What are the different types of homeowners insurance policies?
Homeowners insurance is one of the most important things you can have for your home. It protects you from financial losses caused by certain types of events.
There are many different homeowners insurance policies—and it’s important to understand what is right for your situation.
We’ll cover the most common types in this 2-part series.
5 Types of Homeowners Insurance Policies
HO-1: Basic Form
This type of policy offers the most basic form of coverage. It is known as a perils policy. It covers the structure and many other features—garage, appliances, carpeting, etc.—but not personal property or liability. HO-1 coverage is close to non-existent in the modern insurance market. It became less common because it did not provide adequate coverage for common issues.
The HO-1 policy is named the perils policy because it only covers your home in ten specific situations. These include:
- Aircraft
- Explosion
- Falling objects
- Fire or lightning
- Riot or civil commotion
- Smoke
- Theft
- Vandalism
- Vehicles
- Windstorm or hail
HO-2: Broad Form
HO-2 is more commonly known as a broad-form policy. An HO-2 policy covers your home, personal items, and liability in some situations. It will also cover everything that an HO-1 does but adds six additional perils:
- Accidental discharge or overflow of water
- Freezing
- Damage caused by artificially generated electrical currents
- A sudden and accidental tear, crack, burning, or bulge in a built-in appliance
- Volcanic eruption
- Weight of ice, snow, or sleet
HO-3: Special Form
An HO-3 policy is a special form of homeowners insurance that provides broader coverage than HO-2. It covers your home, personal property, additional living expenses, liability, and medical payments. However, there are some exclusions.
Some of these exclusions include damage caused by government actions, defective construction or maintenance, neglect, and foundation issues.
However, the policy will list your personal property as being covered by certain perils. That means it usually has protection under the same circumstances described in HO-1 and HO-2.
HO-4: Contents Broad Form
This type of policy is specifically for renters. The policy’s purpose is to cover the renter’s personal belongings.
In this case, renters don’t own their homes, so it’s not technically a “homeowners policy.” This type of coverage excludes protection for the building itself.
As with the broad and special form policies, renters’ insurance covers 16 named perils. In most cases, the policy covers the policyholder’s property at replacement value. It might also cover temporary living expenses if you need to live elsewhere due to a covered event.
HO-5: Comprehensive Form
HO-5 is the gold standard of home insurance. It’s the most common homeowners policy for single-family dwellings.
It covers your home, personal belongings, additional living expenses, liability, and medical payments. The homeowner may also have coverage for unanticipated events not mentioned in the policy.
Some common exclusions include earth movement, government actions, intentional loss, mechanical breakdown, pets, mold, and pest infestations.
HO-5 policies are generally for high-net-worth properties in high-risk areas. They’re designed for properties that need extra protection and cost more than other policies.
The Bottom Line
Homeowners insurance is an essential part of homeownership. It protects the investment you make in your home.
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