Home insurance

2 Replies


i'm sorry for posting here but this forum is all I have access to. I am a 1st time homeowner and am looking to understand the diff between HO2 and HO3. I'm in NYC and not in a flood zone at all. The difference between these quotes is quite large (1200 vs 3000). Are there any 2-3 important items including in HO3 that aren't in HO2? From what I hear, many homeowners simply avoid putting in claims as it results in a big increase in their premium and unless there is a loss of a sizable nature, they just eat the costs


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I know I am a little late on this one but I thought I might add my response to help anyone who might be searching for a similar answer later.

Why does my response matter you ask?  I'm a home insurance underwriter.  That's right, the guy the sends you those annoying letters to replace your siding, asking who occupies the home etc..

So the big difference between HO-2 and HO-3 is what we call the covered perils.  In HO-2 policy form it is a named peril policy, meaning you only have coverage for events named under the policy.  The HO-3 form however (for dwelling coverage) is an open peril policy, which means any sudden physical damage, subject to certain exclusions such as wear and tear, manufacturer's defect etc.

Basically you are covered for a lot more in HO-3, the flood portion you mentioned is irrelevant in either form, ground water is specifically excluded from coverage on both forms.  You have to have a separate police for flood.  

Many homeowners avoid putting in claims because they are thinking about long term price increase however there is a limit to how long the premium increase will last.  There is also a limit (dictated by your state's Department of Insurance) on how much your policy can raise.   If you have a legitimate claim that will hurt your pocket book, put it in, just know there are some considerations such as deductibles and depreciation.  

One of the pitfalls to watch out for is the industry practice in some areas of imposing a "Wind and Hail Deductible."  A lot of areas (Colorado, Texas, Oklahoma etc)  have high winds and a lot of wind losses to roof.  The premium rates can't keep up with the increase in claims (due to state regulation) so insurers impose a deductible, usually 1-2% of your coverage A.  Example, you have $200,000 Coverage A (Dwelling coverage), and a 1% W&H deductible, you would pay $2000.00 worth of the replacement cost, your policy pays the rest.

Lastly the biggest pitfall for real estate investors with claiming is gaining the attention of a person like myself.  If you have frequent claims an underwriter will look to mitigate any further claims.  The two instruments we have to deal with this are imposing conditions (repairs, inspections etc) and policy cancellations.  Both of these can be a headache.

Hope this helps.

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