Types of Homeowners Insurance Policies

Eight different policy forms are available to protect every kind of home.

Wendy Connick
Written byWendy Connick
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Wendy ConnickInsurance Writer

Wendy Connick is the founder and owner of Connick Financial Solutions, a provider of tax and bookkeeping services and a QuickBooks Online Certified ProAdvisor. A long-time freelance writer, she specializes in business and finance articles on subjects including taxes, investing, and retirement. Wendy is an Enrolled Agent (EA), the only federally licensed tax practitioners who specialize in taxation and have unlimited rights to represent taxpayers before the IRS. She is a member of the National Association of Enrolled Agents and a certified volunteer for VITA (Volunteer Income Tax Assistance), an IRS-sponsored program to provide free tax help for low-income individuals and families.

Chris Schafer
Edited byChris Schafer
Chris Schafer
Chris SchaferSenior Editor
  • 15+ years in content creation

  • 7+ years in business and financial services content

Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.

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Updated November 13, 2023

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Your homeowners insurance policy can protect your home and its contents in case of disaster. However, no homeowners policy protects you against every possible threat.

It’s important to understand how your particular policy works and what it covers so that you can be sure you’re getting the protection you need.

Quick Facts
  • Replacement cost insurance types include actual cash value, replacement cost value, and guaranteed (or extended) replacement cost.

  • Special Form (HO-3) is the most commonly used of the eight different types of home insurance available.

  • The 80% rule states you should carry replacement cost coverage equal to 80% of the total replacement value of your home.

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8 types of homeowners insurance forms

Nearly every type of insurance policy that protects your living space will fall into one of these eight classifications.

Basic Form (HO-1)

The simplest and least comprehensive type of homeowners insurance provides coverage for only a handful of potential problems:

  • Fire and smoke

  • Explosions

  • Lightning

  • Hail and/or windstorms

  • Theft

  • Vandalism

  • Damage from vehicles

  • Damage from aircraft

  • Riots and civil commotion

  • Volcanic eruption

HO-1 insurance policies usually only provide dwelling protection. Some insurance companies may allow you to add personal property coverage at an additional cost. Most mortgage lenders don’t consider this type of policy to be adequate coverage, so if you’ve financed your home, an HO-1 policy is likely not an option.

Broad Form (HO-2)

A broad form homeowners insurance policy will cover all the dangers included in basic form coverage, plus:

  • Falling objects

  • Weight of ice, snow, or sleet

  • Freezing of household systems, including HVAC systems

  • Sudden and accidental damage to pipes and other household systems

  • Accidental discharge or overflow of water or steam

  • Sudden and accidental damage from artificially generated electrical current

HO-2 policies typically cover both dwelling protection and personal property. In some cases, they may also include personal liability coverage. However, they still only cover the specific damages listed in the policy. For example, these policies cover water damage from steam, but not from floods.

Special Form (HO-3)

Special form policies are the most common type of homeowners insurance. HO-1 and HO-2 policies are examples of “named perils policies.” That means they only cover dangers that are specifically listed in the policy. HO-3 policies are “open peril policies.” That means they’ll cover all dangers except those specifically excluded in the policy documents.

Most HO-3 policies exclude the following types of damage:

Exclusions can vary depending on whether the insurer believes your home is at high risk for certain types of damage. For example, HO-3 policies on homes in areas at high risk of wildfires will often have a fire damage exclusion.

HO-3 policies typically include dwelling protection coverage, other structures coverage, personal property coverage, and liability coverage — many will also include loss of use coverage. However, the personal property coverage is usually limited to a narrower range of perils than the dwelling protection coverage.

Tenant’s Form (HO-4)

HO-4 policies, more commonly known as renters insurance, are for people who rent rather than own their homes. Renters insurance policies typically cover all the same dangers as HO-2 policies. These policies include personal property coverage and liability coverage but don’t cover the physical structure of the house. Some HO-4 policies may also include loss of use coverage for the tenant.

Comprehensive Form (HO-5)

Comprehensive form policies are usually the broadest and provide the highest level of coverage; not surprisingly, they also tend to be the most expensive type of homeowners insurance policies.

The biggest difference between HO-3 and HO-5 policies is that most HO-3 policies are “actual cash value” policies, whereas typically HO-5 policies are typically “replacement cost value” policies. An actual cash value policy will only reimburse you for the actual value of a damaged or destroyed item, while a replacement cost value policy will reimburse you for however much it would cost to completely replace or repair the damaged or destroyed item (up to the coverage limits on the policy).

HO-5 policies also provide personal property coverage against a wider range of dangers than the typical HO-3 policy. Many HO-5 policies also have extra coverage for high-value personal property, such as jewelry and artwork.

Condo Form (HO-6)

Not surprisingly, condo form insurance is for condominium owners. HO-6 policies generally protect against the same types of dangers as HO-3 policies. They provide dwelling protection coverage with a twist: HO-6 policies cover the walls, floors, and ceiling of the condo unit but not the rest of the building. These policies also include personal property and liability coverage and may include loss of use coverage.

HO-6 policies also apply to other types of co-op living. Generally, a condo association or HOA will cover property damage in common areas but will also require unit owners to hold condo insurance for their units.

Mobile Home Form (HO-7)

If you own a mobile home or manufactured home, you likely have an HO-7 policy. Mobile home form policies are typically identical to HO-3 policies, except they’re designed specifically for mobile and manufactured homes. Like HO-3 policies, they provide dwelling protection coverage, other structures coverage, personal property coverage, liability coverage, and possibly loss of use coverage as well.

HO-7 policies generally only protect the home when it’s stationary; if you plan to move your mobile or manufactured home, you’ll need to get a special policy to cover it while it’s in transit. It’s important to remember that mobile home insurance and insurance for RVs are different, so make sure you’ve selected the right category.

Older Home Form (HO-8)

Older homes have generally been built to less stringent code standards than recently built homes, so insurers have designed a specialized type of homeowners insurance policy for them. HO-8 policies often only cover the basic perils listed in HO-1 policies and generally apply to homes that are registered landmarks or otherwise deemed historic homes.

Owners of registered landmarks are typically forbidden from updating HVAC, electrical, and other parts of the home to enable them to qualify for a standard HO-3 policy, so an HO-8 policy is often the only option for them.

Homeowners insurance coverage categories

A homeowners insurance policy may include as many as five different coverage categories. The basic coverages for homeowners insurance are:

  • Dwelling protection: This protects the physical structure of your home. Your policy covers financial protection for damage to your home.

  • Other structures: This protects structures on your property that aren’t directly attached to your house, such as fences and sheds.

  • Personal property: This protects the personal belongings inside your home. Basically, anything inside the house but not attached to it is considered personal property.

  • Loss of use: If you can’t live in your home temporarily because it’s been damaged, this type of coverage will reimburse you for some or all of your relocation expenses (such as hotels and restaurants). These generally fall into a category known as “additional living expenses.”

  • Personal liability: If someone sues you because of damage or injury they suffered on your property, this coverage may help with related expenses. Personal liability might also cover the medical payments of someone injured on your property.

Each of the eight different types of homeowners insurance policy forms provides different types of coverage within these five basic categories.

Replacement cost levels

When it comes to replacement cost insurance, the level of coverage you choose affects the amount of compensation you receive. You’ll generally have the opportunity to choose from the following three options:

  • Actual cash value: Actual cash value reimburses you for losses based on the current value of the home or items, including depreciated value.

  • Replacement cost value: Replacement cost coverage pays for the total replacement cost of your home and belongings in the event of damage or destruction. It doesn’t consider depreciation.

  • Guaranteed (or extended) replacement cost: A tier above replacement cost coverage, guaranteed replacement cost insurance may pay you the full cost of replacing your house and belongings after a covered event, even if the amount is above your policy limits.

Open perils vs. named perils

The way your home insurance policy covers different perils can vary dramatically. Home insurance policies use either an open or named peril policy.

An open peril policy will cover damage to your home caused by any peril except those specifically outlined as excluded in the policy. Flooding, for example, is commonly excluded from home insurance policies.

A named peril policy covers only damages sustained from perils specifically listed in the policy.

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Additional coverage options for homeowners

Standard home insurance coverage won’t protect you from every peril. Fortunately, you can purchase additional optional coverage through riders, including the ones below.

Flood insurance

Flooding is the nation’s single most common disaster, and 90% of all disasters include flooding. However, if you want to protect your home from flood damage, you’ll need to purchase separate flood insurance.

Until recently, the National Flood Insurance Program (NFIP) through FEMA — the Federal Emergency Management Agency — was the only source of flood insurance coverage. It’s now possible to buy comparable flood insurance coverage from private insurance companies in a few states.

Earthquake coverage

Earthquakes aren’t covered under standard home insurance policies. Fortunately, you may buy earthquake coverage from private insurance companies, either as a separate plan or as an endorsement to your homeowners insurance policy.

If an earthquake damages your home or belongings, you can file a claim with this coverage. You may need to pay a deductible, which is the out-of-pocket cost you’ll pay before coverage kicks in.

Depending on what’s included, your policy may also pay for temporary housing if the earthquake damage to your home forces you to relocate.

Umbrella coverage

Umbrella insurance is extra personal liability coverage that you can add to your homeowners insurance policy. It covers liability claims for injury or property damage to others. The umbrella liability policy doesn’t offer coverage for you or your household members for bodily injury or damage to personal property. However, it does provide a safety net if the costs associated with an incident go beyond your standard liability coverage.

Sewer backup/pipe coverage

Sewer backup insurance helps cover the cost of damage caused by the backup, protecting you up to your policy limit. You’ll set this limit when you buy the insurance. This coverage can pay to remove excess water from your home, repair damaged structures (like wood and drywall), and replace personal property. This insurance also includes loss of use coverage, so if you have to stay somewhere else because of the damage, your living expenses will be covered.

Medical payments coverage

This coverage is part of many home insurance policies but can be a good rider to have if your policy doesn’t include it. Medical payments coverage pays for expenses related to injuries guests may suffer while on your property, regardless of fault. Most policies provide $1,000 to $5,000 of coverage, but you may be able to adjust the limits to meet your needs.

How to choose a homeowners insurance policy

Several options are available when it comes to homeowners insurance. Consider the following factors as you compare different homeowners insurance policies:

  • Location: Your home’s location affects your insurance needs. For instance, if you live in a climate with cold weather, you’ll certainly want a policy that covers damage from freezing and snow.

  • The condition of the property: The home inspection process can give you a good idea of which parts of your home might be older and at a higher risk for damage. For instance, a house with an older frame might need robust coverage for wind damage.

  • The property’s claims history: After you buy a home, ask the seller for a CLUE or A-PLUS Report, which outlines the home’s claims history. Understanding the home’s past claims can help you better understand what kind of policy you need.

  • Price: Once you know the type of policy you need, it’s time to compare prices. Comparing prices of similar policies from a wide array of insurance companies helps you get the best value. You might even find that a certain company offers a discount you qualify for.

  • Company reviews: Before you commit to a company, you should read some reviews from customers. Make sure you’re working with a company with robust knowledge about your area, trustworthiness, and responsiveness.

Learn More: Homeowners Insurance Companies with the Cheapest Rates

Learn More: Homeowners Insurance Companies with the Cheapest Rates

How to compare home insurance rates

Comparing home insurance rates from a wide range of insurers can help you find the best value. Start with an idea of your coverage needs and budget. Then employ an online comparison tool to compare insurers against one another and against your needs.

Then, go deeper with your search, toggling between different coverage options and comparing discounts from different companies. In just a few clicks, you can find the best coverage option for your home.

See Also: 10 Best & Worst Sites to Compare Home Insurance Quotes

See Also: 10 Best & Worst Sites to Compare Home Insurance Quotes

What factors influence homeowners insurance rates?

Where you live affects how much you pay for homeowners insurance. For instance, if you live in an area with high crime rates, you might pay more given the higher risk of theft or vandalism to your property.

Similarly, you may pay more if your home is far from a fire department, police department, or water supply source. Other factors that can influence your homeowners insurance rates include your home’s age and construction type (such as a brick versus a frame house).

Additionally, how much coverage you buy will affect your rates. If you buy a more robust coverage package, you’ll end up paying more. You can offset this high price by increasing your deductible to reduce your monthly premiums.

Many insurance companies offer discounts for certain homes. For instance, homes with safety features like alarm systems can qualify you for lower premiums. You can also bundle your car insurance and homeowners insurance with the same company to unlock savings.

What are the common perils of home insurance?

No one wants to think about the unexpected incidents that can damage a home, but you should still be aware of some of the common causes of property damage. The top five reasons for claims include the following, according to a recent study by the Insurance Information Institute:

  • Wind and hail: 45.5% of property damage claims

  • Fire and lighting: 23.8% of property damage claims

  • Water damage and freezing: 19.9% of property damage claims

  • Theft: 0.6% of property damage claims

  • Other, including vandalism and mischief: 7.9% of property damage claims

Though fire and lightning damage is uncommon, it still comes with some of the highest expenses. The average claim severity for fire damage was more than $77,000 (from 2016 to 2020), compared to $11,695 for wind and hail damage across the same period.

Broad form and comprehensive policies will cover you against most of these common perils. For water damage — which accounted for only 1.6% of filed claims between 2016 and 2020 — you should consider buying flood insurance.

Check Out: The 5 Best Home Warranty Companies

Check Out: The 5 Best Home Warranty Companies

Types of homeowners insurance FAQs

Looking to learn more about the different kinds of homeowners insurance? The answers below can help.

  • What is the most common home insurance coverage?

    Special form homeowners insurance (HO-3) is the most common type of homeowners insurance policy. In 2020, HO-3 policies comprised 78% of all written home insurance policies.

  • What is the 80% rule in homeowners insurance?

    The 80% rule states you should carry replacement cost coverage equal to 80% of the total replacement value of your home. This rule protects you by allowing you to rebuild your home in the event of a disaster without suffering total financial hardship.

  • What’s the difference between HO-3 and HO-5 insurance?

    While similar, HO-5 insurance is more comprehensive than an HO-3 policy. An HO-5 covers your home and personal property against all perils except those excluded in the policy. Meanwhile, an HO-3 policy covers your personal property against only the perils specifically outlined in the policy, while giving you all perils coverage for your home.

  • What’s the difference between HO-3 and HO-6 insurance?

    An HO-3 policy is designed for people who own houses, while an HO-6 policy is designed for people who own condos or co-ops.

Wendy Connick
Wendy ConnickInsurance Writer

Wendy Connick is the founder and owner of Connick Financial Solutions, a provider of tax and bookkeeping services and a QuickBooks Online Certified ProAdvisor. A long-time freelance writer, she specializes in business and finance articles on subjects including taxes, investing, and retirement. Wendy is an Enrolled Agent (EA), the only federally licensed tax practitioners who specialize in taxation and have unlimited rights to represent taxpayers before the IRS. She is a member of the National Association of Enrolled Agents and a certified volunteer for VITA (Volunteer Income Tax Assistance), an IRS-sponsored program to provide free tax help for low-income individuals and families.

Chris Schafer
Edited byChris SchaferSenior Editor
Chris Schafer
Chris SchaferSenior Editor
  • 15+ years in content creation

  • 7+ years in business and financial services content

Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.

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