What Types of Homeowners Insurance Policies Are There?

Lucy Lazarony
June 3, 2020

When it is time to buy a home it is also time to insure it. Not sure what kind of homeowners policy to get? You’ve got plenty of choices. There are a number of different types of homeowners policies to choose from. So don’t worry, you’ll be able to find the best type homeowners insurance for your home.

There are four main types of homeowners insurance policies plus a policy for older homes and landmarks. Let’s take a look at each one.

First, here’s a quick snapshot of each homeowners insurance policy: HO-1 is a basic form. HO-2 is a broad form. HO-3 is a special form. HO-5 is a comprehensive form. And HO-8 is a special form for older homes.

HO-1 Policy Form

HO-1 is a named peril plan. So anything that happens outside of the listed perils is not covered by the policy. Perils that are covered by the policy usually include hail, lightning, explosions, fire, smoke, windstorms, vandalism, theft, damage from vehicles, damage from aircraft, riots, civil commotion and even volcanic eruption.

HO-1 policies give you the narrowest type of homeowners coverage and this policy type is no longer available in many states. As mentioned above, HO-1 only covers perils specifically listed in the policy. A HO-1 policy does not cover any personal belongings in the house. So those personal items would need to be replaced out of your own wallet if they should get damaged in a storm or other event.

HO-2 Policy Form

HO-2 is a broad kind of insurance product and covers perils listed in the policy just as HO-1 does. In addition to covering the home’s structure, HO-2 covers your personal belongings and some policies even cover personal liability.

HO-2 also covers all the perils covered in an HO-1 policy plus additional perils including water damage from an accidental overflow of plumbing and damage from falling objects. As with HO-1 policies, an HO-2 policy only covers perils specifically listed in the policy. If a peril or unfortunate event occurs and damages your home, and it is not listed in the policy, it will not be covered. And you will need to pay for any needed repairs all on your own.

HO-3 Policy Form

Unlike HO-1 and HO-2, an HO-3 policy is not a named peril policy. Instead it is a special kind of policy that lists a number of exclusions to its coverage. Other than these exclusions, all other events or perils that could damage your home are covered.

Examples of exclusions include earthquakes and floods and landslides and mudslides. Insurance companies sell separate coverage for these exclusions. So if you live in California you may wish to buy separate earthquake coverage. And if you live near a river you may wish to buy a separate flood coverage. An HO-3 policy covers the home’s structure and structures attached to a home such as a carport or a garage.

The HO-3 policies are the most popular because of their range of coverage. And they are sometimes called “extended” or “special” homeowners insurance policy forms.

HO-5 Policy Form

HO-5 policy forms are similar to HO-3 policy forms in that they cover almost every peril except for a few exclusions. However, HO-5 is more comprehensive than HO-3 and it covers your home from almost every peril except for some exclusions. In fact, HO-5 is the most comprehensive kind of homeowners insurance that you can buy. A HO-5 policy covers anything that is not a written exclusion in the policy. Because of the depth of HO-5 coverage, it tends to be more expensive.

An HO-5 policy offers coverage for the home’s structure and for personal belongings. And after a claim is filed, a HO-5 policy pays the replacement cost of the covered item. An HO-5 policy has higher limits of coverage for valuables such as jewelry.

HO-8 Policy Form

Homeowners with older homes may be interested in an HO-8 policy form. This policy form is designed for older houses that have a replacement value greater than the actual cash value of the home. The materials needed to repair older homes are often more expensive than the home’s value.

A HO-8 policy form is also often used to insure registered landmarks and other significant historical structures.

In the event of the loss of a home, the payout on an HO-8 home would be smaller than the replacement cost. Because of the small payouts, HO-8 policy forms tend to be affordable.

Homes insured with a HO-8 policy form are greater than 40 years old and these homes would not qualify for HO-3 coverage.

Choosing Coverage That Is Right for You

Wondering what homeowners insurance coverage is right for you? Let’s start by looking at the dwelling coverage. This coverage provides protection for the structure of your home and includes a home’s floors, walls, built-in appliances and ceilings plus any attached structures such as a garage. How are these items covered in the homeowners policy? Which of the policy forms meets your dwelling needs the best and also meets your budget?

Next up is checking out a policy’s content coverage. Content coverage includes furniture and clothing and other items inside your home. How would you receive funds for damaged items inside your home? It is best to research all of this in advance so you will know what will happen if items of your home should become damaged.

What about personal liability? Does a homeowners policy cover personal liability as well? Personal liability is bodily injury damage coverage and this would cover costs if a guest on your property has an injury. There is also property damage coverage which takes effect should your property get damaged during an accident covered by your insurance policy. What policies cover these items and which don’t? Choose the policy with the level of protection you are seeking for your home.

Opt for additional coverages. Depending on where you live you may need to purchase additional coverage for your home. Do you live in a place known for flooding or where earthquakes occur? Then signing up for additional flood or earthquake coverage makes sense. These policies are separate from homeowners insurance and come with their own deductible.

Choose the policy with the right coverage for you and your budget. Consider your home’s dwelling and its contents, whether you need personal liability insurance and check out additional coverages for your home. Once you do, you are ready to choose a homeowner’s policy for your home sweet home.

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