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Types of Homeowners Insurance
Navigating the home insurance industry can be tough, especially for new homeowners. Finding the right policy takes time — and we’re here to help.
There are eight different types of homeowner insurance, but not all of them are suited for the owners of traditional houses. Each type is focused on specific coverages for a specific kind of home.
The 8 types of homeowners insurance policy types:
- HO-1 — basic form (for homeowners). Not widely available, this policy only covers you for specific named perils. Any other damage is not covered.
- HO-2 — broad form (for homeowners). This policy also only covers named perils, but will financially protect your home’s structure, personal liability and, in some cases, additional living expenses.
- HO-3 — special form (for homeowners). This is an open-peril policy, meaning anything is covered except exclusions that are listed in your policy.
- HO-4 — tenant’s form (for renters). Renters insurance covers your personal belongings within the dwelling, rather than the home’s structure.
- HO-5 — comprehensive form (for homeowners). This is another open-peril policy that includes personal belongings in this more comprehensive form of coverage.
- HO-6 — condo form (for condo or co-op owners). This covers the interior structure of your condo, personal property and personal liability.
- HO-7 — mobile home form (for mobile home owners). Similar to HO-3 coverage, this usually features open-peril coverage for manufactured homes.
- HO-8 — older home form (homeowners). For homes at least 40 years old, this policy accounts for the fact that replacement costs will likely be higher than the home’s value.
The most basic form of homeowners insurance is rarely offered nowadays. Because home insurance plans that offer more coverage are only slightly more expensive than this basic plan, many home insurers chose not to carry HO-1 insurance.
HO-1 is a named peril plan, so anything that happens outside of the perils specifically named in the policy is not covered.
The basic type of homeowners insurance only covers 10 perils: fire or smoke, explosions, lightning, hail and windstorms, theft, vandalism, damage from vehicles, damage from aircraft, riots and civil commotion, and volcanic eruption.
Fine print is where coverage gets tricky, as the cause of loss for certain weather events can be hard to distinguish. An example is a tornado, which may not fall under a provider’s definition of “wind damage.”
Who should consider this type of home insurance: Extreme budget-conscious homeowners or people with cash to pay for repairs on their own.
What is a peril? A peril is an event that can damage your home, like fire or vandalism. Your insurer should reimburse you for damage caused by covered perils.
The Broad type of home insurance is more common than basic. But just like HO-1, this type of home insurance only covers perils named in the policy.
Aside from covering the home’s structure, HO-2 usually covers personal belongings (including off-premise coverage), and some policies provide coverage for personal liability. The broad type of homeowners insurance covers all of the perils named in HO-1.
In addition, HO-2 also covers accidental discharge or overflow of water or steam, falling objects, freezing of household systems like AC or heating, sudden and accidental damage from an artificially generated electrical current, sudden and accidental tearing apart, cracking, burning, or bulging of pipes and other household systems, as well as weight of ice, snow, or sleet.
Who should consider this type of home insurance: Budget-conscious homeowners who want extra peace of mind with their coverage.
What is off-premise coverage? Off-premise coverage reimburses you for belongings that are damaged or stolen while not at your home, such as while traveling or while your child is living in a dorm at college.
The Special type of home insurance differs from the first two types. Rather than a named-peril policy like the first two, HO-3 is an open-peril policy. That means unless the insurer excludes a peril from the policy, then the policy covers any kind of peril, named or not.
Insurers often exclude earthquakes and flooding from HO-3 plans and offer coverage for them separately from the main policy.
Usually, an HO-3 policy will cover the home’s structure, as well as any structures that are attached like a carport or garage. The Special type of home insurance should also provide coverage for personal belongings and personal liability if someone is injured on the insured property. Your personal property is protected both on-premise and off-premise with this policy, giving you extra security if you travel. HO-3 is commonly offered by today’s leading home insurers.
Who should consider this type of home insurance: Most homeowners will opt for this type of coverage to have most of their belongings and structure covered, without getting comprehensive home insurance.
What is an exclusion? An exclusion is an event that won’t be covered by your insurer. Earthquakes and floods are common exclusions in homeowners insurance policies.
The Comprehensive type of home insurance is the gold standard in the industry. It is — as the name suggests — the most comprehensive kind of home insurance a homeowner can buy. Like HO-3, Comprehensive homeowners insurance is open-peril and will cover anything that’s not excluded from the policy.
Although HO-5 is similar to HO-3 in terms of coverage, there are a few important differences between the two kinds of home insurance.
While HO-3 only offers open-peril coverage on the home’s structure, HO-5 features open-peril coverage for personal belongings, as well as the structure of the home. After filing a claim, HO-5 pays out the replacement cost of the covered item, while HO-3 only replaces the item’s actual value. An HO-5 policy also has higher limits of coverage for valuables like jewelry. You’ll also enjoy off-premise coverage on your personal property, in case something is lost or stolen while you’re away from home.
Other differences between the two policies can differ by insurance company. But the Comprehensive type is usually more expensive than special, and fewer homes are eligible for a HO-5 policy.
Who should consider this type of home insurance: Homeowners with high-value property should get HO-5 Comprehensive home insurance.
What is the replacement cost? This means you’ll be paid the amount it costs to buy a new item today, rather than its current value. If your five-year Mac laptop is stolen, you’ll be reimbursed enough to buy a new, comparable model.
HO-8 Older Home
HO-8 home insurance is typically used to cover homes that are 40 years or older. If homes built decades ago are damaged or destroyed, then the materials needed for replacement are often more expensive than the home’s value. So insurance companies use this type of home insurance to offer affordable coverage to people who own older homes.
Like HO-1 and HO-2, Older Home insurance uses named-peril policies. HO-8 policies usually cover dwelling, personal property, liability and loss of use from named perils. Like other types of home insurance policies, your belongings will likely be covered off-premise as well.
[ Read: What Is Personal Liability Insurance? ]
The 10 named perils included in a HO-8 policy are the same perils named in an HO-1 policy. And rather than using the replacement cost included in HO-5, Older Home policies usually use common construction for paying out claims, which means that a rough equivalent of the destroyed material can be used for replacement.
Who should consider this type of home insurance: Homeowners living in a historic home that hasn’t been fully renovated.
What is a named peril? These are events listed in your policy that are covered. Any damage caused by something else will not be covered by your policy.
Renters insurance policy types
The Tenant type of home insurance is commonly known as renters insurance and provides coverage for people who want insurance for their rented dwelling. The purpose of this kind of policy is to protect items within the dwelling, as well as any permanent fixtures like cabinets that were installed by the renter.
Most renters insurance are named-peril policies that cover the same perils listed in HO-2. Renters insurance usually provides coverage for personal property, liability, medical payments to others, and additional living expenses resulting from loss of use.
Aside from permanent fixtures inside the dwelling installed by the renter, HO-4 does not provide coverage for any structures. That’s because this type of home insurance is for renters who do not own the property where they live. You do, however, benefit from off-premise coverage for your belongings, including if something is stolen out of your car.
Who should consider this type of home insurance: Any renter, especially if renters insurance is required in your lease.
What is loss of use? Loss of use is a coverage that reimburses policyholders for living expenses when their home is uninhabitable after damage. It covers expenses like hotel rooms, food and travel during reconstruction after a fire, for example.
Co-op or condo insurance policy types
The Condo type of home insurance is often referred to as “walls-in” coverage, because it covers the interior of a structure, while the condo association’s master policy will cover the exterior structure and common areas.
Condo insurance usually uses a named-peril policy, but some insurance companies will allow the coverage to be extended to an open-peril policy, which will also mean paying a higher premium.
HO-6 home insurance will generally provide coverage for building property, personal property (including off-premise coverage), personal liability and loss of use. Like other kinds of home insurance, HO-6 usually doesn’t cover flooding, and additional coverage will need to be purchased if flood insurance is desired.
Who should consider this type of home insurance: Condo owners whose HOA covers the exterior structure of the building.
What is a premium? This is the cost of your insurance policy. If you have a mortgage on your property, the annual premium is usually divided up and included in your 12 monthly payments.
Mobile home insurance policy types
HO-7 Mobile Home
HO-7 home insurance is specialized coverage for manufactured homes, which fall outside of the coverage areas for other types of home insurance. HO-7 will cover dwellings like RVs, trailers, sectional homes, as well as single-wide and double-wide mobile homes.
Mobile home insurance usually features open-peril policies very similar to HO-3.
[ Next: Does Home Insurance Cover Roof Damage? ]
Under an HO-7 policy, dwelling, detached structures, personal property and liability are generally covered. Your policy will also likely include off-premise coverage for your belongings. Like other kinds of home insurance, the age or size of the structure will probably affect the price of the premium with a HO-7 policy.
Who should consider this type of home insurance: Homeowners who live in a mobile home or own other mobile structures like an RV or trailer.
What is depreciation? This is the decrease in value as something ages, whether it’s property or a structure.
Types of home insurance coverages
Wondering what is the best type of home insurance? In order to understand the type of policy you need, it’s essential to know the types of coverages available in each one. The nuances can make a major difference in what’s actually covered when it comes time to file a claim. This home insurance guide will explain the details of what may be included in each policy so you can make an educated decision before purchasing (or updating) your home insurance.
Dwelling coverage applies to the actual structure of your home. It can also apply to attached structures, like a garage. Other structures on your property, like a detached garage, shed or fence, isn’t covered as part as your dwelling — you would need other structures coverage to be able to file a claim for any damage.
Coverage for personal belongings
Personal belongings coverage applies to your belongings in the home. Your policy may include replacement cost (which reimburses you for buying a new version of damaged property) or actual cash value (which only covers the item’s current value). In addition to covering your belongings inside your home, most policies include off-premise coverage as well. It can cover your items when traveling or in storage.
[ More: How to File a Home Insurance Claim ]
Liability protection helps pay for medical expenses or lost wages in case someone gets hurt on your property. This doesn’t apply to you or family members living in the home. But it does protect you in case a guest gets injured and wants to hold you responsible for their expenses.
Additional living expenses (or ALE) covers you in case you can’t live in your home while covered damages are being repaired. If a tree falls through your roof, it may be some time until you can safely live in the home. Additional living expenses cover things like hotel fees, furniture rental or storage unit costs.