When you buy homeowners insurance from an insurance company, you might see a slew of insurance jargon. How are you supposed to know what you need out of a home insurance policy? And what do all these different coverage types mean? Also, what is the difference between each homeowners insurance policy? Thankfully, we have your go-to for untangling the nuances of homeowners insurance. You may even find extra coverage you should always have just in case. 

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Types of Homeowners Insurance

While shopping around, you will see some common types of home insurance coverage listed on your policy options. Many people overlook the types of home insurance coverage on their policies. You don’t have to miss these essential items. See below for examples of coverage listed on most insurance policies:

Coverage A: Damage to House

Coverage A includes the dwelling coverage amount on the physical structure of your home. Coverage consists of the walls, ceilings, floors, and more. With this coverage, you are protected as long as it’s a covered event or peril.

Coverage B: Other Structures

Most homes have more than one structure on the property, like detached garages, sheds, mailboxes, and fences. Coverage B is for these types of structures that face accidental damage or loss from a covered peril. 

Coverage C: Personal Property

Coverage C protects your personal property, including personal belongings. When the interior of your dwelling faces damage from a covered peril like a fire, you’re covered. Valuable items like artwork, antiques, and expensive jewelry may be worth more than policy limits. Review your policy and find out if these types of costly items require additional coverage to meet the right amount of coverage. 

Coverage D: Additional Living Expenses

Coverage D is known as loss of use coverage. Let’s say a fire breaks out, and your home becomes uninhabitable. You need to live somewhere else for a while. While you’re away, your insurance will pay for additional living expenses to live elsewhere under your loss of use coverage. Your insurance company will reimburse you for additional living expenses like food, lodging, and transportation. 

Coverage E: Personal Liability

There are instances in which you might be liable for negligent actions. Let’s say your neighbor comes over, and an accident causes your neighbor to sue you. Your personal liability coverage pays for lawyers and court fees. 

Coverage F: Medical Payments

Medical payments coverage on home insurance is similar to medical payments on an auto insurance policy. Let’s say the same neighbor from above gets injured while on your property. Your medical payments coverage will pay the medical bills for your injured neighbor.

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Other Additional Coverages to Consider:

Your insurance will not include additional coverage on your standard home insurance policy. Always consider the following additional coverages upon purchase of your home insurance policy:

Extra Contents Coverage

Most home insurance coverages are a flat percentage of the amount of insurance on your home. Let’s say your contents coverage is 50 percent of the home insurance, and you insure your home for $100,000. That means the contents coverage is $50,000. With extra contents coverage, you can increase coverage on your home’s contents. Of course, a coverage increase has a minimal charge. But additional contents coverage does not increase the insured amount on your dwelling’s structure. 

Replacement Cost Coverage

At an additional cost, you can purchase guaranteed replacement cost coverage for broader coverage. Let’s say a covered peril happens, and you need to repair or replace things in your home. Replacement cost includes the total amount of money it costs to repair or rebuild your home before it was destroyed. This coverage also purchases brand new items to replace your old ones when they become damaged or stolen. Replacement cost coverage is better than actual cash value. Actual cash value only covers the item’s value minus depreciation. With actual cash value coverage, your insurer gives you less to repair or replace items. Always ask your insurance agent to see what your policy covers

Scheduled Personal Property Endorsements

Your personal property has special coverage limits. Most policy limits are typically set to $500 or $1,000. Let’s say your coverage for theft of furs or jewelry is limited to $500. You can increase the coverage of an item by adding a scheduled personal property endorsement to your basic home insurance policy

Flood Insurance

Flooding may occur from storms or overflow of water from nearby lakes or rivers. The standard home insurance policy does not include flood insurance. So, if you live in a flood zone, it may be worth purchasing flood insurance. Ask your local agent for flood insurance options. 

Earthquake Insurance

Catastrophic damage caused by an earthquake is not covered on a standard homeowners insurance policy. You can purchase earthquake insurance or an earthquake endorsement. This coverage may be necessary if you fear your home may sustain earthquake damage.

Additional Liability and Medical Payments

Additional liability coverage and medical payments coverage is available with an additional premium. Purchase additional liability or medical payments if you think the standard coverage won’t be enough.

Types of Homeowners Insurance Policies

Whether you need to insure your rental, house, condo, apartment, or older home, there are specific policy types for each. Insurance companies write policies on things called forms. According to the Insurance Information Institute, the type of home you live in determines your needs, coverage, and policy form. You should know what these policies or forms are to have a better picture of what you need in a policy. Here’s what each of these forms means in terms of types of home insurance coverage:

HO-1 Policy

An HO-1 policy is the most basic form of coverage in home insurance. This policy covers 10 perils. But many perils, including falling objects and weight of ice, are excluded from an HO-1 policy. This is a very minimal form of coverage that most insurers no longer offer. 

HO-2 Policy

An HO-2 is known as broad form coverage. This type covers a much broader range of perils than a basic form (HO-1) but is also very limited. 

HO-3 Policy

An HO-3 policy is known as a special form of coverage and is the most common type of policy. An HO-3 offers open-peril coverage. “Open perils” means your policy helps pay for property damage repairs by any peril unless specifically excluded on your policy. And you can get an HO-3 that offers named perils on your personal items. This is handy for things like furniture, clothing, and electronics. Named-peril coverage helps pay for repairs or replacement of belongings damaged by perils specifically listed in your policy. So, if a peril is not listed, you don’t get coverage. A typical HO-3 form covers these perils:

  • Hail and windstorms
  • Volcanic eruption
  • Lightning strikes, fire, and smoke
  • Explosions
  • Vandalism and malicious mischief
  • Theft
  • Aircraft, car, or vehicle damage
  • Falling objects
  • Weight of ice, snow, or sleet
  • Water damage or accidental discharge of water

HO-4 Policy: Renters Insurance

If you rent, you want to have renters insurance, known as an HO-4 policy. With renters insurance, you get protection on your personal belongings. Renters insurance protects your items against 16 covered perils. Yet an HO-4 policy doesn’t cover damage to the rental unit’s structure. Your landlord must have a separate landlord insurance policy to cover the structure of the rental property. 

HO-5 Policy

An HO-5 policy is the most comprehensive form of coverage. It provides broader protection and higher coverage limits than the typical home insurance policy. Think of it as standard home insurance. But it comes with many extras like replacement cost coverage, expanded coverage limits, and open perils coverage. 

HO-6 Policy: Condominium Insurance

Most condominium insurance policies are written on an HO-6 policy form. Some agents refer to this as “walls-in” coverage. That’s because it protects the unit’s walls, floors, and ceilings, and the condo owner‘s personal belongings from 16 covered perils. Your condo association most likely has a separate policy to protect the condominium building itself and common areas

HO-7 Policy: Mobile Home Insurance

An HO-7 form protects the personal property and the physical structure of mobile and manufactured homes. You can think of this policy form as a modified version of an HO-2 policy. Double-check with your insurance agent, as covered loss may be different from a standard HO-2 policy

HO-8 Policy: Protection on Older Homes

If you own an older home (think 50 years and older), you probably require an HO-8 policy form. An HO-8 covers up to 10 perils. But the reimbursement for covered damage is paid out on actual cash value instead of the replacement cost. It’s pretty common to carry this type of policy if you own a historic home or registered landmark. 

What Should Homeowners Insurance Cover?

Different types of homeowners insurance cover different threats. Make sure your most cherished items are properly covered.

Property and Personal Belongings

When you have the proper coverage on your property and personal items, you pay less out of pocket if there’s a covered peril. 

You and Your Family

Liability protection protects you and your household members from lawsuits on your property. You should have enough protection for lawyer fees and medical payments if anything happens. 

Mortgage Lender Requirements

Your lender will likely require you to have home insurance coverage for the mortgage amount on your home. Or they might require it to be the replacement cost of your dwelling. Make sure you read your lender‘s fine print to ensure you have enough coverage. 

Policy Requirements 

Some insurers impose coverage requirements for replacement costs. A quality plan requires policy limits at 100 percent of the replacement cost, but standard insurance may require policy limits of only 80 percent of the replacement cost

It never hurts to have the right coverage, but being with the best insurance company is best. Use Insurify to help you find the best coverage at the right price now!

Frequently Asked Questions - Types of Home Insurance Coverage

What is a broad form home insurance policy?

A broad form insurance policy is the same thing as an HO-2. This policy covers the property's loss and damage from perils specifically listed in a policy. It covers events like vandalism, theft, and falling objects.

What type of coverage do I need for home insurance?

The type of coverage depends on the type of property you live in. If you rent, you should have renters insurance. If you own a condo, an HO-6 policy would be best. Always check with your local agent to be sure you have the right coverage.

What does a typical homeowners policy cover?

A typical homeowners insurance policy covers damage from fire, lightning, windstorms, and hail along with theft and vandalism. 

Conclusion: Finding the Best Type of Home Insurance Coverage

Everyone’s needs differ in life, and it’s the same with home insurance coverage. The property type and personal items you have will determine the best type of home insurance coverage for you. Now you know the difference, so you can go out and buy the right home insurance policy

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Updated October 20, 2020

Stephanie Shaykin is a seasoned writer and marketing professional with experience in real estate. With a true passion for brand storytelling and SEO, she breaks down the most complex copy into a pleasant experience for the reader. In her spare time, she enjoys creating art and cooking in her home base of Chicago, Illinois.