Real Estate Investing

One can hardly think about real estate today without considering San Diego, where “Witch Fire” has consumed over 1,000 homes and businesses in the city alone. That’s not to mention the surrounding area to which the fire has rapidly spread, fueled by extremely dry conditions and Santana winds.

In the midst of such a horrible natural disaster, you can only watch, wait and hope that everyone gets out safely and is able to get back on their feet in time. Not to preach or trivialize the current disaster on the west coast, but today’s post will focus on the different types of insurance available to homeowners and what it all means. Do you know what your fine print says?

Homeowners insurance is an invaluable safeguard in a crisis such as the current one in California. An acquaintance whose family recently lost nearly everything in a house fire commented repeatedly on what a godsend the insurance company was. The company offered restoration services, not only for the structure itself but for the family’s personal belongings like clothes and furniture. It reconstructed the home’s extensive damage and helped pay for a hotel room to house the family temporarily.

There are several types of homeowners insurance available. Following natural disasters, horror stories often surface about insurance companies refusing to pay up on the basis of technicalities. So the best advice is to cross your t’s, dot your i’s, know what the fine print reads and keep your insurance paperwork in a fire-proof safe. The following is an explanation of the different types of homeowners insurance available, to help you prepare now rather than in hindsight. Individual homeowner’s policies may vary slightly from those listed below, so individual assessment is appropriate.

HO-1: “Basic coverage” that insures against fire, damage from lightning strikes, broken glass, rioting, theft, vandalism, etc.

HO-2: “Broad coverage” that offers protection against all of the above, alongside a few other specifics such as damage from the weight of snow or ice. It also adds coverage for plumbing, heating and air conditioning problems.

HO-3: The most common of all HO policies, this “special form” protects against all threats except a few specifics like flood, earthquake, nuclear and war. Supplementary policies may be purchased to cover these specific threats, and flood insurance is a legally mandated expense for those living in a geographic floodplain.

HO-4: “Renter’s policy” that insures all personal possessions inside the residence. It protects against all the risks listed in the HO-2 policy. It also offers assistance with related living expenses and medical payments. This policy does not cover the actual rental structure itself, as that is typically covered under a landlord’s policy purchased by the property owner.

HO-6: “Condominium coverage” that helps protect personal belongings and anything else not covered by the condo association policy. It does not cover the structure itself, as that should be covered by the association’s policy.

HO-8: Older homes are covered under this policy, particularly those with historic value. The policy does not cover reconstruction, as with older homes, that might cost much more than the home’s market value.