Standard homeowners insurance perilsMost homeowners insurance policies provide protection for the following disasters or perils:
- Riots/civil disobedience
- Damage from vehicles crashing into property
- Volcanic eruption
- Objects falling
- Weight of ice, snow or sleet
- Interior flooding from plumbing, HVAC, or appliances (including fire sprinklers)
- Other damage from steam, heating, cooling or fire protection systems
- Electrical damage
- Flooding from external sources (rivers, etc.)
- Maintenance damage
- Sewer backup
1. Homeowners insurance for manufactured homesMany home insurers consider manufactured homes' ability to withstand the standard perils listed above to be inferior to that of traditional (in-site) homes that are built on foundations. As a consequence, homeowners insurance companies estimate that damage claims from "normal" disasters like tornadoes, hail, and other severe weather events could be higher for manufactured homes. Given that the value of manufactured homes is typically less than that of an in-site home of equal size, the ratio of premiums to value on manufactured homes is several times higher than for traditional homes. Many insurers simply do not provide coverage for manufactured homes.
Before buying a manufactured home, research coverage availability and premium costs when you compare homeowners insurance quotes. Be sure to factor in the higher insurance premiums in your decision whether to purchase a manufactured home, as opposed to a traditional one.With a manufactured home, it is important to note the "loss settlement" option. This refers to how you are paid in the event of a claim. For example, if your manufactured home burned to the ground, there are three possible ways your claim could be paid:
- The actual cash value, which takes into consideration any depreciation
- A stated or agreed value which pays what the policy states as the home's worth
- A replacement cost which pays "old for new"
2. Homeowners insurance for old homesHomes built before the 1940s are generally considered "old homes." While you might think an older home's insurance premiums would be lower, they are usually higher. There are two reasons for this: 1. Costs: Building materials continually evolve and the materials used to build older homes are often not readily available and, when they are, they usually cost more. That increases the claim size for older homes, causing insurance companies to require higher premiums. The loss settlement option (described above) you choose can result either in higher premiums or higher out-of-pocket cost in the event of a claim. Most owners of older homes opt for a replacement cost policy, but keep in mind those are often capped at 20 or 25 percent over the insured value of the home. Be sure to ask your agent or broker if the policy that you have, or are considering, has such a cap. 2. Codes: Building codes change over time, usually to increase safety in newly-built homes. For example, a city or county might change staircase grades to be safer. If your home was built before 1940 and has a fire, replacing the stairs may require re-engineering the staircases, significantly increasing the claim amount. Many insurers offer additional coverage, typically called "Ordinance and Law coverage" for such eventualities. If you don't have that coverage, the cost increase due to re-engineering (or rewiring in the case of electrical systems) will come out of your pocket. You might find that purchasing a fixer-upper means a typical homeowners policy is enough; but after you have done a few years of improvements and renovation, that policy might become inadequate. It pays to do an annual check of your homeowner insurance needs to determine whether you should switch to a different type of coverage that takes into account the work you have done on the home in recent years.
3. Homeowners insurance for historic homesHistoric homes can differ from older homes in two ways:
- They are designated by a historical organization as historic
- They were built before (approximately) 1900
Owners of historic homes should look for something like "guaranteed replacement coverage with restoration," which means the insurer will replace the original material with the same thing, if it's available -- called "like-kind replacement." Such policies are more expensive because materials may be hard to find (read: costly) and they usually need to be installed by craftsmen who know how to use centuries-old construction techniques.Some insurers avoid covering historic homes for that reason (similar to manufactured homes). Fortunately, most historical organizations have located carriers who provide coverage, and those policies usually cost 20-25 percent more than usual coverage. (Be sure to find out if there are caps on claims.) If you are considering purchasing an historic home, be sure to check with both your existing insurer and the organization governing the home. In most cases, those insurance companies send restoration experts and appraisers to the home before the policy is written to help ensure that they are aware of all the details that can make the difference between your home's true value and basic replacement value. Many people who buy historic homes upgrade them with things like new plumbing or electrical wiring. Remember that repairs or upgrades to a historic home will likely increase its value, requiring updates to your coverage. Some of those might bring higher insurance premiums but others, such as smoke detectors and sprinklers, could bring them down.
4. Homeowners insurance for a condoDo you need homeowners insurance for a condo? It is common for a condo's homeowners association (HOA) to carry a master policy covering the structure and possibly other elements. But the typical master policy may not protect anything inside your unit, and that may be the biggest single difference between homeowners insurance coverage for a condo versus a single-family dwelling. All too often condo buyers are not required to have homeowners insurance in place at the time of closing, because the HOA master policy typically has sufficient coverage for lenders' interests. Buyers may not review their HOA bylaws to discover which coverages they need. This can result in unhappy surprises when damage occurs inside their unit and they discover it is not covered. HOA master policies differ, making it important to understand the protection your unit will have from the HOA.
5. Homeowner insurance for rental propertyThe home insurance needs are different for a home you rent to tenants compared to a single-family home. Renters can sue you for medical or other damage they suffer and allege your property is at fault. On the positive side, you don't need as much coverage for the interior, unless it has furnishings that belong to you.
Landlord insurance provides essential protections to property owners who should require their tenants to purchase adequate renters insurance.