Understanding the Types of Homeowners Insurance Policies

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Posted Jan 8, 2025

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Homeowners insurance is a crucial investment for anyone who owns a home. It protects your property and financial well-being in case of unexpected events like natural disasters, theft, or accidents.

There are several types of homeowners insurance policies to choose from, each with its own unique features and benefits.

One of the most common types is the HO-1 policy, which provides basic coverage for damages to the home's structure and personal property. This policy is often the least expensive option.

The HO-2 policy, on the other hand, offers more comprehensive coverage, including damage to personal property and additional living expenses in case you need to temporarily relocate.

Types of Homeowners Insurance

There are several types of homeowners insurance, each offering varying degrees of protection against unfortunate circumstances. Most homeowners policies of any type will not include coverage for earthquakes or flooding.

The most basic type of homeowners insurance is the HO-1, also known as the Basic Form policy. It protects your home and possessions at cash value, but only covers 10 named perils, including fire, theft, and vandalism.

Credit: youtube.com, Homeowners Insurance Exam: Policy Types Overview

The HO-2 policy, or Broad Form policy, offers more protection than the HO-1, covering personal property at cash value and a damaged or destroyed home at the cost to replace it. It also includes coverage for additional hazards such as freezing damage and damage caused by the weight of snow, ice, or sleet.

The HO-3 policy, or Special Form, is the most popular type of homeowners insurance policy for single-family homes. It protects against a large number of dangers to a family's home and possessions, covering homes at their replacement value and possessions at cash value.

Here's a brief summary of the different types of homeowners insurance:

TypeDescription
HO-1 (Basic Form)Protects home and possessions at cash value, covering 10 named perils.
HO-2 (Broad Form)Covers personal property at cash value and damaged or destroyed home at replacement cost, with additional hazard coverage.
HO-3 (Special Form)Protects against a large number of dangers to home and possessions, covering homes at replacement value and possessions at cash value.

These are the main types of homeowners insurance, each with its own set of features and benefits. Understanding the differences between them can help you choose the right policy for your needs.

Basic Coverage (Ho 1, Ho 1: Basic, Ho Basic)

The HO-1 policy is the most basic form of homeowners insurance, offering limited coverage for single-family homes. It only protects against 10 types of dangers, including lightning, fire, theft, and vandalism.

Credit: youtube.com, Homeowners Insurance 101 (Home Shopping 4/6)

This policy is often referred to as the "cash value" policy, meaning it only pays out the value of your home and possessions at the time of the loss, rather than their replacement value.

The HO-1 policy is not very popular, making up only 1.46% of policies for single-family homes in the US, according to the National Association of Insurance Commissioners (NAIC).

Here are the 10 perils that the HO-1 policy covers:

  • Fire (Smoke)
  • Explosions
  • Lightning
  • Hail (Windstorms)
  • Theft
  • Vandalism
  • Damage from Vehicles
  • Damage from Aircraft
  • Riots (Civil Commotion)
  • Volcanic Eruption

Broad Coverage (Ho 2, Ho 2: Broad, Ho Broad, HO2: Broad)

The HO-2 policy offers broad coverage for homeowners, including protection for their belongings and sometimes personal liability as well. This policy is a significantly better choice for most homeowners.

The HO-2 policy covers not only the home's structure but also personal property at cash value and damaged or destroyed homes at the cost to replace them. This level of protection is a major upgrade from the HO-1 policy.

Some of the additional hazards covered by the HO-2 policy include freezing damage, damage caused by the weight of snow, ice, or sleet, and sudden, unforced damage to built-in appliances. These hazards are not typically covered by the HO-1 policy.

Credit: youtube.com, Everything You Need To Know About A HO-2 Policy

According to the NAIC, 5.37% of single-family homeowners insurance policies were HO-2 policies in 2017. This suggests that many homeowners are opting for the broader coverage of the HO-2 policy.

Here are some of the specific hazards covered by the HO-2 policy:

  • Freezing damage
  • Damage caused by the weight of snow, ice, or sleet
  • An overflowing stream or body of water
  • Sudden, unforced damage to a built-in appliance
  • Volcanic eruption
  • Damage caused by artificial electrical current

The HO-2 policy also covers accidental discharge or overflow of water or steam, falling objects, and sudden and accidental tearing apart, cracking, burning, or bulging of pipes and other household systems. This comprehensive coverage provides peace of mind for homeowners.

Special Coverage (Ho 3, HO3: Special, Ho 3: Special)

The HO-3 policy is a special form of homeowners insurance that covers a wide range of perils, including fire, lightning, windstorms, and hailstorms. It's considered an open-peril policy, which means that unless an insurer excludes a certain peril from the policy, it's covered.

This type of policy is designed to provide extensive coverage for the structure of your home and personal belongings. It's typically the most common type of homeowners insurance policy for single-family homes.

Credit: youtube.com, What is an HO-3 Policy?

The HO-3 policy covers the home and attached structures, such as the garage, at replacement value. It also provides coverage for personal liability and personal belongings. However, it's essential to note that this policy does not typically cover earthquakes and floods, although coverage may be obtained separately.

The HO-3 policy is generally defined by the perils it does not protect against. These exclusions often include earthquakes, power outages or failures, nuclear hazard, war, and more. It's crucial to understand what your policy does and does not cover before an accident or incident occurs.

Here are some of the typical exclusions found in an HO-3 policy:

  • Earthquakes
  • Power outages or failures
  • Nuclear hazard
  • War
  • Wet rot, mold, or fungus (exception: when it is caused by overflowing water from a stream, etc.)
  • Vandalism for property left vacant for 2+ months
  • Corrosion from smog or rust
  • Pollutant seepage, discharge, or disposal
  • Insect, bird, vermin, or rodent damage
  • Theft while the home is under construction
  • Neglect or wear and tear
  • Flooding, groundwater damage, or sewer backups
  • Mechanical failure
  • Parts of the home shifting, bulging, or changing shape (e.g., walls or foundation)
  • Animals under the insured party’s ownership
  • Agricultural or industrial smoke or operations
  • Government action
  • Law or ordinance
  • Intentional loss

In 2017, the NAIC reported that HO-3 policies comprised nearly four out of every five single-family home policies in the U.S. This highlights the popularity and widespread use of this type of policy.

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Comprehensive Coverage (Ho 5, HO 5: Comprehensive, HO4: Contents Broad (Renters), HO 5: Comprehensive)

Credit: youtube.com, HO5 vs HO3 explained by Karen Yates

An HO-5 policy is the most comprehensive type of homeowners insurance, providing open-peril coverage for the structure and personal belongings, except for certain named dangers.

This policy is often more expensive than HO-3 policies, but it offers greater peace of mind for homeowners concerned about extensive coverage. It's a good choice for homeowners with high-value property who live in an area of greater risk.

An HO-5 policy typically covers more perils than an average HO-3 policy, including personal liability, and has replacement cost to personal property and possessions as a standard. This means that if you need to replace an item, the insurance company will pay for the replacement cost, not just the actual value of the item.

The cost of an HO-5 policy is generally more than an HO-3 policy, and fewer homes are eligible for HO-5 policies.

An HO-4 policy, also known as renters insurance, covers the value of your possessions inside your rental property as well as elsewhere in the world. It also covers personal property at the cost to replace it and liability and housing expenses if you need to find temporary housing elsewhere due to damage.

Credit: youtube.com, Types of Home Insurance

Here are some key differences between HO-5 and HO-4 policies:

Policy TypeCovers
HO-5Structure and personal belongings, except for certain named dangers
HO-4Personal property and liability, but not the structure

An HO-5 policy is considered to be a more comprehensive coverage with superior protection, but it's also more expensive and may not be offered by as many insurers.

Condo and Unit Owners (Ho 6, Ho 6: Unit Owners, 6. Ho6)

Condo and unit owners have a unique insurance need, which is met by the HO-6 policy.

This type of policy is designed specifically for condo owners and provides financial protection for their belongings and personal liability.

Unlike HO-1 policies, HO-6 policies cover the interior structure of the unit, including walls, floors, and ceiling.

Routine wear and tear is not generally covered under an HO-6 policy, so you'll want to factor that into your maintenance budget.

An HO-6 policy may also cover your share of the expenses on common property loss, such as hallways and other shared areas.

You may hear the HO-6 policy referred to as "walls-in" coverage, which is a fitting description of its scope.

Credit: youtube.com, How Condo Insurance Works

The NAIC's 2017 findings show that HO-6 policies comprise 26.59% of condo policies, indicating their popularity among condo owners.

As a condo owner, you'll typically use your HO-6 policy to cover new upgrades to your unit, as well as your possessions, personal liability, loss assessment, medical bills, and loss of use coverage.

This type of coverage is quite variable, as different homeowners associations will provide different amounts of coverage.

Mobile Home (Ho 7, Ho 7, Mobile Home)

Mobile Home (HO-7, HO-7, Mobile Home) insurance is designed specifically for mobile or manufactured homes. The HO-7 policy is geared towards homes not covered by other types of insurance, such as those with substandard wiring or in disrepair.

The HO-7 policy covers manufactured homes, including RVs, trailers, single-wide mobile homes, double-wide mobile homes, and sectional homes. It's usually an open peril policy with similarities to HO-3 policies.

These policies generally include coverage for detached structures, personal property, and liability. But, what the HO-7 policy does and does not cover may vary in different states and with different insurers.

If you're unsure about your policy, speaking with Miami insurance law attorneys can help clarify what's covered and what's not. Separate policies are usually available for items not covered by the HO-7 policy.

Older Homes (8 Older Homes, Older Home, HO 8: Not specified)

Credit: youtube.com, What is an HO-8 Policy?

An HO-8 policy is the least common type, making up only 0.46% of single-family home policies.

This type of policy is designed to address specific concerns with coverage for older homes, like historic homes, registered landmarks, and vacant homes.

For homes over 40 years old, an HO-8 policy is generally the proper type of coverage, as the cost of materials to repair and replace damaged areas can be very expensive.

Homes with unique characteristics and potential rebuilding costs of historic or older properties are best suited for HO-8 policies.

These policies may have limitations on coverage amounts and may only cover the actual cash value of the home rather than the full replacement cost.

Modified Coverage

Modified coverage is a type of homeowners insurance that only covers the structure of your home against ten named dangers, including fire, lightning, and theft. It's the least common type of insurance policy, making up only 0.46% of single-family home policies.

Credit: youtube.com, Types of Homeowners Insurance Coverage Explained

This type of policy is not designed to provide replacement cost coverage, but rather covers only the cash value of the home. This means you won't be able to rebuild or repair your home to its original state if it's damaged or destroyed.

It's essential to note that this type of policy does not cover earthquakes or flooding, which are considered separate perils that require their own insurance policies.

Frequently Asked Questions

What are the 4 main coverages in a homeowners insurance policy?

A standard homeowners insurance policy typically includes four main coverages: Dwelling, Other Structures, Personal Property, and Loss of Use, which provide protection for your home, outbuildings, belongings, and temporary living expenses. Understanding these coverages can help you tailor your policy to your specific needs.

What insurance do you need on your house?

You'll need Homeowners Building Insurance to protect your home's structure against damage from fires, theft, and natural disasters like floods. This type of insurance provides financial security and peace of mind for homeowners.

Virgil Wuckert

Virgil Wuckert

Senior Writer

Virgil Wuckert is a seasoned writer with a keen eye for detail and a passion for storytelling. With a background in insurance and construction, he brings a unique perspective to his writing, tackling complex topics with clarity and precision. His articles have covered a range of categories, including insurance adjuster and roof damage assessment, where he has demonstrated his ability to break down complex concepts into accessible language.

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