Homeowner’s insurance policies (HOI), also called home insurance or hazard insurance, is a type of package property insurance.  The policy covers various insurance protections such as losses occurring to a home, its contents, loss of use, loss of personal possessions, and liability insurance that might happen at the home or at the hands of the homeowners within the policy territory.  The cost of this insurance depends on what it would cost to repair or even replace the home and which additional riders are attached to the policy.  As homes are usually purchased through mortgage loans, the mortgage lender usually requires that a buyer purchase homeowners insurance as a condition of the loan.  For example, this stipulation applies to Kloze home loans.  Here are some overviews of the different tiers of HOI policy that vary in coverage thus would also vary in the price of their premiums.

The Basics

A basic homeowner’s insurance policy is called HO-1.  It covers your home and possessions if they are damaged by any of the following:  fire, lightning, windstorms (but not in hurricane zones), hail (not available everywhere), explosions, riots, civil commotion, aircraft and things falling from aircraft, vehicles and things thrown from vehicles, smoke, vandalism (some policies exclude this), malicious mischief, theft, and volcanic eruptions.  It is important to note that many states will not allow the sale of a basic HOI therefore you must buy an upgraded policy that covers more scenarios.

Middle of the Road

The upgraded policy most states require is called HO-2.  These policies give you the same protections as HO-1 but include coverage for falling objects, the weight of snow, ice, and/or sleet, flooding from appliances, plumbing, HVAC, or fire sprinklers, damage to electronics caused by artificial electric currents such as power surges, glass breakage, and abrupt collapse.  This same list applies to those buying a condo with the exception of being called HO-6 instead of HO-2.

Kloze home loans

The Works

The most popular and common form of HOI is HO-3 coverage.  While this is the most complete tier of insurance and covers open perils, it is important to understand that these comprehensive policies do have several exclusions.  While an open peril is considered to be storm damage, criminal activity, and a multitude of other damage-inducing scenarios, HO-3 policies clearly sate their exclusions or what they do not cover.  The typical exclusions are enforcement of building codes, earthquakes, floods, power failure, neglect, war, sewage backups, termite damage, sinkholes, sump pump failures, nuclear hazards, intentional damages, the freezing of pipes in vacant dwellings, damage to pavement or foundation from water weight, theft from a dwelling under construction, vandalism to vacant dwellings, latent defects, wear and tear, pet damage, government actions, and defective construction.  When taking these exclusions into consideration, talk to your insurance agent or mortgage lender to find out about the supplementary policies that can be purchased to cover some exclusions, especially flooding.


When it comes down to whether or not your HOI will cover mold, there is a basic litmus test.  If the existence of mold is due to the homeowner simply not maintaining their home, the damage done will not be covered.  This falls under the exclusion of neglect thus a person’s failure to take reasonable steps to protect their property.  If the mold is a direct result of a peril that is covered by your policy, then your HOI will most like cover the cost of the cleanup.  This is another reason to seriously consider supplementary flood insurance.

Things Outside the Residence

You HOI also covers things outside of your house but still on your property.  For example, structures such as fences and sheds, trees, plants, shrubs, and lawns damaged by fires or car crashes, and even if your dog bites a neighbor this is included in basic liability coverage.  Another interesting fact about your policy is that it applies off your property as well.  If you ram into someone with a cart at the grocery store of a golf ball injures someone on the golf course, your HOI covers you in these situations.  Finally, your policy will foot the bill in the event you are temporarily unable to live in your home due to the occurrence of a peril covered by your HOI.  This might include living in a hotel due to smoke, fire, or water damage.

Final Thoughts

If you are preparing to buy a home do as much research as possible on the structure, property, municipal systems, and geography of the area you are in.  These are important things to review with an inspector and to be dually cautious you might want to have someone from a licensed pest control company join you at the time of the inspection to make sure the home is completely free of termites and other unwanted residents.  These experts can tell you what additional coverage you might consider adding on to your HOI, especially if your home is attached to old sewage lines or is in an area plagued by sinkholes.  This additional coverage can be very affordable, especially if you have your insurance policies with the same company and take advantage of multi-policy discounts.  Simply run this by NHL lending or your current insurance company.  Even if the total for all premiums seems expensive, just think about the potential costs you will be looking at if you do not add these things to your HOI.