What are the different types of homeowners insurance policies?
There are eight different homeowners insurance policy types – or forms – and for good reason. The insurance needs of a single-family home are much different than the needs of a condo or rental unit. Policy forms help tailor coverage to fit those homes.
These are the eight types of home insurance policies:
Let’s look at each one in more detail.
In today’s world, the HO1 policy is rarely used because its coverage is so limited, It only covers damage to your home from 10 named perils and insures your home at its actual cash value. That means your home is only covered for its depreciated value, not what it would actually cost to rebuild it today.
For example, it may cost $120,000 to rebuild your home given today’s cost of labor and materials. But if your home’s actual cash value is only $90,000, you’d need to come up with the $30,000 difference to rebuild.
HO1 covers damage to your home from 10 named perils:
- Fire or lightning
- Windstorm or hail
- Explosion
- Aircraft
- Riot or civil commotion
- Smoke
- Vehicles
- Vandalism
- Theft
- Falling objects
This policy doesn’t cover your belongings, other structures, personal liability, loss of use, or medical payments. It only covers your dwelling. Homeowners may opt for this policy if their home doesn’t qualify for a higher level of coverage or if the home is usually vacant.
An HO2 policy is an upgrade from the HO1. It covers the home for its replacement cost and your belongings for their actual cash value. It protects your home and the things in it against 16 named perils:
- Fire or lightning
- Windstorm or hail
- Explosion
- Aircraft
- Riot or civil commotion
- Smoke
- Vehicles
- Vandalism
- Theft
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or stream
- Freezing
- Volcanic eruption
- Sudden, accidental tearing apart, cracking, or burning or a built-in appliance such as a water heater or an oven
- Sudden and accidental damage from a generated electrical current
Unlike HO1, the HO2 form covers other structures, belongings, personal liability, loss of use, and medical payments coverage.
The HO3 policy is the most popular homeowners policy because it’s a good balance between robust coverage and affordable premiums. In fact, 79 percent of homeowners policies issued are HO3 policies, according to 2017 data from the National Association of Insurance Commissioners.
The Kin HO3 policy covers your belongings at their replacement cost against the 16 named perils in the HO2 form. With some HO3 policies, that replacement cost coverage for your belongings must be added on.
Your home gets far more coverage, too. The HO3 policy covers your home and other structures on an all-risk basis. That means it covers all sources of loss or damage except those the policy lists as exclusions, usually:
- Ordinance or law
- Earth movement
- Backup of sewer or drain
- Power failure
- Neglect
- War
- Nuclear hazard
- Intentional loss
- Government action
- Theft to a dwelling under construction
- Vandalism from vacancy of 60 days or more
- Mold, fungus, or rot
- Wear and tear
- Mechanical breakdown
- Smog, rust, or corrosion
- Smoke from industrial operations or agricultural smudging
- Discharge, dispersal, or seepage of pollutants
- Settling, shrinking, bulging, or expanding of structure such as foundation
- Birds, vermin, rodents, insects
- Animals owned by insured
It also covers loss of use, personal liability, and medical payments.
HO-4 contents broad form
An HO4 policy, also called renters insurance, covers only belongings and personal liability. It can be purchased for any type of property (condo, single-family, apartment) if it’s leased.
Unlike other home insurance policies, HO4 doesn’t cover your dwelling or other buildings on the premises. That’s because it’s up to your landlord to insure these structures.
Belongings are typically protected against 16 named perils:
- Fire or lightning
- Windstorm or hail
- Explosion
- Riot or civil commotion
- Aircraft
- Vehicles
- Smoke
- Vandalism
- Theft
- Volcanic eruption
- Falling object
- Weight of ice, snow, or sleet
- Accidental water overflow or steam
- Sudden and accidental tearing apart, cracking, burning, or bulging of certain household systems
- Freezing
- Sudden and accidental damage from artificially generated electrical current
Most renters policies cover your belongings anywhere in the world. It also offers personal liability, loss of use, and medical payments coverage.
The HO5 policy is usually for high-value properties in high-risk areas. As the name suggests, this policy offers comprehensive coverage similar to our HO3. Both policies cover the home, other structures, and belongings at their replacement cost. But there are some key differences:
- HO5s offers all-risk coverage for your home and belongings. Remember, HO3 defaults to named-perils coverage for belongings.
- The HO-5 policy usually offers higher coverage limits for expensive belongings like electronics, jewelry, and furs.
For most homeowners, the extra coverage is not worth the extra premium when the HO3 covers similar losses.
Also called condo insurance, the HO6 policy covers a condo unit owner’s interior, belongings, loss of use, personal liability, and medical payments. The HO6 policy complements the HOA’s master insurance policy, which typically covers the exterior of the condo and shared property (like terraces, pools, hallways, etc.). Condo insurance covers the part of the unit that the owner is responsible for – the walls, ceiling, floors, and fixtures.
Because the condo insurance policy works with the master policy, it also includes loss assessment coverage. This kicks in when you’re responsible for helping cover damage or repairs to shared property. For example, if your condo association files a claim on the master policy, unit owners may need to chip in to cover the deductible. Loss assessment coverage can help cover that unexpected cost.
The HO7 policy is for mobile homes, including single-wide, double-wide, or triple-wide mobile or manufactured homes. It’s also referred to as an MH3 policy because it’s like the HO3 policy for homeowners but designed to protect the unique characteristics of a mobile home.
The policy covers the mobile home itself, other structures on the property (like fences or sheds), belongings, personal liability, and loss of use, and medical payments.
The HO8 policy is the go-to policy for older, high-risk homes. These homes may have a difficult time getting other coverage because they may not meet underwriting requirements. For example, these homes may have outdated electrical wiring, which can be a fire risk. For that reason, their replacement cost may outweigh the home’s value.
An HO8 policy may be a good fit your home is:
- Older, especially more than 40 years old.
- A registered landmark.
- An architecturally significant home.
- Constructed of hard-to-replace materials.
The HO8 covers the home for its actual cash value against 10 named perils like the HO1:
- Fire or lightning
- Windstorm or hail
- Explosion
- Aircraft
- Riot or civil commotion
- Smoke
- Vehicles
- Vandalism
- Theft
- Falling objects
Unlike the HO1, it also covers other structures, belongings, loss of use, personal liability, and medical payments.
