An HO2 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 HO2 policies also cover your personal property and liability.
Most homeowners insurance policies are written on standardized forms. These forms make it easier for states to regulate insurance. HO2 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 HO1 plus a few extra. In total, an HO-2 policy covers these 16 perils:
Because HO2 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.
HO2 usually includes personal property coverage and personal liability coverage, too. For example, let’s say you experience a kitchen fire. Your HO2 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 a fire originates in your house and spreads to your neighbor's home, your personal liability protection may help pay for repairs you're liable for.
While HO2 does offer broader coverage than HO1, it still excludes some common risks you may face. For instance, HO2 includes sudden and accidental discharge of water and steam but usually omits sewer backup and slow leaks.
HO-2 also excludes coverage for:
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.
HO2 insurance is considered a middle-of-the-road policy. It offers more protection than an HO1 policy, but HO3 and HO5 offer even more. However, an HO2 policy can still be the right for you. Here are three questions to think about before you decide:
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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