Types of Homeowners Insurance

8 Types of Homeowners Insurance

1. HO-1 (Basic Form)

The HO-1 basic form policy offers the most limited type of homeowners insurance coverage available, and many insurance companies no longer offer it due to its minimal protection. This named-peril policy covers only 10 specific perils that could damage your home or personal property. These typically include:

• Fire or lightning damage
• Windstorm or hail damage
• Explosion damage
• Riot or civil commotion
• Aircraft-related damage
• Vehicle-related damage
• Smoke damage
• Vandalism or malicious mischief
• Theft
• Volcanic eruption

Because HO-1 policies provide such limited coverage, they generally don't meet mortgage lender requirements. What's more, the HO-1's narrow coverage leaves significant gaps, excluding common perils like water damage from burst pipes, falling objects or the weight of ice and snow.

2. HO-2 (Broad Form)

The HO-2 broad form policy expands on basic coverage by protecting against 16 named perils instead of just 10. In addition to everything covered under an HO-1 policy, HO-2 insurance typically adds protection for:

• Falling objects
• Weight of ice, snow or sleet
• Accidental discharge or overflow of water or steam from plumbing, heating or air conditioning systems
• Sudden and accidental tearing, cracking, burning or bulging of certain household systems
• Freezing of plumbing, heating, air conditioning or automatic fire sprinkler systems
• Sudden and accidental damage from artificially generated electrical current

This policy type suits homeowners seeking more comprehensive coverage than basic insurance while maintaining relatively affordable premiums. HO-2 policies may work well for budget-conscious homeowners who want broader protection without paying for open-peril coverage.

However, like HO-1 policies, HO-2 coverage still operates on a named-peril basis, meaning any damage from perils not specifically listed won't be covered.

3. HO-3 (Special Form)

The HO-3 special form policy is the most popular type of homeowners insurance in the U.S., covering roughly 79% of owner-occupied homes, according to the National Association of Insurance Commissioners.

This policy provides open-peril coverage for your dwelling and other structures, meaning it protects against all perils except those specifically excluded in the policy documents. Common exclusions typically include:

• Flood damage
• Earthquake damage
• Landslide damage
• Mudhole damage
• Sinkhole damage
• Nuclear hazards
• War or government action
• Mold
• Pest or vermin infestations
• Normal wear and tear
• Intentional damage
• Neglect or improper maintenance

While your dwelling receives open-peril protection, personal property under an HO-3 policy is covered on a named-peril basis—usually for the same 16 perils listed in an HO-2 policy. This combination of comprehensive dwelling coverage and named-peril personal property protection strikes a balance between robust protection and affordability that appeals to most homeowners.

The open-peril coverage for structures means you don't need to prove a specific named peril caused damage. Instead, your insurer must demonstrate that the damage resulted from an excluded cause to deny a claim. This shift in burden of proof often benefits policyholders during the claims process and provides peace of mind knowing that unexpected perils are likely covered.

4. HO-4 (Renters Insurance)

Despite its inclusion in the homeowners insurance category, HO-4 policies specifically serve renters rather than property owners. This coverage is designed to protect tenants' personal belongings and provides liability protection without covering the dwelling itself—that responsibility falls to the landlord's insurance policy.

Renters insurance typically includes three main coverage components:

• Personal property protection: Covers your belongings against the same 16 named perils found in HO-3 personal property coverage.
• Liability coverage: Protects you against lawsuits if someone is injured in your rental unit or you accidentally damage others' property.
• Additional living expenses: Covers temporary housing and related costs if your rental becomes uninhabitable due to a covered peril.

Tip: Many renters mistakenly believe their landlord's insurance covers their personal belongings, but landlord policies only protect the building structure and the property owner's liability. In some cases, landlords may require you to maintain a minimum amount of liability coverage as a renter, usually $100,000 or more.

5. HO-5 (Comprehensive Form)

The HO-5 comprehensive form policy provides the most extensive coverage available for single-family homes, offering open-peril protection for both your dwelling and personal property. This premium coverage option eliminates the named-peril restrictions on personal belongings found in HO-3 policies, providing the same broad protection for your possessions as for your home's structure.

This enhanced coverage can prove particularly valuable for homeowners with expensive personal property like jewelry, electronics, art or collectibles. Under an HO-5 policy, you won't need to verify that damage to personal items resulted from a specific named peril because coverage applies unless the insurer can prove the damage came from an excluded cause.

Tip: HO-5 policies don't automatically cover all personal property losses. Like most insurance policies, there are exclusions that range from floods to acts of war. Check with your insurer to find out exactly what's covered.

While HO-5 policies cost more than comparable HO-3 coverage, many homeowners find the additional protection worthwhile, especially those with significant high-value personal property or those seeking maximum peace of mind. The comprehensive nature of HO-5 coverage also simplifies the claims process, as fewer coverage limitations mean fewer potential disputes over whether specific damage qualifies for reimbursement.

6. HO-6 (Condo Insurance)

Condominium and townhouse owners require specialized insurance that coordinates with their condo association's master policy, and condo insurance fills this unique need. This policy type covers the interior of your unit, personal property, liability and loss of use, while the association's insurance typically handles the building's exterior, common areas and shared structures.

Understanding your association's master policy is crucial when selecting HO-6 coverage limits. Association policies generally follow one of three approaches:

• Bare walls coverage: Also called walls-in coverage, it protects only the building structure, leaving you responsible for insuring everything inside your unit's walls, including flooring, cabinets, fixtures and appliances.
• All-in coverage: Includes the building structure along with fixtures and installations inside each unit, requiring you to insure only personal property and any improvements you've made.
• Single entity coverage: Covers shared areas and property owned by the association, while also extending protection to the original fixtures and structural elements inside your unit.

HO-6 policies also include loss assessment coverage, protecting you if the condo association levies a special assessment to cover deductibles or damages exceeding the master policy's limits. This becomes particularly important after major disasters affecting multiple units or extensive common area damage.

7. HO-7 (Mobile Home Form)

Mobile and manufactured homes require specialized insurance due to their unique construction and transportation-related risks, which HO-7 policies address. These policies function similarly to HO-3 coverage, providing open-peril protection for the structure and named-peril coverage for personal property, but with modifications accounting for mobile homes' specific characteristics.

One key difference in HO-7 policies is optional coverage for transportation-related risks if you need to move your mobile home.

Insurance companies often charge higher premiums for mobile home coverage compared to traditional homes due to increased vulnerability to wind, hail and fire damage. However, factors like the home's age, tie-down systems, location in a mobile home park versus private land, and safety features can significantly impact premium costs.

8. HO-8 (Older Home Form)

Historic and older homes whose replacement costs far exceed their market value need specialized coverage, which HO-8 policies provide. This insurance type addresses the unique challenge of insuring homes where rebuilding with original materials and craftsmanship would be prohibitively expensive or impossible due to modern building codes.

Rather than promising to rebuild your home exactly as it was, HO-8 policies provide actual cash value coverage or functional replacement cost coverage. Actual cash value coverage factors in depreciation, which means you likely won't get enough of a payout to fully replace your home or belongings.

In contrast, functional replacement cost coverage pays to repair or replace damaged portions with modern, commonly available materials. For instance, if ornate plaster molding suffers damage, the policy might cover drywall replacement rather than custom plaster restoration.

HO-8 policies typically cover the same named perils as HO-1 policies.

Frequently Asked Questions

The Bottom Line

Selecting the right homeowners insurance requires balancing coverage needs, budget constraints and risk tolerance. While HO-3 policies suit most traditional homeowners, your specific situation might call for more barebones coverage with HO-1 or HO-2 policies, the enhanced protection of HO-5 coverage, or the specialized approach of HO-4, HO-6, HO-7 or HO-8 policies.

Understanding these eight policy types empowers you to make informed decisions about protecting your home and belongings. Before choosing a policy, get quotes from multiple insurers and read the fine print carefully to ensure you get the best possible coverage for your needs.