The Basic Forms of Homeowners Insurance Policies
Nearly every type of insurance policy that protects your living space will fall into one of these eight classifications.
The simplest and least comprehensive type of homeowners insurance provides coverage for only a handful of potential problems:
HO1 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 HO1 policy is likely not an option.
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
HO2 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 policies are the most common type of homeowners insurance. HO1 and HO2 policies are examples of “named perils policies.” That means they only cover dangers that are specifically listed in the policy. HO3 policies are “open peril policies”. That means they’ll cover all dangers except those specifically excluded in the policy documents.
Most HO3 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, HO3 policies on homes in areas at high risk of wildfires will often have a fire damage exclusion. HO3 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.
HO4 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 HO2 policies. These policies include personal property coverage and liability coverage, but don’t cover the physical structure of the house. Some HO4 policies may also include loss of use coverage for the tenant.
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 HO3 and HO5 policies is that most HO3 policies are “actual cash value” policies, whereas typically HO5 policies are “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). HO5 policies also provide personal property coverage against a wider range of dangers than the typical HO3 policy. Many HO5 policies also have extra coverage for high-value personal property such as jewelry and artwork.
Not surprisingly, condo form insurance is for condominium owners. HO6 policies generally protect against the same types of dangers as HO3 policies. They provide dwelling protection coverage with a twist: HO6 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.
HO6 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 (HO7)
If you own a mobile home or manufactured home, you likely have an HO7 policy. Mobile home form policies are typically identical to HO3 policies, except they’re designed specifically for mobile and manufactured homes. Like HO3 policies, they provide dwelling protection coverage, other structures coverage, personal property coverage, liability coverage, and possibly loss of use coverage as well.
HO7 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 homes have generally been built to less stringent code standards than recently built homes, and so insurers have designed a specialized type of homeowners insurance policy for them. HO8 policies often only cover the basic perils listed in HO1 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 HO3 policy, so an HO8 policy is often the only option for them.
