Among the jargon on your homeowners insurance policy paperwork, you may notice the letters “HO” followed by a number. This identifies your homeowners policy form — the contract language at the core of the policy. (“Form” in this case is not to be confused with a piece of paperwork you may be asked to fill out and sign for your policy.)
Fact is, several types of properties can be insured with a homeowners policy. So, there are several types of policy forms to meet each type’s specific insurance needs.
Here’s a description of each of these forms.
HO-1: Basic Form
This is the most basic type of policy for owner-occupied, standalone, single-family homes. It protects against ten “named perils.” These are:
- Fire or lightning
- Hail or windstorms
- Explosions
- Rioting or civil commotion
- Damage from aircraft
- Damage from vehicles
- Smoke
- Malicious mischief or vandalism
- Theft
- Volcanic eruptions
A policy with named perils only pays if the damage or destruction to your home is caused by one of these events. If an event not listed here damages your home, the repair costs will come out of your own pocket!
These policies also typically do not provide coverage for your personal property (things such as your electronics, furniture, clothing, and other valuables), your personal liability, or additional living expenses incurred if your home is damaged and you need to move out temporarily.
Because HO-1 policies are so limited, they're unavailable in many parts of the country.
HO-2: Broad Form
Think of this as an upgrade from the HO-1 policy. Also for single-family homes, an HO-2 policy adds six events to the list of named perils for a total of 16. The additional six are:
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge of water or steam
- Sudden and unexpected tearing apart, cracking, burning, or bulging of your home's plumbing or HVAC system
- Freezing of household systems
- Sudden and unexpected damage from your home's electrical system
Again, as a named perils policy, an HO-2 will pay to repair your home only if the damage is caused by one of these 16 types of events.
Unlike an HO-1 policy, an HO-2 home insurance policy will cover your personal property and personal liability. It will also cover additional living expenses if you're forced to move out temporarily because your home has been damaged by one of the named perils.
HO-3: Special Form
HO-3 is by far the most common policy type for owner-occupied, single-family homes. It provides dwelling and other structures coverage on an open perils basis. This means it'll pay for damages to your home or unattached structures due to any incident unless it's expressly excluded in the policy contract. Typical exclusions include earthquakes and flooding (but coverage for these may be added to the policy or purchased as separate policies).
HO-3 home insurance policies provide named perils coverage for your personal property. It also covers personal liability, and additional living expenses if you're forced to move out temporarily because your home is being repaired due to a covered incident.
HO-4: Contents Broad Form
If you're renting an apartment or house, then HO-4 is the policy for you. An HO-4 renters insurance policy provides no coverage for the dwelling itself — this is your landlord's responsibility (they should purchase a landlord insurance policy, which is outside of the scope of this article).
What an HO-4 does provide is coverage for your personal property — things such as furniture, clothing, and electronics). This is typically on a named perils basis. It also provides personal liability coverage and pays for your additional living expenses if your apartment becomes temporarily uninhabitable due to damage.
HO-5: Comprehensive
An HO-5 policy offers the highest level of protection for owner-occupied, freestanding, single-family homes. It provides coverage for the dwelling and unattached structures, along with personal property, all on an open perils basis.
Because an HO-5 is so robust, it will typically cost more than an HO-3 policy. As such, HO-5 is usually marketed to those with high-value properties.
HO-6: Unit Owners
An HO-6 policy is designed for the unique insurance needs of condominium unit owners.
It complements the condominium association’s policy, which usually covers common areas, exterior walls, and roofs. An HO-6 policy picks up where the association's policy leaves off, providing coverage needed by the individual unit owner. This may include dwelling coverage for the interior walls and fixtures on a named perils basis, plus coverage for personal property, personal liability, and additional living expenses if the unit becomes temporarily uninhabitable due to damage from a covered loss.
Tip: When buying an HO-6 condominium insurance policy, have a copy of the association’s policy or bylaws handy to ensure you understand exactly what you do and don't need to insure.
HO-7: Mobile Home Form
An HO-7 policy is for those who own manufactured and mobile homes — prefabricated homes delivered to a property in a single piece and placed on a standard foundation.
Aside from the intended home type, an HO-7 mobile home insurance policy is similar to an HO-3 policy. It provides coverage for the dwelling and unattached structures on an open perils basis, plus named perils coverage for personal property. It also provides personal liability and additional living expense coverage.
HO-8: Modified Form
An HO-8 policy is designed for older homes whose replacement costs exceed the home’s market value. These homes are typically more than 40 years old, may be a registered landmark or architecturally significant, and may be built with hard-to-replace materials.
Similar to an HO-1 policy, an HO-8 provides coverage only for the ten basic named perils. However, an HO-8 will also cover personal property, liability, and additional living expenses.
Because older homes tend to be so costly to replace, HO-8 damage claims are usually paid on an actual cash value basis. This means the insurer will calculate depreciation when deciding on a claim settlement amount.
How and why policy forms are standardized
The “HO” is a labeling system used by the Insurance Services Office (ISO). This organization provides information and services that help insurance companies improve the products they offer. Among these services is a series of policy forms (contracts) for homeowners insurance. ISO provides these policy forms as templates, with the legal language already reviewed by courts and insurance regulatory bodies.
The insurance company can thus adopt the ISO templates as their own policy forms, knowing the language passes muster with the courts and the law. In practice, many insurance companies modify these templates to suit their business needs. But some do issue policies using unmodified ISO policy forms.
What's not covered on a standard homeowners insurance policy
No type of standard homeowners policy — not even one with open perils coverage — will cover every possible event that might occur with your home. Insurers typically exclude certain catastrophic events, meaning they won't pay for claims when they damage your home. They do this to limit their overall risk, which also helps them keep their policies affordable.
Two of the most common exclusions are earthquakes and floods. The good news is that if you live in an area prone to either of these events (an earthquake-prone state such as California or a flood-prone location such as a river valley), you can get coverage. Earthquake insurance is available either as a standalone policy or as a coverage added to a standard homeowners policy for extra premium. Flood insurance policies are available through the federal National Flood Insurance Program.
A final word on buying homeowners insurance
Homeowners insurance can be a complicated thing to understand and purchase. It's a good idea to review the policy contract to understand precisely what is and isn't covered. And if you have any questions or need clarification, contact either your insurance agent or the insurance company directly.
Glossary of terms
Exclusion
A specific incident that is not covered by your policy. A homeowners policy may list multiple exclusions, including earthquakes and flooding. If an excluded event damages your home, your homeowners policy will not pay to repair that damage.
Named peril
A specific incident that is covered by your policy. Some types of homeowners policy cover a “basic” list of ten perils, while others cover a “broad” list of 16 perils.
The ten basic perils include:
- Fire or lightning
- Hail or windstorms
- Explosions
- Rioting or civil commotion
- Damage from aircraft
- Damage from vehicles
- Smoke
- Malicious mischief or vandalism
- Theft
- Volcanic eruptions
The 16 broad perils include:
- Fire or lightning
- Hail or windstorms
- Explosions
- Rioting or civil commotion
- Damage from aircraft
- Damage from vehicles
- Smoke
- Malicious mischief or vandalism
- Theft
- Volcanic eruptions
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge of water or steam
- Sudden and unexpected tearing apart, cracking, burning, or bulging of your home's plumbing or HVAC system
- Freezing of household systems
- Sudden and unexpected damage from your home's electrical system
Open perils
Open perils means the policy will cover any type of peril, unless it’s expressly excluded in the contract language. This is the most expansive type of coverage.
Peril
A type of incident that may damage your home or property. Common examples are fire and theft.
Policy form
The contract language that establishes the contractual agreement between the insurance company and you.