When purchasing a home, no matter how big or small, expensive or inexpensive, property or no property, homeowners insurance is a must. In order to receive financing for the house recently purchased, homeowners insurance needs to be included. Homeowners insurance works a lot like other insurances in the way that its purpose is to protect the buyer from having to pay enormous amounts in accidental damage, theft, fire, or whatever else is specified in the coverage. Depending on what plan the buyer chooses, and the company that creates the policy, each policy will have differing coverage and price points.

There are three types of homeowner’s insurance policies. The two cheapest ones are 1 and 2, known as HO-1 and HO-2. Along with these being the cheaper options, there are fewer options for the buyer and definitely less things covered. HO-1 and HO-2 will only cover the actual property that was purchased by the customer, not the personal belongings. For example, the garage will be covered, but not the snowmobile that lies inside. This can become problematic with cases dealing with fires or any destruction of the entire structure. It is recommended that when buying an HO-1 or HO-2, the buyer makes sure to look well into the exclusions of the policy, as to make sure that the policy is desirable.

The third and last type of homeowners insurance comes right after the first two and is labeled HO-3. Even though this option is the priciest, depending on the situation, the extra cash spent could pay off when a disaster strikes. HO-3 offers protection for both the homeowner’s property and his liability aspects. Unlike in HO-2 and HO-1, an HO-3 policy will most likely cover the snowmobile inside the garage. Depending on the company, the buyer could be reimbursed the complete original value of the damaged personal belongings, which is rarely found in other insurance policies. When it comes to homeowners insurance 101, HO-1 and HO-2 may be the cheaper options for a buyer, but the buyer may be unhappy with the results and wished they had gotten an H0-3.