Types of Homeowners Policies
Those who purchase insurance for their home may think that all homeowners policies are the same. In fact, there are several different types designed for varying risks.
Whether you own a single-family dwelling or rent an apartment, there is homeowner’s coverage for you. What you might not know is what each policy does and why it is distinct.
Listing of Types of Homeowners Policies
HO-1: Homeowner’s Basic Form
HO-2: Homeowner’s Broad Form
HO-3: Homeowner’s Special Form
HO-4: Homeowner’s Contents Broad Form (“Renters Policy”)
HO-5: Homeowner’s Comprehensive Form
HO-6: (Condominium) Unit-Owners Form
There is also an HO-7 policy for mobile homes, and an HO-8 policy for older homes in which the cost to rebuild them is much higher than their actual cash value.
The numbers 1, 2, 3, and so on in the HO-# come from the policy forms that drive coverage. For example, the HO-3’s coverage form within the policy is numbered HO 00 03 and the HO-6 is the HO 00 06.
Homeowners Policies: HO-1
The “Homeowner’s Basic Form” policy is exactly what the name suggests. It only covers property damage with specific “named perils.” This is to say, the causes of loss covered by the policy must be spelled out specifically. If the cause is fire, lightning, and internal explosion, you’re good. If it’s not, you’re out of luck. This coverage may also include vandalism, smoke, and windstorm or hail.
HO-1 policies are virtually unheard of these days. As they are incomprehensive, they are also inadvisable to purchase. Generally speaking, the only people who get basic form policies only do so because they have no other underwriting alternatives.
Homeowners Policies: HO-2
This “Homeowner’s Broad Form” is a little more expansive than the HO-1, but still a “named perils” policy. Only causes of loss listed in the policy are covered. These policies are similar to the HO-1, but also include coverage for such things as freezing, weight of ice, artificial electrical current, and theft.
This is the basic form on steroids, but still limited in the scope of property coverage provided.
Homeowners Policies: HO-3
Perhaps the most common homeowner’s policy for single-family, owner-occupied homes. This is a “special form” policy, setting it apart from “named perils.” All causes of loss are covered except for those few things named specifically. This form gives the insured a lot more flexibility than the HO-1 and HO-2 in terms of what’s covered and what isn’t.
Be careful, though: just the dwelling is covered on an “open perils” basis. The personal property is covered on a “named perils” basis like the HO-1 and HO-2.
Homeowners Policies: HO-4
The HO-4 is the “renter’s policy.” Officially known as the “Contents Broad Form,” this provides no dwelling or other structures coverage. Since you’re renting an apartment, condo, or other living space, you obviously don’t need them. It goes without saying that if you own the home in which you reside, a renter’s policy would be a bad idea.
Aside from your personal liability and medical payments coverage, this includes coverage for your personal property and “loss of use.” In the event of a covered loss, the latter would insure you, among other things, for additional living expenses incurred if you must go elsewhere.
Homeowners Policies: HO-5
This is a relatively new form, but it’s even broader than the common HO-3. Unlike the HO-3, both the dwelling and your contents are covered on an “open perils” basis. The policies are otherwise similar, but since it’s new, it might not be available in your state or with your carrier.
Homeowners Policies: HO-6
The “Unit-Owners Form” is for condominium unit owners. Unlike the renter’s policy, it does include coverage for the dwelling. (As in, the shell of your condominium unit, or the portion of the overall association structure you own.) It’ll be up to your bank and your condo by-laws to help determine how much, if any, dwelling coverage you need. For example, your unit may be worth $300,000, but if the by-laws are “all-in,” the condo master policy will typically cover the structure and any permanently-installed fixtures within it. This does not mean you get to avoid dwelling coverage, but it will make a difference.