The mortgagee (lender) will require that you keep hazard insurance (fire and similar risks) on the property in an amount sufficient to cover the loan and in areas where it may be required, flood insurance as well. As a prudent homeowner, you will want wider coverage, and for a larger amount. Rebuilding after a fire, even partially, can sometimes cost more than your original purchase price. And you need personal protection for risks that don’t concern your lender—liability for a guest who is hurt on your property, for example. Your best bet is a homeowners policy, which puts many kinds of insurance together in a package. The least expensive, called basic or HO (homeowners)-1, covers fire, windstorm, explosion, smoke, glass breakage, and other perils, including three very important ones: theft, vandalism, and liability. More expensive is the broad form, HO-2, which adds several more items, largely connected with plumbing, heating, and electrical systems. Comprehensive insurance (all-risk) covers even more items and is considered a luxury item. HO-6 is used for condominiums and cooperatives. State regulations dictate the specific coverage in the various policies. Besides asking what is covered by the policy you buy, it’s important to find out what is not covered (earthquakes, floods, laptop computers, musical instruments, bottles dropped from airplanes). If you have lots of expensive computer equipment or a valuable collection of jewelry, you may want to pay an additional premium for riders covering those items. |
