What Is an HO-4 Insurance Policy

An HO-4 policy is a type of homeowners insurance that provides property, liability and additional living expense coverage for renters. Although it is not a legal requirement, renters are often required by their landlords to purchase this kind of coverage.

Keep reading to learn more about renters insurance including what it covers and how much you should consider buying to protect your belongings and assets.

Key Takeaways Renters insurance typically includes personal property, loss of use, personal liability and medical payments coverage but doesn’t include dwelling or other structures coverage. Most HO-4 policies insure your belongings at their actual cash value but you should be able to receive replacement cost value coverage by paying a higher premium. The average renters insurance policy cost a little over $14 per month in 2020. You aren’t required by law to purchase renters insurance but it is often required by landlords.

How Does an HO-4 Insurance Policy Work?

HO-4 insurance is another name for renters insurance, which can provide a financial safety net for people who rent houses, apartments and condos in case their home or belongings are damaged by a sudden peril or they are held responsible for another person’s injury or damage to their property.

Most HO-4 policies insure your belongings at their actual cash value (ACV). This means that, after a covered loss, your insurance company will pay you the market value of your lost possessions after taking depreciation factors like age or wear and tear into account.

However, if you are willing to pay a 10% higher premium, you can instead insure your property at its replacement cost value (RCV), which is the amount it would take to replace your lost items with similar ones.^[1] Keep in mind that claims related to damaged belongings will require an upfront payment of a set amount of money known as a deductible.

What Does an HO-4 Policy Cover?

Renters insurance provides similar coverage to other types of homeowners insurance, although there are only four components of a typical HO-4 insurance policy: personal property, loss of use, personal liability and medical payments coverage.

Personal Property Coverage

Personal property insurance can pay to repair or replace your personal possessions like furniture, clothing, electronics and more if they are damaged by a covered peril. Renters coverage generally insures your belongings against the following 16 perils.

Fire or lightning	Vandalism or malicious mischief
Windstorm or hail	Theft
Explosion	Volcanic eruption
Riot or civil commotion	Falling objects
Damage by aircraft	Weight of ice, sleet or snow
Damage by vehicle	Freezing of home systems
Smoke	Sudden/accidental power surges
Sudden/accidental tearing, cracking, burning or bulging of home systems	Water/steam discharge from home systems and appliances

HO-4 policies typically include off-premises coverage, meaning your belongings are insured even when they are outside of your home. However, your off-premises coverage limit may be set at 10% of your overall personal property coverage limit.^[1] Your policy may also come with sublimits that apply to high-value items like jewelry, furs, firearms and more.^[2]

Some companies sell additional coverage options to further protect your belongings. For example, State Farm offers inflation coverage that automatically raises your personal property coverage limits to match the rate of inflation.^[2]

Loss of Use Coverage

Loss of use coverage can take care of additional living expenses that arise if you need to temporarily move after a covered peril leaves your home uninhabitable or if you are otherwise unable to return to your home. This can include coverage for expenses like restaurant meals, hotel stays, laundromat costs and more.

If your home becomes uninhabitable, your insurance provider will only cover costs that are above your normal living expenses. For example, if you normally spend $1,500 per month on rent but end up paying $2,000 to stay at a motel for one month, your insurance company will only pay the excess $500.

You should keep in mind that insurance carriers typically don’t pay for additional living expenses up front. Instead, you will have to pay for these expenses out of pocket and then submit receipts to your insurer, after which you may be reimbursed.

Personal Liability Coverage

Personal liability insurance can cover hospital bills, treatment costs and other medical expenses if someone is injured on your property and pay for repairs or replacements if you are held responsible for damaging someone else’s property. In addition, it can cover legal expenses if you are sued over a bodily injury or property damage claim.

For example, your personal liability coverage might kick in if a poorly-secured picture frame falls from your wall and gives one of your guests a concussion or if you let your dog off of its leash and it tramples your neighbor’s vegetable garden.

Medical Payments Coverage

Medical payments coverage similarly covers medical expenses if someone is injured on your property, although this coverage type can apply even if you are not held liable for the injury. However, medical payments coverage generally comes with a lower limit than personal liability coverage and doesn’t cover legal expenses, so it is generally used as a deterrent to prevent a minor bodily injury claim from escalating into a costly lawsuit.

What Isn’t Covered by HO-4 Insurance?

Your HO-4 insurance policy won’t cover anything that should instead be covered by a separate insurance policy or that is normally excluded from homeowners insurance coverage. See below for an overview of some of the most common exclusions renters ought to keep in mind.

• Buildings and other structures: Unlike a typical homeowners insurance policy, renters insurance does not include dwelling coverage or other structures coverage. This is because the physical structure of your home and other structures on the property you rent like sheds and fences should instead be covered by your landlord’s insurance policy.
• Your roommates: While you may be able to add a roommate to your policy in some cases, it’s generally recommended that roommates maintain separate HO-4 policies to cover their own belongings and liability risks.
• Floods and earthquakes: Renters insurance provides coverage for most kinds of natural disasters but floods and earthquakes are the most notable exceptions. As a result, you will need to buy flood insurance and earthquake insurance to protect your personal property from these perils.
• Gradual damage: The main purpose of insurance is to protect you from financial losses due to sudden and accidental perils, meaning your insurer won’t cover more gradual sources of damage like neglect, wear and tear, infestation or mold.
• Dog bites: Your personal liability insurance will generally cover claims related to dog bites but your policy could exclude coverage for dog breeds that have a reputation for being aggressive such as rottweilers and mastiffs.
• Your medical expenses: While a renters policy can cover your guests’ medical bills, it won’t cover yours or your housemates’. You will need to rely on your health insurance for coverage.

How Much Does an HO-4 Policy Cost?

American renters paid $173 per year on average for HO-4 policies in 2020.^[3] Exact prices will vary from person to person based on factors like the insurance company you buy coverage from, the coverage limits and deductible you choose, where you live and whether you are eligible for any discounts.

Do I Need an HO-4 Policy?

Renters insurance is not required by law in any state. That said, it’s likely that your landlord will require you to buy an HO-4 policy before allowing you to rent their property.

Even if it’s not required of you, purchasing renters insurance is still a wise investment to protect yourself in case a sudden peril causes significant damage to your property or you are sued because of an unexpected liability concern.

How Much Renters Insurance Do I Need?

You will likely want to maintain enough personal property insurance to replace all of your important belongings in case they are destroyed in a large destructive peril like a house fire. If you want to get as precise an estimate of the value of your belongings as possible to help you decide how much personal property coverage to purchase, you could create a home inventory that documents all of your most valuable items, when you bought them and how much you paid for them.

The loss of use coverage limit for an HO-4 policy may be set at a flat amount or it may be based on your personal property coverage limit. For example, Lemonade usually sets the loss of use coverage limit for renters policies at 30% of the personal property coverage limit but policyholders have the option to raise the limit as high as $200,000.^[4]

HO-4 policies generally come with at least $100,000 worth of personal liability coverage, although it’s recommended that you raise your limit to at least $300,000. Meanwhile, you can typically purchase between $1,000 and $5,000 worth of medical payments coverage.^[1]

How Do I Get an HO-4 Policy?

You should obtain quotes from at least three to five renters insurance companies so you can compare rates and see which company can offer you the best deal. Unfortunately, it can be burdensome to individually reach out to insurers to provide them with information like your address, the number of people living in your home and the approximate value of your belongings.

However, you can make the process easier by using an insurance marketplace like SmartFinancial. We can collect information about your coverage needs and budget through a simple online questionnaire and then share that information with insurance agents in your area. To get started, enter your zip code below and we’ll help you get a free renters insurance quote.