Finding home insurance that safeguards the roof over your head and your belongings can be challenging. There are different types of homeowners insurance policies and while you are trying to find the right one, you will overhear and read many unfamiliar terms. For example, policy forms like HO-3 or HO-6 which are determined by the type of home you have and your coverage needs, so if you own a house or a condo, the form will be different.
It’s essential to understand homeowners insurance, so you know where you are protected and where you are vulnerable. The best homeowners insurance can help guard against the damages caused by a whole host of issues. Still, if you live in a break-in prone neighborhood or a hurricane evacuation zone, you will need to rely on endorsements or add-ons that aren’t included in standard policies. To learn more about the different types of home insurance policies, continue reading this article.
The 9 Types of Homeowners Insurance Policies
HO-1: Basic Form
The most basic and limited form of homeowners insurance, HO-1, is a coverage policy no longer widely offered. Properties and belongings are covered at the actual cash value, for which most lenders don’t consider it sufficient protection, because it doesn’t typically provide liability or personal property coverage.
An HO-1 policy covers only the following ten specific causes of damages or losses, best known in the insurance industry as named perils:
- Fire and smoke
- Hail and windstorms
- Damage from vehicles
- Damage from aircraft
- Riots and civil commotion
- Volcanic eruption
HO-2: Broad Form
The broad policy is a step up from HO-1. Still, it’s limited in that it’s a named perils policy and its coverage areas are narrowly defined. If you choose this coverage, please note that if the peril isn’t explicitly stated in the policy, you aren’t protected against it.
HO-2 beefs up the ten coverage items listed above by including the following perils:
- Falling objects
- Weight of ice, snow, or sleet
- Freezing of household systems (HVAC)
- Sudden and accidental tearing apart, cracking, burning, or bulging of pipes and other household systems
- Accidental discharge or overflow of water or steam
- Sudden and accidental damage from artificially generated electrical current
HO-3: Special Form
The HO-3 or special form policy hits the sweet spot for price and coverage, making it the most common policy type held by homeowners today. HO-3 is what people refer to when they say “basic homeowners insurance.” It offers all the protection points of the HO-2 “broad policy” but ditches the “named perils” structure.
Instead of only covering what is stated, this open perils policy covers everything except what is explicitly excluded. It offers the following six core coverages:
- Dwelling coverage
- Other structures
- Personal property
- Loss of use
- Personal liability
- Medical payments to others
Some of the perils excluded by this policy are:
- War, government action, and nuclear hazard
- Wear and tear
- Earth movement (earthquake, landslide, mudslide)
- Water damage
- Flooding damages
HOB: Hybrid Policy
This hybrid policy type is very similar to the HO-3. It combines an open perils policy for your home’s structure with a named perils policy for your home’s contents and excludes basically the same perils. The main difference between the HO3 and HOB boils down to water damage protection. HOB provides this point of coverage, while HO-3 does not.
The 16 perils included for protection are:
- Fire or Smoke
- Accidental Discharge or Overflow of Water or Stream
- Windstorm or Hail
- Riot or Civil Commotion
- Vandalism or Malicious Mischief
- Falling Objects
- Weight of Ice, Snow, or Sleet
- Volcanic Eruption
- Accidental Tearing Apart, Bulging, Cracking or Burning
- Accidental Damages from Artificially Generated Electrical Power
HO-4: Contents Broad Form
The HO-4 policy is a tenant’s policy type, more commonly called renters insurance. It covers everything inside your dwelling, but not the structure itself, because the landlord is responsible for that. Still, this coverage will protect your belongings, personal liability, and additional living expenses if anything happens and you need to live outside of your lease temporarily.
Renter’s insurance covers a mix of the named perils listed on the HO-2 and HO-3 form.
HO-5: Comprehensive Form
The super-sized, spendier upgrade to the HO-3, HO-5 is a comprehensive policy. Another open perils policy, it includes everything that isn’t expressly excluded for dwelling coverage and personal possession coverage. While HO-3 policies typically offer Actual Cash Value for damage and loss (original value minus depreciation), HO-5 policies offer Replacement Cost. The payout will equal the full replacement cost of the property. If you have a high volume of big-ticket personal possessions, an HO-5 policy also offers greater protection for content.
Typical exclusions for HO-3 and HO-5:
- Earth movement (earthquake, landslide, mudslide)
- Water damage
- Damage from or infestation of birds, vermin, rodents, and insects
- Neglect, deterioration, and general wear-and-tear
- Settling, shrinking, bulging, or expanding of the foundation
- Pets and other animals
- Mold, fungus, and rot
- Intentional loss
- War, government action, and nuclear hazard
- Ordinance or law
- Smog, rust, and corrosion
HO-6: Unit-Owners Form
HO-6, otherwise known as condo insurance, is made for those living in condominiums or at a co-op. This policy includes personal property and liability coverage as well as protection for damage to the walls, floor, and ceiling of the unit. Your premium cost will depend on what is covered by it, the condominium’s HOA should cover the remainder of the structure. Condo policies include building and personal property, personal liability, loss of use and loss assessment coverage.
HO-7: Mobile Home Form
An HO-7 is essentially the same policy as the HO-3, but adapted to mobile or manufactured homes. This policy protects all varieties of prefab homes, from single- and double-wides to fifth-wheelers. Unlike typical homeowners insurance, mobile home insurance doesn’t assume that you live in the dwelling full-time. You can customize coverage to your living arrangement, securing primary residence coverage, secondary or seasonal or rental.
Mobile home form includes coverage for:
- Park model homes
- Prefab homes
- Sectional home
- Modular homes
- Single- and double-wide mobile homes
HO-8: Modified Coverage Form
The modified coverage form policy is essentially the same as the HO-3, but this time adapted for the particular concerns of older homes. This is the homeowners policy typically held by historic homes and registered landmarks and to qualify for an HO-8 you will need to live in an older house.
HO-8’s provide coverage for 10 named perils, specifically informed by your insurers, which includes:
- Lightning and fire
- Hailstorms and windstorms
- Volcanic eruptions
- Civil unrest and riots
- Vandalism and malicious mischief
If you own your home…
Depending on their coverage needs, homeowners should look into the following policies: HO-1, HO-2, HO-3, HO-5 and HO-8. We recommend analyzing the standard policies but keeping in mind that deductibles, add-ons, the house’s age, and your personal belongings can affect how much home insurance coverage you need. Another great practice is to shop around for quotes to compare the premiums cost from one company to another.
If you own a condo…
If you live at a condo or a co-op, the right coverage for you will be an HO-6. You need to keep in mind that the amount of coverage that you need will vary depending on what’s covered by your condo’s HOA insurance.
If you rent…
If you are looking for renters insurance, then the right policy for you is an HO-4. This form has a mix of the perils listed on an HO-2 and HO-3 policy. And it was created explicitly for individuals under a lease for houses, apartments and even condos.
If you live in a mobile or manufactured home…
An HO-7 will be the right policy for mobile homes that could not be covered under a typical single-family policy. It is an HO-3 created specifically for park model homes, prefab homes, RVs, sectional and modular homes, trailers, and lastly, single- and double-wide mobile homes
Homeowners Insurance Policies FAQ
What is the difference between an HO-5 vs HO-3 form?
An HO-3 and an HO-5 both are forms of coverage that have open peril basis, which means that the insurers will protect against all causes of loss unless they specified that is not included. The main difference between these two types of policies is that an HO-3 policy will only cover specific perils for your personal property. Meanwhile, the HO-5 still has open perils for personal property. The same goes for replacement costs, where an HO-3 only offers actual cash value and the HO-5 will pay for the full replacement cost of the lost or damaged items. These premium offerings make the HO5 more expensive, but should anything happen, you will have to pay less money out of pocket, which could end up saving you money in the long run.
What is the difference between an HO-3 vs HO-6 form?
The main difference between an HO-3 and an HO-6 is that the first one is specifically made for houses and the second one is created to protect condos. HO-3 is both named perils and open perils policy, covering the structure and content of your home as well as other areas in your property. On the contrary, an HO-6 usually covers only named perils and only protects what’s inside of the walls of your property. Another thing that separates these two policies is that the HO-3 claims reimbursement can only be done based on actual cash value, while the HO-6 offers to add replacement cost value.
What home insurance endorsements or add-ons should I get with home insurance policy?
Endorsements and add-ons are used to expand the existing coverage that homeowners have. Depending on the location you live, this additional coverage extends the perils that protect your belongings. Some of the most important add-ons are flood insurance to protect from water damage caused by heavy rain and hurricanes and earthquake insurance to cover property damage caused by destructive seismic activity. Another important endorsement is identity theft coverage to provide direct assistance in recovering your identity and covering legal fees.
Finally, water backup of sewer protection is a fairly inexpensive endorsement and one to consider if you live in an older home. If you want to learn more about what does homeowners insurance covers, check our guide.
What types of homeowners insurance coverages exist?
The following are coverage types of homeowners insurance policies:
- Dwelling coverage protects the essential structure of your home floors, walls, windows, ceiling, and roof, as well as attached structures, like the garage.
- Contents coverage protects your furniture and decor, plus your clothing, devices, collectibles, and jewelry. The items listed are typically covered at their actual cash value (ACV) but you can usually upgrade the protection to replacement cost for an extra fee.
- Personal liability responds to various perils: medical expenses for injuries sustained by guests on your property, your property damaging someone else’s property, and lawsuit. Personal liability is sometimes subdivided into personal liability and medical payments to others.
Take a look at these homeowners insurance frequently asked questions if you want to learn more about this industry.