If you take out a mortgage to purchase a new home, your lender will probably require you to get homeowners insurance. Before you start getting quotes, however, it’s important to know what type of home insurance you will need.
For example, if you own an older home, you might need to purchase an HO-8 insurance policy. Here’s what an HO-8 home insurance policy covers, how it differs from other types of coverage, and which homeowners can benefit from this policy.
What is an Ho8 Homeowners Policy?
An HO-8 insurance policy, also called the modified coverage form, is a type of homeowners insurance that is designed for older homes where the property’s actual cash value (ACV) is greater than the potential market value.
You might need an HO-8 insurance policy if your home was built more than 40 years ago, is a registered landmark, is constructed with rare materials, or holds some architectural significance.
Because these properties are generally more expensive to repair and rebuild, some insurance providers will not offer a standard HO-3 or HO-5 insurance policy, leaving HO-8 coverage as the only option.
What Does an Ho8 Policy Cover?
HO-8 home insurance offers the same types of coverage as many other home insurance policies. The HO-8 policy includes dwelling, other structures, personal property, liability, medical payments, and additional living expenses coverage.
However, HO-8 insurance provides more limited coverage compared to some of the more robust home insurance policies, like the HO-5 policy. Your dwelling and personal belongings are covered on a named perils basis, which includes the following 10 losses:
- Lightning and fire
- Hailstorms and windstorms
- Aircraft damage
- Vehicle damage
- Volcanic eruptions
- Civil unrest and riots
What Does Ho-8 Insurance Not Cover?
HO-8 home insurance policies offer coverage for the most common perils you could face as a homeowner. However, there are many perils that are excluded from this policy. HO-8 home insurance policies do not cover perils such as:
- General wear and tear
- Maintenance and repairs
- Pet damage
- Pests and infestations
- Mold, rust, and mildew
It’s also important to note that an HO-8 policy does not include the same named perils as some other policies. For instance, HO-2 and HO-3 insurance are both named perils policies, but they provide coverage for a list of 16 covered perils, rather than 10. Here are several other losses that are not covered under an HO-8 policy:
- Falling objects
- Accidental water discharge
- Accidental home system damage
- Accidental power surges
- Weight of snow and ice
What is the Difference Between Ho8 and Ho3?
HO-8 and HO-3 home insurance policies are very different. HO-3 insurance is a popular insurance policy for standard houses, whereas HO-8 insurance is only used to cover older homes, or properties with architectural significance.
In addition, HO-3 insurance is underwritten as an open perils policy and HO-8 insurance is a named perils policy. With an HO-3 policy, you have coverage for any loss that is not explicitly excluded from your policy. If you have HO-8 insurance, however, your home is only protected against 10 specific perils.
Does Ho8 Offer Replacement Cost?
When you file a claim for an HO-8 insurance policy, your payout is typically based on actual cash value (ACV), which includes depreciation. For example, if you spent $2,000 on new living room furniture that was damaged in a fire, you might only receive $1,500 to replace everything, depending on how old the furniture is.
However, you can typically upgrade your HO-8 policy to get replacement cost value (RCV) coverage, which does not subtract depreciation from your claim payouts. So, using the example from above, you would receive $2,000 to replace your furniture if you had an RCV policy.
Although an RCV HO-8 policy will provide larger payouts in the event of a claim, this type of policy will have a higher monthly premium. Also, consider that most home insurance policies offer very limited coverage for valuables, like jewelry and electronics. Even with an RCV policy, you may need to add an endorsement to get enough protection.
Who Needs Ho-8 Insurance?
Most homeowners don’t need HO-8 insurance. You should only purchase HO-8 insurance if your home is more than 40 years old, has some sort of architectural significance or is a registered landmark. You can also get HO-8 insurance if your home was constructed with rare or unique materials that would be very expensive to source and replace.
In order to get HO-8 insurance, you must live in the house full-time. If you own an older home that’s only occupied for a few weeks out of the year, or if you purchase an investment property that has historical significance but is not a full-time residence, you can’t get HO-8 insurance.
When you apply for a home insurance policy, your insurance provider should recommend an appropriate policy type. For example, if your home was built more than 40 years ago but has no architectural significance, you may be able to purchase a regular HO-3 or HO-5 policy. If you’re not sure what type of policy is best for your home, an insurance agent can help you choose and compare costs.