Types of Homeowners Insurance
Navigating the home insurance industry can be difficult, especially for first-time buyers. It takes time to find the right policy — and we're here to help.
There are eight different types of homeowner insurance, but not all of them are appropriate for traditional home owners. Each type focuses on specific coverages for a particular type of home.
The 8 types of homeowners insurance policy types:
- HO-1 — basic form (for homeowners). This policy, which is not widely available, only covers you for specific named perils. Other types of damage are not covered.
- HO-2 — broad form (for homeowners). This policy, too, only covers specific perils, but it will financially protect the structure of your home, personal liability, and, in some cases, additional living expenses.
- HO-3 — a unique form (for homeowners). This is an open-peril policy, which means that everything is covered except the exclusions specified in your policy.
- HO-4 — Tenant Information Form (for renters). Renters insurance protects your personal belongings within the home rather than the structure.
- HO-5 — comprehensive form (for homeowners). In this more comprehensive form of coverage, this is another open-peril policy that includes personal belongings.
- HO-6 — condo form (for condo or co-op owners). This includes your condo's interior structure, personal property, and personal liability.
- HO-7 — mobile home form (for mobile home owners). This, like HO-3 coverage, typically includes open-peril coverage for manufactured homes.
- HO-8 — older home form (homeowners). This policy takes into account the fact that replacement costs are likely to be greater than the home's value for homes at least 40 years old.
HO-1 Basic
Nowadays, the most basic type of homeowners insurance is rarely available. Because more comprehensive home insurance plans are only slightly more expensive than this basic plan, many home insurers have chosen not to carry HO-1 insurance.
Because HO-1 is a named peril policy, anything that occurs outside of the perils specifically mentioned in the policy is not covered.
Fire or smoke, explosions, lightning, hail and windstorms, theft, vandalism, damage from vehicles, damage from aircraft, riots and civil commotion, and volcanic eruption are the only ten perils covered by the most basic homeowners insurance.
The fine print is where coverage becomes complicated, as the cause of loss for certain weather events can be difficult to distinguish. A tornado, for example, may not fall under a provider's definition of "wind damage."
Who should think about getting this type of home insurance: Homeowners who are extremely frugal or who have enough cash to pay for repairs on their own.
What exactly is a peril? A peril is an event that can cause damage to your home, such as a fire or vandalism. Damage caused by covered perils should be reimbursed by your insurer.
HO-2 Broad
Broad home insurance is more common than basic home insurance. However, just like HO-1, this type of home insurance only covers the perils specifically listed in the policy.
Aside from the home's structure, HO-2 typically covers personal belongings (including off-premise coverage), and some policies include personal liability coverage. All of the perils listed in HO-1 are covered by the broad type of homeowners insurance.
Furthermore, HO-2 covers accidental discharge or overflow of water or steam, falling objects, freezing of household systems such as air conditioning or heating, sudden and accidental damage from an artificially generated electrical current, sudden and accidental tearing apart, cracking, burning, or bulging of pipes and other household systems, and weight of ice, snow, or sleet.
Who should think about getting this type of home insurance: Homeowners on a tight budget who want extra peace of mind with their insurance.
What exactly is off-premise coverage? Off-premise coverage reimburses you for belongings that are damaged or stolen while you are not at home, such as when you are travelling or your child is living in a college dorm.
HO-3 Special
The Special type of home insurance is distinct from the first two. HO-3 is an open-peril policy, as opposed to the first two, which are named-peril policies. That is, unless the insurer specifically excludes a peril from the policy, the policy covers any type of peril, named or unnamed.
Insurers frequently exclude earthquakes and flooding from HO-3 plans and offer separate coverage for them in addition to the main policy.
An HO-3 policy will typically cover the structure of the home as well as any attached structures such as a carport or garage. Personal belongings and personal liability coverage should be included in the Special type of home insurance if someone is injured on the insured property. With this policy, your personal property is protected both on-premise and off-premise, providing you with added security if you travel. Today's top home insurers frequently provide HO-3 coverage.
Who should consider this type of home insurance: The majority of homeowners will choose this type of coverage to cover the majority of their belongings and structure without purchasing comprehensive home insurance.
What exactly is an exclusion? An exclusion is an event that your insurer will not cover. Earthquakes and floods are common exclusions in homeowner policies.
HO-5 Comprehensive
The Comprehensive type of home insurance is the industry standard. It is, as the name implies, the most comprehensive type of home insurance that a homeowner can purchase. Comprehensive homeowners insurance, like HO-3, is open-peril and will cover anything that is not specifically excluded from the policy.
Although the coverage provided by HO-5 is similar to that of HO-3, there are a few key differences between the two types of home insurance.
While HO-3 only provides open-peril coverage for the home's structure, HO-5 provides open-peril coverage for personal belongings as well as the home's structure. After filing a claim, HO-5 pays the covered item's replacement cost, whereas HO-3 only replaces the item's actual value. An HO-5 policy also provides greater coverage for valuables such as jewelry. Off-premise coverage on your personal property is also included in case something is lost or stolen while you are away from home.
Other distinctions between the two policies may vary depending on the insurance company. However, Comprehensive policies are typically more expensive than Special policies, and fewer homes are eligible for a HO-5 policy.
Who should think about getting this type of home insurance: Homeowners with valuable property should obtain HO-5 Comprehensive home insurance.
What is the replacement cost? This means you will be paid the cost of purchasing a new item today, rather than its current value. If your five-year-old Mac laptop is stolen, you will be compensated for the cost of a new, comparable model.
HO-8 Older Home
HO-8 home insurance is commonly used to insure homes that are 40 years or older. When homes built decades ago are damaged or destroyed, the materials required to replace them are frequently more expensive than the home's value. As a result, insurance companies use this type of home insurance to provide affordable coverage to homeowners with older homes.
Older Home insurance, like HO-1 and HO-2, is based on named-peril policies. HO-8 policies typically include coverage for dwelling, personal property, liability, and loss of use from specified perils. Your belongings, like other types of home insurance policies, will most likely be covered off-premises as well.
The ten named perils in a HO-8 policy are the same as those in a HO-1 policy. In addition, rather than using the replacement cost included in HO-5, Older Home policies typically pay out claims using common construction, which means that a rough equivalent of the destroyed material can be used for replacement.
Who should think about getting this type of home insurance: Homeowners who live in a historic home that has not been completely renovated.
What exactly is a named peril? These are the covered events as listed in your policy. Your policy will not cover any damage caused by something else.
Renters insurance policy types
HO-4 Tenant
Tenant home insurance, also known as renters insurance, provides coverage for people who want to insure their rented home. The goal of this type of policy is to protect items within the home as well as any permanent fixtures installed by the renter, such as cabinets.
The majority of renters insurance policies are named-peril policies that cover the same perils as those listed in HO-2. Renters insurance typically covers personal property, liability, medical payments to others, and additional living expenses due to a loss of use.
Aside from permanent fixtures installed by the renter within the dwelling, HO-4 does not cover any structures. This is due to the fact that this type of home insurance is designed for renters who do not own the property where they live. You do, however, have off-premise coverage for your belongings, which includes coverage if something is stolen from your car.
Any renter, especially if renters insurance is required in your lease, should consider this type of home insurance.
What exactly is loss of use? Loss of use is a type of insurance that reimburses policyholders for living expenses if their home is rendered uninhabitable due to damage. It pays for things like hotel rooms, food, and travel during the reconstruction process after a fire, for example.
Co-op or condo insurance policy types
HO-6 Condo
Condo insurance is also known as "walls-in" coverage because it only covers the interior of a structure, whereas the condo association's master policy will cover the exterior structure and common areas.
Condo insurance is typically written as a named-peril policy, but some insurance companies will allow the coverage to be expanded to an open-peril policy, which will also mean paying a higher premium.
In general, HO-6 home insurance will cover building property, personal property (including off-premise coverage), personal liability, and loss of use. HO-6, like other types of home insurance, usually does not cover flooding, and additional coverage is required if flood insurance is desired.
Who should think about getting this type of home insurance: Condo owners whose HOA covers the building's exterior structure.
What exactly is a premium? This figure represents the cost of your insurance policy. If you have a mortgage on your home, the annual premium is usually divided into 12 monthly payments.
Mobile home insurance policy types
HO-7 Mobile Home
HO-7 home insurance is specialized coverage for manufactured homes that are not covered by other types of home insurance. HO-7 will apply to dwellings such as RVs, trailers, sectional homes, and single-wide and double-wide mobile homes.
Open-peril policies, similar to HO-3, are common in mobile home insurance.
Dwellings, detached structures, personal property, and liability are all generally covered under a HO-7 policy. Off-premise coverage for your belongings is also likely to be included in your policy. The age or size of the structure, as with other types of home insurance, will most likely affect the price of the premium with a HO-7 policy.
Who should think about getting this type of home insurance: Owners of mobile homes or other mobile structures such as an RV or trailer.
What exactly is depreciation? This is the decrease in value that occurs as something ages, whether it is real estate or a structure.
Types of home insurance coverages
Do you know what the best type of home insurance is? It is critical to understand the types of coverages available in each policy in order to understand the type of policy you require. When it comes time to file a claim, the nuances can make a significant difference in what is actually covered. This home insurance guide will explain the specifics of what each policy may include, allowing you to make an informed decision before purchasing (or updating) your home insurance.
Dwelling
Dwelling coverage protects the physical structure of your home. It can also refer to attached structures, such as a garage. Other structures on your property, such as a detached garage, shed, or fence, are not covered as part of your dwelling coverage; you would need other structures coverage to file a claim for any damage.
Coverage for personal belongings
Personal belongings coverage protects your possessions in your home. Replacement cost (which reimburses you for purchasing a new version of damaged property) or actual cash value (which only covers the item's current value) may be included in your policy. Most policies include off-premise coverage in addition to covering your belongings inside your home. It can protect your belongings while travelling or storing them.
Liability protection
In the event that someone is injured on your property, liability insurance can help pay for medical expenses or lost wages. This does not apply to you or any family members who live in the house. However, it does protect you in the event that a guest is injured and wishes to hold you liable for their medical bills.
Additional expenses
Additional living expenses (or ALE) protect you if you are unable to live in your home while covered damages are repaired. If a tree falls through your roof, it may be some time before you can return home safely. Hotel fees, furniture rental, and storage unit costs are examples of additional living expenses.