The 8 Types of Homeowners Insurance
Whether you are a first-time homeowner or have just relocated, there exists an insurance policy for every residence type.
Knowing the basics of home insurance coverage is essential in mitigating your future risks and liabilities and making an informed decision on purchasing the best homeowners insurance possible.
Here is our comprehensive guide on the types of homeowners insurance policies:
What Is Standard Homeowners Insurance?
The Standard Homeowners Insurance is just another name for the HO-3 policy.
While on the market, you will find many different standard homeowners insurance coverage types, virtually all of them will have certain coverage policies featured.
This can include:
1. Home structure coverage
In the event your home gets damaged or destroyed in the event of a disaster e.g. fire, lightning strikes, hurricane, your insurance company will pick up the tab to have it repaired or rebuilt.
Typically, a standard insurance policy will not provide coverage for damages caused by a flood, earthquake, or routine wear and tear.
2. Coverage for personal belongings
In the event your households personal belongings such as furniture and clothes get stolen or are destroyed by an insured disaster, the costs will be covered by the insurance company. Usually, the amount is between 50-70% of the coverage for home structure.
3. Liability protection
Liability protection ensures that in the event a third party suffers bodily injury or property damage by you or your family members, you will not be liable to pay for your resulting legal expenses or the victim’s associated medical bills. Instead, they would be covered by the insurance company.
There is a certain cap to it, but you can increase the coverage limits by opting to add a personal umbrella policy.
4. Additional living expenses
This covers additional living costs you and your household incur in the event your home has been rendered inhabitable. This can include hotel bills, restaurant meals, and other living expenses that are part of the rebuilding process.
What Are the Different Types of Homeowners Insurance?
Within the U.S., there are 8 main home insurance policy types, also referred to as insurance forms.
- HO-1 — basic form (for homeowners)
- HO-2 — broad form (for homeowners)
- HO-3 — special form (for homeowners)
- HO-4 — tenants form (for renters)
- HO-5 — comprehensive form (for homeowners)
- HO-6 — condo form (for a condo or cooperative owners)
- HO-7 — mobile home form (for mobile homeowners)
- HO-8 — older home form (homeowners)
1. HO-1 — Basic Form (For Homeowners)
What is an HO-1 Insurance Policy?
This is meant as a basic home insurance policy that provides coverage to your home and your personal belongings limited only to specific situations.
As per the latest data from NAIC, only 1.46% of homeowners choose this type of coverage, and many insurance companies don’t offer it anymore.
What does HO-1 Insurance Cover?
Typically, this includes the following named perils:
- Damage from aircraft or vehicles
- Damage from lightning and fire
- Explosions
- Windstorms and hail
- Smoke
- Riots
- Theft
- Volcanic eruption
- Vandalism
Additional Notes
It is also important to know that HO-1 insurance only covers your assets at their actual cash value.
For example, if a piece of furniture brought for $3000 was destroyed in a fire, this won’t be the amount paid the insurance company would restore.
Instead, they will first assess such factors as the age and prior condition of the asset to find how much its value depreciated before finalizing your claim.
2. HO-2 — Broad Form (For Homeowners)
What is an HO-2 Insurance Policy?
HO-2 Broad insurance coverage is a definite upgrade over the basic form, providing you with more comprehensive coverage.
It isn’t generally recommended to homeowners, especially if one is living with a family, because liability coverage isn’t featured. As such, only 5.37% of homeowners hold this insurance type.
What does HO-2 Insurance Cover?
In addition to the 10 above-mentioned named perils, it also provides coverage for the following hazards:
- Ice damage
- Accidental water overflow or discharge
- Sudden and accidental damage to a built-in home appliance e.g. water heater or centralized air conditioning system
- Accidental or sudden damage from an electric source that’s artificially generated
- Volcanic Eruption
Additional Notes
Unlike an HO-1, HO-2 insurance covers your home at its replacement cost, meaning depreciation isn’t factored in how the property is valued for a claim. However, personal belongings are still covered at their actual cash value.
3. HO-3 — Special Form (For Homeowners)
What is an HO-3 Insurance Policy?
An HO-3 special home insurance policy not just protects your assets but also extends coverage to other areas of expenses, such as legal liabilities, additional living expenses, and medical fees for injuries sustained by guests at your property.
With 79.12% of homeowners holding this type of coverage, it is easily the most popular homeowners insurance policy in the market.
What does HO-3 Insurance Cover?
Most HO-3 forms are an open perils policy. Claims for your home are covered except for ones specially excluded in your policy. Excluded perils and hazards include the following:
- Defective maintenance or construction
- Animal or pet damage
- Foundation issues
- Corrosion and pollution
- Government actions
- Vandalism, frozen pipes, and theft in any vacant houses
- Mold, fungus, or wet rot
- Wear and tear
- General neglect
- War
- Mechanical breakdowns
- Nuclear hazard
Additional Notes
Generally, with HO-3 insurance coverage, both your dwelling and your personal belongings will be covered at actual cash value. However, for a small increase in the premium, many insurance companies allow you to add a replacement-cost endorsement for your assets.
4. HO-4 — Tenants Form (For Renters)
What is an HO-4 Renters Insurance policy?
More commonly known as renters insurance, HO-4 is a policy specifically meant for those leasing rather than owning a residential property.
Since renters do not own their homes, coverage for the buildings structure is not included. Instead, the policy held by the property owner applies for it.
What does HO-4 Insurance Cover?
In most cases, the coverage on an HO-4 form is limited to the following perils:
- Damage from aircraft or vehicles
- Damages as a result of an electrical current
- Damage from snow or ice
- Falling objects
- Explosions
- Damage from lightning and fire
- Pipes freezing
- Windstorms and hail
- Riots
- Theft
- Smoke
- Water damage from an HVAC overflow or from plumbing issues
- Vandalism
- Damage as a result of a water heater
5. HO-5 — Comprehensive Form (For Homeowners)
What is an HO-5 Insurance Policy?
An HO-5 Comprehensive Insurance provides you with the best and most complete coverage. In many ways, it is similar to an HO-3 policy; with a few key differences:
- Your home dwelling and personal belongings are insured at their replacement cost by default.
- Its open peril policy not just covers your home but also, unlike an HO-3, also extends to your personal belongings.
- The coverage limits cap is much higher than that of an HO-3.
An HO-5 insurance form is generally meant for high-net-worth home properties and those located in high-risk areas. As such, premiums for it tend to be higher.
About 13.59% of homeowners have an HO-5 insurance policy, making it the second most common type in the country.
What does HO-5 Insurance Cover?
HO-5 insurance usually covers certain perils and hazards. Some standard exclusions are:
- Movement of the earth
- Government actions or laws
- Intentional loss
- Mold, fungus, or wet rot
- Mechanical breakdowns
- Pets or animal damage
- Nuclear hazard
- Vandalism – this is if the property has been vacant for more than two months
- Water damage as a result of sewer backup or floods
- War
6. HO-6 — Condo Form (For Condo or Co-Op Owners)
What is an HO-6 Insurance Policy?
This is homeowner insurance meant for those living in a condominium or co-op.
The amount of coverage you get from this policy for your dwelling varies – largely dependent on what is already covered by your condo association’s HOA insurance, also known as the ‘Master Policy.’
Protection for your personal belongings is defined, and most insurance companies include coverage for personal liabilities, medical fees, and additional living expenses.
Loss assessment coverage is also included within condo insurance, and this is meant to cover shared losses to common spaces in an HOA property.
What does HO-6 Insurance Cover?
HO-6 policies are also known as perils policies. These policies offer coverage for:
- Smoke
- Fire and lightning
- Explosions
- Riots
- Hail and windstorms
- Damage from aircraft or vehicles
- Theft
- Vandalism
- Explosions
7. HO-7 — Mobile Home Form (For Mobile Home Owners)
What is an HO-7 Insurance Policy?
An HO-7 Mobile Homeowners Insurance policy is especially for those living in manufactured or mobile homes. This can include but is not limited to:
- Trailers
- Modular homes
- Sectional homes
- Manufactured homes
- Park model homes and R.V.s
Similar to your standard home insurance, only for specific situations, this policy will provide coverage for your home’s structure, personal belongings, any personal liabilities, as well as additional medical fees and living expenses.
What does HO-7 Insurance Cover?
In most cases, mobile homeowners insurance coverage tends to be relatively limited. You are generally covered only when it comes to particular circumstances, including:
- Explosions
- Damage from aircraft or vehicles
- Fire and lightning
- Explosions
- Hail and windstorms
- Riots
- Theft
- Vandalism
- Smoke
Additional Notes
In many U.S. jurisdictions, mobile homes are classified as personal, rather than real property. Knowing its classification in your area of residence could be helpful in choosing your HO-7 insurance package.
8. HO-8 — Old Home Form (Homeowners)
What is an HO-8 Insurance Policy?
Also known as old home insurance, this policy is designed for those dwellings that are too dated to qualify for most other types of homeowners insurance without extensive modifications.
This policy also allows you to keep the old property exactly in the way it was many generations prior. Only 0.46% of homes are insured with this policy.
What does HO-8 Insurance Cover?
Because of the higher associated risks of an old home, HO-8 insurance coverage offered by most companies tends to be limited, eligible for only a few perils.
Generally, this includes the following:
- Damage from aircraft or vehicles
- Hail and windstorms
- Fire and lightning
- Riots
- Smoke
- Explosions
- Theft
- Vandalism
Additional Notes
Both your home and personal belongings are insured at actual cash value with this policy. In addition, in the case of most companies, you are not offered a replacement-cost endorsement option. This does make sense since much of the assets in questions could be decades or even centuries old.
What are some unnecessary home insurance policy types?
While it is important to secure ourselves and our loved ones from future risks, there are some potential disasters it is not worth insuring against.
Among them is Private Mortgage Insurance. It protects the lender against a possible loss in case you default. You derive no benefit from it. Instead, the cost of its premium is added to your monthly mortgage payment.
Another is Car Rental Damage Insurance. Since most auto insurance policies already tend to cover rentals, buying a separate coverage is highly redundant.
Flight Insurance is also a waste of money because, despite how it is portrayed in media, statistics show airline accidents to be an extremely rare occurrence. Plus, your life insurance might already cover for such a tragedy.
Specific Disease Insurance, such as for cancer and heart disease, is also highly unnecessary. A better option is to invest in more comprehensive health policy.
Conclusion
The above-given summary of the different types of homeowners insurance policies covers most residence types and is meant to give you a basic understanding of the subject. The specific details and combinations, though, always depend on the particular home insurance company.
FAQs
What an umbrella policy does not cover?
An umbrella policy on top of your homeowner’s insurance can provide coverage for most liabilities. Keep in mind though, that it would never cover costs associated with your own being, such as:
- Your own injuries
- Intentional or criminal acts
- Damage to your personal belongings
- Any business you operate from your home
In addition, it doesn’t cover anything excluded from your original insurance coverage. For instance, if a certain recreational vehicle is uncovered and you injure another party with it, the policy won’t pay for the associated liability.
What does personal liability homeowner’s insurance cover?
This depends on the insurance package you purchase. In most cases, the following liabilities are covered:
- Medical bills associated with a visitor’s injury at your residence
- Bodily injuries or property damage unintentionally caused by you or your pet.
- Legal expenses relating to lawsuits seeking damages up to the amount defined by the policy
What are the main types of property insurance coverage?
The 3 main types of property insurances are:
- Actual Cash Value Coverage
This covers the repairs and replacement costs of your property minus the depreciation.
- Replacement Cost Coverage
It covers the repairs and replacement costs of your property at its original purchase value regardless of how much the said property has been appreciated or depreciated since then.
- Extended Replacement Cost Coverage
This is similar to replacement cost coverage, except it will pay over the coverage limits if the associated costs have increased. Typically, it is capped at 25% of the coverage limit.
Which are the most popular home insurance companies?
Excellent financial strength, great customer service, long history, and good policy options are some of the hallmarks of a great home insurance company.
The most popular home insurance companies in the country are as follows:
| Company | Market Share |
| State Farm | 18% |
| Allstate | 8.4% |
| USAA | 6.6% |
| Liberty Mutual | 6.5% |
| Farmers | 5.7% |
How much homeowner’s insurance do I really need?
A piece of common wisdom is that the biggest risk you can take when buying homeowner’s insurance is not buying enough of it.
You should buy enough homeowner’s insurance to completely cover the replacement cost of your dwelling as well as your personal belonging in the event of a disaster.
In the case of liability coverage, you should buy at least $300,000 – or more, if possible. With legal and medical costs today highly exorbitant (and rising), a small rise in the premium is worth it.
Lastly, when it comes to additional expenses, a rule of thumb is to set its coverage at 20-30% of your dwelling coverage amount.
What if someone gets hurt on my property? What is my liability in that case?
What type of liability you incur when someone suffers an injury on your premise is dependent on a number of factors. This can include:
- The visitor’s legal status (e.g. an invitee, social guest, or an unwelcome trespasser)
- The state of your property (Has an effort been made to make it a safer environment)
- Whether the injured party was an adult or a child
- Whether both you and the visitor were at fault for the injury
With some exceptions, premise liabilities can apply even if you are a tenant as the court presumes that your landlord, being not present at the premise, does not have adequate control over it, and thus, not to be held accountable.
