Types of homeowners insurance

Purchasing a home is a significant financial commitment. It is critical to obtain homeowners insurance to protect your new home. Basic insurance policies protect your home and belongings from damage and destruction caused by specific events such as fires or extreme weather. You would have to pay out of pocket to repair or rebuild your home if you did not have homeowners insurance.

However, not all homeowner's insurance is the same. According to Laura Adams, a personal finance and insurance expert, "there are different types of homeowners insurance for various property types, such as single-family homes, condos, co-ops, mobile homes, and older homes." Depending on the type of home you own, you can also select your coverage type based on the level of protection you require.”

The following are the most common types of homeowners insurance policies:

HO-1 policies
HO-2 policies
HO-3 policies
HO-4 policies
HO-5 policies
HO-6 policies
HO-7 policies
HO-8 policies

HO–1

An HO-1 policy is the most fundamental type of homeowners insurance policy. It only covers the structure of your home, attached structures such as garages, appliances, and home features such as carpeting. Personal property, liability, and additional living expenses are not covered. Because of these constraints, it is not a popular option for homeowners insurance.

HO-1 insurance is a named perils policy, which means it only covers your home in specific circumstances, which typically include:

Damage from aircrafts or vehicles
Explosions
Fire and lightning
Hail and windstorms
Riots
Smoke
Theft
Vandalism
Volcanic eruption

HO–2

An HO-2 insurance policy, also known as a broad form, protects your home and personal belongings. Most insurance companies will cover your personal belongings wherever they are, whether at home, in your car, or elsewhere. In some cases, HO-2 policies may include liability coverage. Contact your insurance company directly to find out if your HO-2 policy includes liability coverage.

HO-2 insurance, like a HO-1 policy, is a named perils policy that protects your home and personal belongings from the same perils as a HO-1 policy. This policy type covers everything that the HO-1 does, plus a few extra perils:

Unintentional discharge or overflow of water or steam in the home
Some household systems are tearing apart, burning, and cracking.
Pipes, as well as heating and cooling systems, have frozen.
Certain electrical currents can cause unexpected and unintentional damage.
A falling object
Weight due to ice, snow, or sleet

HO-3

The HO-3 Special Form policy, which covers your home, personal property, liability, additional living expenses, and medical payments, is the most common type of homeowners insurance.

According to Adams, "an HO-3 is considered standard coverage." It provides ‘open perils' coverage for your home structure, which protects you against all disasters unless the policy specifies exceptions. Personal possessions, on the other hand, are covered by ‘named perils' coverage, which applies to disasters named in the policy.”

The following perils are typically excluded from your home and other structures:

Construction or maintenance flaws
Problems with the foundation
Governmental initiatives
Animal or pet damage
Corrosion and pollution
In vacant homes, there has been theft, vandalism, and frozen pipes.
Deterioration
Flood
Earth tremors
War
Nuclear danger
Loss on purpose
Neglect
Mold, fungus, and wet rot
Power outage
Ordinance or law
Mechanical failure
Smog, rust, or corrosion
Birds, rodents, and vermin
Any animals that the insured owns

Because your personal property is covered by named perils, your personal items are usually covered in the following situations:

Damage caused by aircrafts or vehicles
Damage caused by the weight of snow or ice
Electrical current-related damage
Explosions
Objects that fall
Fire and lightning
Windstorms and hail
Pipes freezing
Riots
Smoke
Theft
Vandalism
Volcanic eruptions
Water damage caused by a plumbing or HVAC overflow
Water heater damage

HO–4

A standard renters insurance policy is known as a HO-4 insurance policy. Renters insurance protects your personal belongings and provides liability protection. Some policies also cover additional living expenses, which can help you pay for food and hotel bills if your home is damaged and you must relocate temporarily. Because renters do not own their homes, HO-4 policies do not cover the structure of the building.

Typically, renters insurance policies are named peril policies that cover the following events:

Damage caused by aircrafts or vehicles
Damage caused by the weight of snow or ice
Electrical current-related damage
Volcanic eruptions
Explosions
Objects that fall
Lightning and fire
Windstorms and hail
Pipes freezing
Riots
Smoke
Theft
Vandalism
Water damage caused by a plumbing or HVAC overflow
Water heater damage

HO–5

If you're looking for the gold standard in home insurance, look no further than a HO-5 policy. This is the most comprehensive type of home insurance available, covering your home, personal belongings, liability, additional living expenses, and medical payments for others. These policies also provide higher available limits for items such as jewelry.

Adams recommends HO-5 homeowners insurance policies for people who have high-value items. “It typically costs more and may not be offered by every insurer, but it may be worth it if you have many valuable possessions,” she says.

An HO-5 policy covers both your home and your personal belongings under an open perils policy, which means it will protect you from anything not specifically excluded in your policy. Some examples of common exclusions are:

Earth movement
Government actions or laws
Infestation of birds, rodents or insects
Intentional loss
Mechanical breakdown
Mold
Nuclear hazard
Pets
Vandalism if the property is vacant more than two months
War
Water damages from floods or sewer backup

Because a HO-5 policy is written on an open perils basis rather than a named perils basis, it covers more situations and can make filing a claim easier because you do not have to prove that a covered peril caused the damage.

HO–6

HO-6 insurance is only available to condo owners. It includes coverage for everything inside your unit, as well as personal liability and additional living expenses. Because some condo owners are responsible for the interior walls of their units, condo policies may include a small amount of dwelling coverage. Because condo owners only own their unit and not the entire building, the condo association has its own insurance policy that covers common areas, grounds, and the building's exterior. In the form of condo or HOA fees, condo owners contribute to the association's insurance.

HO-6 policies are named peril policies that provide coverage for the following risks:

Damage from aircrafts or vehicles
Damage from the weight of snow or ice
Damages caused by an electrical current
Explosions
Falling objects
Fire and lightning
Hail and windstorms
Pipes freezing
Riots
Smoke
Theft
Vandalism
Volcanic eruptions
Water damage from plumbing or HVAC overflow
Water heater damage

HO–7

An HO-7 insurance policy covers trailers, sectional homes, RVs, and modular homes, as well as mobile or manufactured homes. This type of policy covers the structure of your home, your personal belongings, liability, additional living expenses, and medical payments.

Your home's exterior is covered by an open perils policy, which covers any situation that isn't explicitly stated in your insurance policy.

HO-7 policies, on the other hand, cover your personal belongings under a named perils policy. That means your personal items are only covered under certain conditions, such as:

Damage from aircrafts or vehicles
Explosions
Fire and lightning
Hail and windstorms
Riots
Smoke
Theft
Vandalism

HO–8

The HO-8 policy is the final type of homeowners insurance, and it is ideal for homeowners who have older homes or homes that would be difficult to replace. This includes architecturally significant homes, historic landmark homes, and homes constructed using materials and methods that are no longer common. If the cost of repairing your damaged home exceeds its current value, a HO-8 policy may be a viable option.

The standard coverage for dwelling, personal property, liability, additional living expenses, and medical payments is included in HO-8 policies. A named perils policy protects both the structure of your home and your personal property. This includes things like:

Damage from aircraft or vehicles
Explosions
Fire and lightning
Hail and windstorms
Riots
Smoke
Theft
Vandalism

Frequently asked questions

What is the cheapest home insurance?

Renters insurance is technically the cheapest type of home insurance, and it can cost as little as $20 per month for some people. Traditional homeowners insurance, on the other hand, is much more expensive. Even so, the cost of homeowners insurance varies. The location of your home, your age, the value of your home, and your credit score are all factors that can raise or lower your interest rate. You can, however, try to find the providers who offer the cheapest home insurance for your situation.

How much should I be paying for homeowners insurance?

The cost of homeowners insurance varies greatly between individuals. However, the average cost of home insurance in the United States in 2018 was $1,249 per year. You should do some research and obtain several quotes to get an idea of how much homeowners insurance costs in your area.

How many types of home insurance are there?

There are eight different kinds of home insurance. They are labelled HO-1 through HO-8. Each category is designed for a specific type of home and has its own set of coverages.

Is everything covered by the different types of homeowners insurance policies?

Each type of homeowners insurance is tailored to a specific homeowner, and each has its own set of limitations. According to Adams, "the peril must be accidental and sudden, regardless of the type of home insurance you have." If you have damage as a result of your own negligence, it will not be covered.”