Understanding the Types of Insurance Coverage for Restoration: What homeowners should know about their policies
Home insurance is the sort of thing that we all want to have but never use. In the event of a disaster, be it natural or a result of some type of mechanical failure, your house will likely need extensive restoration work.
The process of fixing up a home after fire or water damage can be extremely expensive, but it’s often done at little to no personal cost for the homeowner provided they have the right kind of insurance coverage.
In this article, we take a look at what options are out there and how each might serve to keep your home safe.
The Core Type of Homeowners Insurance Policies
There are multiple options when it comes to finding home insurance in the United States. While there are many different subcategories of options, these are the most common insurance categories you’ll find.
HO-3
HO-3 is the most common policy type and covers the structure of a home under the conditions of what insurers call “open peril.” This means everything is covered unless it is specifically excluded. Personal property, on the other hand, is generally covered on a named peril basis, which is to say items of particular value must be stated and individually insured in cases of theft or damage.
HO-3 may exclude certain types of natural disasters, including flooding and earthquakes, along with inevitable failures owing to wear and tear.
HO-5
HO-5 is similar to HO-3, but generally includes more comprehensive forms of coverage. For example, it may include both structural and personal property on an open peril basis, and there will generally be fewer restrictions on personal property claims. HO-5 will typically come with higher premiums but is often considered more favorable in the restoration context.
HO-1 and HO-2
HO-1 and HO-2 are both limited policies. HO-1 is so basic that it is rarely used at all today. HO-2, on the other hand, is limited based on specificity and includes only named-peril items protected under limited coverage plans. It’s often an artifact of older policies or budget plans. Because the coverage is so narrow, it has little, if any, value in a restoration context.
HO-4 (Renters Insurance)
Renters insurance is designed to supplement coverage that would be carried by the building’s owner. It is specific to personal items and can be relevant in a restoration context if you’ve experienced the loss of personal items in a disaster.
HO-6 (Condo Insurance)
HO-6 is similar to HO-3 but is specific to the nuanced conditions of condo living. Because there are shared interior aspects that might include things like roofing, walls, and so on, HO-6 is designed specifically to avoid disputes among neighbors during the claims process.
Key Insurance Coverage Types Relevant to Restoration
It’s important to understand what’s covered within an insurance plan. Dwelling coverage, for example, will cover damage caused by fire, windstorms, and water in the context of walls, roofing, floors, built-in cabinetry, plumbing, electrical systems, and more.
Personal property coverage, on the other hand, will protect your actual belongings. This could include your furniture, your electronics, and even your clothing.
Also relevant is loss of use coverage, which can help pay for your lodging during the restoration process. This might involve helping you secure a long-term rental or hotel room, and even potentially covering storage for personal items and food bills.
Finally, there’s liability coverage, which can help cover third-party restoration costs in the event that your actions in some way cause damage to a neighbor’s property. This might be relevant in a condo space where a leaky pipe or an electrical fire causes harm that extends beyond your domicile.
Understanding Named Versus Open Peril
We described earlier, to an extent, the difference between named and open peril. Named peril is very specific and covers only conditions that are listed directly in the policy. It might be fire, lightning, windstorm, theft, or vandalism. If the cause is not directly named within the policy, the claim will be denied.
Open peril is broader and will cover anything except exclusions. For example, it might not cover flood, earth movement, or failure based on neglect or age, but will cover anything else. Open peril is most commonly used in restoration scenarios.
Coverage Exclusions
There are several restoration items that are frequently excluded from coverage. For example, flood damage generally requires its own specific provisions within a policy, while maintenance-related neglect, including leaks or mold that are the result of long-term humidity issues, may not be covered.
There might also be coverage limitations even for items that are featured in the policy. For example, mold coverage might be capped at $10,000.
You’ll also need to take into account your policy’s deductible. For example, if you have a flat deductible of $5,000, it means that you will owe that much, and everything else will be covered, at least insofar as the repairs are consistent with the terms of the policy.
Navigating Insurance Complexity
After an emergency, insurance is usually the last thing that most people want to think about. At AMH Restoration, we pride ourselves on being a valuable resource during every stage of the process.
Not only do we conduct repairs from start to finish, but we also take as much friction out of the insurance claims process as we possibly can.
Contact us to learn more about our approach to restoration.
