HO-2 Policy

Sometimes called the broad form, an HO-2 policy can cover your home and personal property against 10 named perils.

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What Is an HO-2 Form?

An HO-2 policy is a type of home insurance that is written on a named-perils basis. This means it only covers damage to your property that’s caused by one of the perils listed on the policy. Some HO-2 policies also cover your personal property and liability.

What Do Homeowners Need to Know about HO-2 Policies?

Most homeowners policies are written on standardized forms.These forms make it easier for states to regulate insurance. HO-2 is simply one of those forms.

HO-2 is sometimes called the broad form. This is because it covers the same 10 perils, or events, as HO-1 plus a few extra. In total, an HO-2 policy covers these 16 perils:

  • Fire or lightning
  • Hail or windstorms
  • Explosions
  • Riots or civil commotion
  • Damage from aircrafts
  • Damage from vehicles
  • Smoke
  • Malicious mischief or vandalism
  • Theft
  • Volcanic eruptions
  • Falling objects
  • Weight of ice, snow, or sleet
  • Accidental discharge of water or steam
  • Sudden and accidental tearing apart, cracking, burning, or bulging of pipes and other household systems
  • Freezing of household systems
  • Sudden and accidental damage from artificially generated electrical current

Because HO-2 is a named-perils policy, it only pays for damage caused by one of these events. If anything else causes the damage, you must pay for the repairs.

However, HO-2 usually includes personal property and personal liability coverage. For example, let’s say you experience a kitchen fire. Your HO-2 policy may help pay for repairs to the structure of your house and cover the cost of damaged appliances and other personal belongings. And if the fire damages your neighbor's home, your HO-2 policy may help cover their repairs or medical bills.

While HO-2 does offer broader coverage than HO-1, it still excludes some common risks you may face. For instance, HO-2 includes sudden and accidental discharge of water and steam but usually omits sewer backup and slow leaks.

HO-2 also excludes coverage for:

  • Floods
  • Earthquakes

Homeowners who face these risks may want to consider additional insurance.

Finally, you can get an HO-2 policy that insures your property’s  replacement cost or actual cash value (ACV). Replacement cost coverage pays the cost of replacing or repairing your home minus your deductible. Actual cash value coverage means your insurer considers depreciation when it settles your claim. With ACV, your settlement may not be enough to replace your property.

Is an HO-2 Policy Enough Insurance for My Home?

HO-2 insurance is considered a middle-of-the-road policy. It offers more protection than an HO-1 policy, but HO-3 and HO-5 offer even more. However, an HO-2 policy can still be the right for you. Here are three questions to think about before you decide:

  • Is my home likely to suffer other kinds of damage? The 16 perils covered by HO-2 represent some of the more common risks homeowners face. But the list leaves out other risks that can cause significant damage, like sewer backup, foundation leaks, and power failures.
  • What does my mortgage lender require? Most lenders require insurance for structures and real estate. An HO-2 policy usually satisfies this requirement while also adding coverage for your liability and personal property.
  • How much premium can I afford to pay? More protection almost always costs more money, so you need to consider your finances before you decide to upgrade. Take some time to comparison shop to see if you can find a better deal.

Getting the appropriate insurance for your home means striking a balance between your risks and your budget. Do your research and compare your options before you buy.

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