A Basic Guide to Homeowners Insurance

Whether you’re a current or a future homeowner, it’s important to know some basic information about homeownersHomeowners Insurance insurance to ensure you have the proper coverage in the event you need it.

A “peril” is any type of event that causes damage to your home or belongings, such as a tornado or a fire. (Most policies do not include flooding). The perils covered by your insurance are stated in your homeowners insurance policy.

Add-ons or “endorsements” are offered as extra protection to policies which may be lacking. A few examples include: sewer backup, earthquake, or home business coverage.

The different types of homeowner insurance policies available are called “forms”. While you’re reviewing your current policy or shopping for a new one, make sure you understand exactly what is and is not covered.

Here are some general guidelines:

HO-1 Basic form

The HO-1 form is the most basic policy and provides coverage for only the following, basic perils:
Fire and smoke
Hail, windstorm, and lightning
Vehicles and aircraft
Civil commotion
Volcanic eruption

It is a policy often used for catastrophic loss only and is not available in some states.

HO-2 Broad form

HO-2 is a broader type of policy than the HO-1, which covers the same perils as HO-1 plus the following:
Falling objects
Weight of ice, snow, or sleet causing damage
Accidental discharge or overflow of water or steam
Sudden and accidental tearing apart, cracking, burning, or bulging
Freezing of plumbing, heating, A/C, sprinkler system, or appliance
Sudden and accidental damage from artificially generated electrical current

The HO-2 broad form only covers damage resulting from a named peril so any unnamed perils occurring outside those listed are not covered. Personal property may be listed at replacement or actual cash value. HO-2 generally excludes coverage for damage relating to water backup, foundation, or slow leaks.

HO-3 Special form

HO-3 is more comprehensive and is often referred to as an “all risk” policy because it includes “open, unnamed perils” and does not limit coverage to only named perils. HO-3 includes:
The dwelling and private structures connected to the dwelling
Unscheduled personal property on and away from the premises
Loss of use
Personal liability coverage and medical payments

HO-3 is probably the most common policy today. Its coverage applies to the home for open (unnamed) perils, but to the personal property for only named perils. Coverage is additionally excluded for the following:
Ordinance of law
Earth movement
Governmental action
Nuclear hazard
Power failure
War or military action
Water (flood)
Inherent defects

HO-4 Tenant’s form
Also referred to as “renter’s insurance”, the HO-4 policy is for tenants and can be written as either an actual cash value or replacement cost policy. It includes coverage for personal property- but not for the dwelling itself. Actual cash value policies use a method of depreciation which means you will only be reimbursed in a claim for the value of the item when it was purchased- not for the cost to replace it.

Most renter’s insurance policies include an amount of liability coverage for legal or medical situations.

HO-5 Comprehensive form
HO-5 is a more elite type of policy that includes a broader protection and higher coverage limits than a typical policy. Not all homes/homeowners qualify for this type of policy. Its coverage applies to the home for open, unnamed perils and to personal property for open, unnamed perils.

HO-6 Condo form
This is a policy designed specifically for condos and most often includes coverage for the walls, floors, and ceiling of the unit. Coverage includes for the interior of the unit and the personal property inside.

The homeowner’s association policy typically includes the rest of the building structure.

HO-7 Mobile home form
An HO7 is similar to that of an HO-1 or HO-3 policy, but is designed specifically for mobile or manufactured homes that don’t meet the requirements for typical homeowner’s insurance policies. It includes coverage for the mobile home structure and adjacent structures as well as most personal belongings. Liability coverage may also be included.

HO-8 Older home
HO-8 is a very basic policy designed specifically for older homes that would be difficult to replace if destroyed- particularly historic homes and landmarks.

Unlike other policies that use the replacement cost method to determine the cost to repair or replace, HO-8 uses “common construction” materials and methods to determine the cost, leaving insurance companies with flexibility in determining what they pay out on claims.