage. These classifications are as follows:
The first category secures the primary structure of the house you own. It includes the basement and attic and may or may not include the structure(s) next to the main building such as a garage. This category does not include land. According to law, the property has to be insured up to 80% of its market value to cover replacements.
This category of home owners insurance is applicable for owned homes only while being invalid for apartments. The ‘Other Structures’ policy of home owners insurance covers structures around the property being used for domestic purposes such as garages, painter’s room or room for wood broilers.
You can insure your personal property regardless of whether you live in a rented house/ apartment or in your own one. Usually the amount paid to insure personal property is 50 to 70% of the amount paid to insure your ‘Dwelling’, in spite of the worth of personal property being much below that 50% of that of your ‘Dwelling’.
The fourth category of insurance includes charges for protecting rental income. This may be applicable even if part of your house has been rented while you yourself occupy the rest of it. It is also inclusive of other expenses such as fair rental value. However, it is not inclusive of utilities provided in the rented space such as electricity, sewage and gas.
Other events of damage to your property are covered under the fifth category named ‘Additional Coverage’. It recovers costs incurred due to cleaning up of debris, damage to trees (damaged by an aforementioned list of perils excluding regular causes such as ice and wind), theft of property such as credit cards or identity and damage to landlord’s furniture or other items.
This policy contains protection for your home against 11 different listed causes of damage including lightning, vandalism, theft, windstorm, volcanic eruption, civil commotion, robbery and smoke.
A broader form of the earlier insurance policy protects your home against seventeen causes of damage including the eleven from the earlier form of home insurance and six other ones.
If you live in a single-family home (also known as single family detached home), this type of insurance is for you. This insurance policy provides your home an ‘all risk’ coverage excluding protection from a few listed perils.
The Renters’ Insurance policy covers your personal items placed within a rented house against causes of damage listed in the Broad Form Home Insurance Policy or in Special Form Home Insurance Policy.
This policy covers the maximum number of causes of damage to regular houses and apartment just like the Special Form Home Insurance Policy does for single-family homes.
This policy is applicable if you live in a condominium.
If you own a house that has aged considerably and its market value is well below the costs that would occur should a calamity befall it, you’ll have to opt for the Modified Coverage Home Insurance Policy for its protection.
Knowing the categories above will help you decide the weightage you like to allot to each clause that protects different parts of your property. The weightage will obviously depend on what the value is of each of category of property. Once you have done so, get quotes from at least three different household insurance companies and then make your final decision.