Home insurance comes in different forms and depending on which type of policy you choose your home insurance rates and coverage options will be quite different.
- HO-1: the most basic form of home insurance »
- HO-2: It is often referred to as "broad coverage" »
- HO-3: also referred to as "special" form »
- HO-4: is often called a tenant’s policy »
- HO-6: type of home insurance addressed condominium unit owners »
- HO-8: such policies are specifically designed for owners of old homes »
Home insurance is a very effective financial tool for protecting your most valuable asset. Learn how home insurance can help you protect your house and its contents against different perils.
Home insurance: distinguishing wind and water
The insurance industry is one of the most profitable and investors, not surprisingly, want to see those dividends continue. This is not to suggest the insurers were ever charitable in their intentions. Insurance has always been a business in the real sense of the word. The result is the wording of the policies allows the claims adjusters some wriggle room when it comes to deciding which claims to honor. In another article on this site, we note the insurers have grown increasingly reluctant to cover flooding. Most of the coastal areas where high tides combined with strong winds can overcome sea defenses, and all areas formally designated flood plains, are now no-go for private insurers. Yet, you will still see standard terms for wind and water damage. This creates the impression you have some protection while allowing the insurers to argue they are not liable at all should you claim or only liable for a small percentage of your losses.
This is all smoke-and-mirrors. You can see a listing of perils covered which will include wind damage but, when you look at the clause on deductibles, you will probably find there's a mandatory hurricane deduction. Unlike the auto insurance policies, this is not a fixed amount. These deductibles are a percentage of the value of your home and some insurers pitch the deductible up to 5% of your home's value, e.g. $15,000 if your value is $300,000. For homeowners to have to find 5% as a lump sum to trigger the payment of the rest of the claim can be a major financial strain.
Now let's comes to the theme of this article. One of the reasons why the claims process can slow down to a snail's pace is disagreements over the difference between wind damage and water damage. The majority of policies exclude or restrict water damage. So, as an example, suppose a strong gust of wind removes the roof from your home. That's clearly wind damage and the cost of rebuilding will usually be covered. Why "usually"? When the wind exposes the timber frame of your home, it can get wet and this can cause the frame to warp. Now the question is whether replacing the frame is responding to the damage by the wind or damage caused by the subsequent rain. You argue that the timber would not have gotten wet had the roof not blown off, so the main cause is the wind. The insurer argues the wind did not cause the timber to twist out of shape. That was the rain.
It would be good if all such arguments could be quickly resolved but, after Katrina, insurers are more defensive faced with large weather events. Worse, they have also been reducing the number of claims adjusters and everything now takes longer. This puts a heavy burden on home insurance policyholders. You're often forced to take emergency measures to protect your property, e.g. when the roof blows off. Keep a detailed photographic record to show the before and after situation, keep all the invoices and bills for the materials and labor, and make sure you keep a constant stream of updating messages going to the home insurancecompany. It must always have the chance to monitor this work.