According to current statistics, approximately 95% of homeowners in the United States carry homeowner’s insurance on their dwellings. One reason why this number is so high is due to the fact that, when you buy a house and finance it through a mortgage company, that company requires that you maintain at least a minimum amount of homeowner’s insurance coverage on the home. This requirement is to ensure that their financial exposure is protected in the event that something occurs to cause harm or to destroy the home.
Insurance For All Types of Homes
There is a variety of homeowner’s insurance types of which many homeowners may not be aware. This includes Forms HO1, HO2, HO3, HO4, HO6, HO8 and more. By far, the most popular and commonly sold homeowner’s insurance policy is the HO3 Special Form. Unlike the HO1 and HO2 policies, which are “named perils” policies, meaning they only cover specific perils listed in the contract, the HO3 is an “open perils” coverage, meaning it covers just about any peril (except those expressly excluded in the contract). Typical exclusions to “open perils” policies include:
- Earthquakes
- Floods
- Landslides
- Nuclear accidents
- Neglect
- Mold/fungus
- General wear and tear
- Pest damage or insect infestation
The reason the HO3 policy, often referred to as standard coverage, is the one most commonly sold is because it’s the most affordable means for insuring your home to the minimums required by mortgage companies.
Enhanced Coverage
In the State of North Carolina, there’s something available called an Enhanced Homeowners Insurance Policy, or HE7. This coverage is typically only offered by companies working with independent insurance agencies. You won’t usually find it being sold through the large, national insurance chains.
HO3 vs HE7 Coverage
The HE7 Policy is a step up from the HO3 as far as the coverage provided. Here’s a chart that gives a clear explanation of HO3 vs HE7 coverage.
Both policies contain the same five types of coverage:
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- Dwelling
- Other structures
- Personal property
- Loss of use
- Personal Liability
Policy limits and approved claims causes, however, are much more favorable to the insured with the HE7 coverage. Some examples of this include guaranteed full replacement dwelling and contents costs. Study the chart and consult your independent agent. You’ll see there are numerous areas where the HE7 provides superior coverage compared to the HO3.
HO3 vs HE7 Comparison
| Coverage | HO-3 Policy | HE-7 / 21 Policy |
| Replacement cost coverage on dwelling (cost to rebuild back to pre-loss condition) | Optional for an additional charge, 125%-150% cap | Guaranteed (full) replacement cost coverage |
| Replacement cost coverage on contents (no depreciation taken) | Optional for an additional charge | Included |
| Contents-covered perils | Named perils | All risk |
| Law & Ordinance | Caps at 10% of coverage on dwelling | Caps at amount of coverage on dwelling |
| Primary mortgage expense | Not Available | Pays the first mortgage payment while the residence premises is not fit to live in due to a covered loss, for up to 12 months/payments; part of Loss of Use coverage. |
| Watercraft | $1500 | $2500 |
| Trailers | $1500 | $3500 |
| Money sublimit | $200 | $1000 |
| Securities sublimit | $1500 | $5500 |
| Business personal property, on premises | $2500 | $5000 |
| Business personal property, away from premises | $500 | $1500 |
| Credit card/fund transfer card forgery | $500 | $5000 |
| Jewelry sublimit | $1500 (theft only) | $5500 (theft, misplacing or losing, $1500 per item limit) |
| Firearms sublimit | $10,000 (theft only) | $10,000 (theft, misplacing or losing) |
| Silverware sublimit | $10,000 (theft only) | $10,000 (theft, misplacing or losing) |
| Land coverage | Not available | Pays up to $10,000 to replace, stabilize, or rebuild the land necessary to support the dwelling or other structure as a result of a covered loss. This is additional insurance and no deductible applies. |
| Water back-up of sewers or drains | Optional for additional charge | Automatic coverage for up to $50,000; optional for up to policy limit at $25 charge. |
| Loss assessment | $1000 | $5000 |
| Personal injury | Optional for an additional charge | Included |
| Lock replacement | Not available | $500 (if keys are stolen) |
| Debris (tree) removal | $1000 for any one occurrence, regardless of the number of fallen trees | $2000 for any one occurrence with a $1000 limit per tree |
| Reward coverage | Not available | $2500 leading to the arrest and conviction of the person committing the crime, resulting in a loss and $5000 for the return of stolen covered property. This coverage is additional insurance. |
| Witness expense | Not available | $250/day loss of earnings and $50/day expenses up to a max of $3000 to appear as a witness in court to prosecute person charged with committing a crime against insured’s property resulting in a covered loss. This is additional insurance and no deductible applies. |
| Directors & officers coverage | Not available | Affords liability coverage up to policy limits when an insured acts in the capacity of an unpaid director or officer of a not-for-profit corporation or organization. |
| Deductible waived on losses exceeding $50,000 | Not available | Included |
| Property in vault coverage | Not available | Provides a single maximum limit of $50,000 for loss to or theft of silverware, jewelry, and/or securities in any one occurrence when such property is in a safe deposit box stored in a bank vault. |
| Trees, shrubs, other plants coverage | $500 per plant limit | $1000 per plant limit |
| Fire department service charge | $500 | $1000 |
| Power interruption coverage | Not available | Provides for loss of use for up to 7 days beginning after the first 2 days of loss of use. |
| Business pursuits of minors | Not available | Limit of liability applies to insured minors involved in occasional or part-time, self-employed business pursuits normally undertaken by minors. |