What Home Insurance Add-Ons Do You Need?


The Home Insurance Add-Ons You Need To Buy

Insuring your home is not a simple task, especially when insurance companies create plans that fail to cover all of your needs. That’s where home insurance add-ons come in. With additional home insurance coverage, you can get coverage for exactly what you need. SEE ALSO: 5 Tips To Choose The Right Home Insurance

What Your Plan Covers

The first step in deciding on insurance add-ons, Frugal First Home Buyer, is finding out what exactly your basic insurance covers. Here are some of the most common home insurance plans:
  • HO-1: Also referred to as the “bare-bones” insurance plan, an HO-1 covers 11 “perils,” including fire, lightning, hail or windstorms, explosions, riots, aircraft, vehicles, theft, vandalism, smoke, and volcanic eruption.
  • HO-2: More common today than HO-1, these plans cover all of the above and falling objects; water damage from an accidental overflow of plumbing systems; structural damage due to the weight of ice, snow, or sleet; rupture of your home’s heater, air conditioner, fire sprinkler, or water heater; damage due to surges; and frozen plumbing.
  • HO-3: The most common insurance plan today. Insurance companies insure you based on an “everything except” basis. You work out what is not covered by your insurance plan with your insurance agent. There are some things that cannot be included in this plan, however. For instance, earthquake and flood insurance must be purchased separately as an add-on.
  • HO-5: Also called the “no fuss” policy, an HO-5 works like an HO-3, but has the added benefit of covering your personal belongings. An HO-3 only covers structural damage, while the 17 items covered in an HO-2 cover your belongings.
  • HO-8: This home insurance covers older homes using the 17 items in an HO-2. For example, if your 18th century New England home has hail damage, your home insurance company will cover it under this plan.

The Add-Ons

Depending on the home insurance plan you end up purchasing, different add-ons are available. Flood and earthquake insurance are the main two add-ons that are not covered by any home insurance plans. Personal liability insurance is also a valuable tool.

Flood And Earthquake Insurance

Flood insurance, as the name suggests, covers damages to your property and possessions due to a flood. More specifically, flood insurance covers:
  • Overflow or inland tidal waves
  • Mudflow
  • Unusual and rapid accumulation of runoff surface waters from any source
  • Collapse of land due to erosion from waves or currents exceeding typical levels
In order to purchase flood insurance, your community must be participating in the National Flood Insurance Program (NFIP) and your insurer has to have dealings with the Federal Emergency Management Agency (FEMA). Unlike flood insurance, earthquake insurance is available in all 50 states. However, cost varies depending upon where you live and the condition of your home. You can purchase earthquake insurance through state and nationally funded organizations, like the California Earthquake Authority (CEA). Earthquake insurance also covers personal property damage and structural damage. For Californians, the CEA allows you to cover either $5,000 or $10,000 in personal property and 85 percent of the insured home’s value. There are stipulations, though. Before your insurance pays the damages for an earthquake, you will have to pay a deductible that is around 10 or 15 percent. This means that if you have $300,000 in dwelling coverage, you will have to pay $30,000 to $45,000 before your insurance pays.

Personal Liability Insurance

Another add-on you should consider is personal liability insurance (or umbrella insurance). These plans are a last line of defense against a lawsuit, and can be added on when your other insurances will not cover everything. For example, if a child runs in to your driveway to get a ball and you hit her, your personal liability insurance will cover at least part of the amount your auto or home insurance does not cover.

Factors To Consider

But only the extremely rich can afford to cover every nook and cranny of their home against any and all disasters. Therefore, it is important to assess the value of your home, its physical location, its age, and the cost of your personal belongings before purchasing insurance add-ons. An overabundance of insurance coverage will cost you a lot of money and, ultimately, might not be needed. To assess the natural disasters most prevalent in your area, visit the United States Geological Survey website. SEE ALSO: 3 Ways Your Insurance Bundle Isn't As Cost Effective As You Think

Saving Money

There are also other ways for you and your husband to save money. Often, home insurance companies offer discounts for different situations, products, and services to your home. Here are some examples:
  • Purchasing home security or other protective devices can lower your insurance payments by a significant amount
  • Having multiple policies with the same insurance provider can also lower your rates
  • Not having a loss within a certain period of time also reduces your insurance costs
  • Owning an ecologically friendly  home can also reduce your home insurance costs
Before closing on your next home, befriending an insurance agent might be a good idea. If an insurance agent is performs an inspection of your potential home, then you will know before closing what needs to be changed to appease an insurance company. Any additional costs that will come with insuring your home, then, can be part of the negotiation process with the seller. So, you see, Frugal First Home Buyer, there are many ways to get the insurance coverage you need without breaking the bank.
Date of original publication:
Updated on: November 10, 2015

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