Types of Home Insurance Plans
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The HO System
Navigating the home insurance market is made easier by a series of eight standard policy types, numbered from HO-1 to HO-8. Each type shares common features so you can easily find policies that suit your situation and compare deals. Remember though that these are simply broad categories of policy so you’ll always need to look at the specific details of each policy to make sure it’s right for you.
Which Homeowners Insurance Policy Types Are Right For Me?
We’ve detailed the policy types below, but here’s a quick guide: If you own a standard home, check out HO-1, HO-2, HO-3, and HO-5. If you own a condo or are in a co-op, check out HO-6. If you own a non-standard home, check-out HO-7, and HO-8. If you rent, HO-4 is for you.
HO-1 - A policy that offers the most basic protection, that covers limited damage named in your policy
HO-2 - A policy that offers slightly more coverage than an HO-1, and a more commonly used basic homeowners insurance policy
HO-3 - The most commonly used type of homeowners insurance, covering personal property and covers the named perils that are covered in HO-1 and HO-2 plans
HO-4 - Coverage for Renters
HO-5 - The most comprehensive homeowners insurance, offering HO-3 coverage and includes additional coverage for expensive items and pays claims at replacement cost.
HO-6 - Condo Insurance, which offers coverage in addition to your condo's HOA insurance
HO-7 - Mobile Home Insurance
HO-8- Homeowners insurance for older homes that are older than 40 years.
In More Detail
People who own a standard home have four main options, covering two variables: whether you want a broad or narrow range of coverage and whether you want personal property covered as well as the building itself.
HO-1 and HO-2 are both “named peril” policies, meaning only events specifically listed in the policy are covered. An HO-1 policy pays out your claim at replacement cost, meaning the insurance company will either repair or replace the damages without factoring in the depreciation of the items. HO-1 covers the building against ten risks:
Aircraft damaging the building
Hail (and windstorms)
Riots and civil unrest
Vehicles damaging the building
While premiums tend to be lower, most companies do not offer these types of homeowners insurance policies anymore.
HO-2 is much more commonly available than HO-1. It usually adds in coverage for falling objects and water damage from events in the home itself, for example from burst pipes or washing machines. (Note that this doesn’t cover flooding from outside.) HO-2 also extends the coverage to personal property. HO-2 also covers the following:
Frozen or Burst Pipes
Damage due to snow or ice
Damage due to water heaters
Personal Property coverage
An HO-3 is the most common type of homeowners insurance. It takes an “all perils” approach, meaning it covers any damage to your dwelling and personal belongings unless the damage is caused by a peril specifically excluded in the policy. Common exclusions include earthquakes, flooding, and landslides.
HO-4 is renters insurance. It covers damage to renters' personal property, which is usually not covered by the landlord’s homeowner policy. A standard HO-4 policy covers the renter’s property on a “named peril” basis similar to HO-2. It will also usually pay for temporary accommodation if the rental property is damaged and becomes uninhabitable.
(When getting an HO-4 policy, check whether it covers accidental damage by the renter to the building or to the landlord’s property. Check also whether it covers liability for damage and injury to visitors.)
HO-5 policies take an all-perils approach and it offers the broadest type of insurance coverage. As the most comprehensive homeowners insurance available, an HO-5 policy covers your personal belongings, liability, additional living expenses, and medical payments coverage. This is the best type of homeowners insurance for people with many valuable possessions and covers the replacement cost of expensive jewelry, clothes, and electronics.
HO-6 is for condo owners and co-op tenants. In effect, it’s an enhanced HO-4 renter policy that also covers damage to the walls, floors, and ceilings. While an HO-6 policy is usually a very sensible purchase, always check how it will work alongside your condo association or co-op association’s own coverage.
HO-7 covers mobile/manufactured homes. Generally, it works in the same way as an HO-3 policy, meaning “all perils” coverage for the structure and “named perils” coverage for personal property.
Unlike a standard homeowner policy, an HO-7 policy doesn’t automatically assume you will be living in the property full-time. Instead, it may offer varying premium costs depending on how much of the year you use it. (An uninhabited property represents a greater risk to insurers as it’s a greater risk of burglary or fires that aren’t quickly tackled).
Usually, an HO-7 policy only covers the mobile home when it’s stationary, not when it’s being transported.
HO-8 covers older homes. Usually, they’ll be at least 40 years old and will have some components such as electrics or plumbing that don’t meet modern standards and thus make the home ineligible for standard homeowner insurance.
An HO-8 policy works on a “named peril” basis. One big difference is that if the home is destroyed, the policy pays out only the actual value of the house (taking into account depreciation) rather than the cost to completely rebuild and replace it.
To learn more about HO-8 insurance coverage, check out our article on Historic Homes Insurance Policies.
Frequently Asked Questions and Special Circumstances
How Does Homeowners Insurance Work In Texas?
Texas has an extra set of standard policies.
HOA: This is similar in principle and coverage to HO-1 but adds cover for smoke damage.
HOA+: This is similar in principle and coverage to HO-2 but adds cover for falling trees.
HOB: This is similar to HO-3 but includes coverage for some water damage excluded by HO-3. Examples include sewer systems backing up, slow leaks, and the cost of replacing foundations that have to be torn up to access pipes.
HOC: This is similar to HO-5, but adds the same extra water damage coverage as HOB.
Does Homeowners Insurance Cover Flood Damage?
None of the eight “HO” policy types cover external flood damage (meaning not caused by leaks in the home) as standard. Depending on your location you may be able to buy flood insurance from an insurance company through the government-administered National Flood Insurance Program. You may be required to have flood insurance as a condition of your mortgage.
Is Homeowners Insurance Required?
Homeowners insurance policies are not required by law but are typically required by mortgage lenders in order to protect their investment. Even in situations where you don't have a mortgage, it is a good idea to invest in some type of homeowners insurance in order to provide coverage for your property, personal belongings, and personal liability coverage. At PolicyScout, we can help you find the best insurance carrier to help protect your assets within your budget, regardless of your living and financial situations. Reach out to one of our agents today or request a quote here.
What Homeowners Insurance Policy is Right For Me?
When shopping for homeowners insurance, there are many different things to consider. If you own your home, an HO-2 plan is the easiest way to get limited coverage from most insurance companies. An HO-3 plan offers more comprehensive coverage and is considered the best option for most homeowners. If you own more valuable possessions, an HO-5 plan is an expensive option but provides the best replacement cost coverage. If you're renting or own a condo, an HO-4, or HO-6 plan is for you. If your dwellings are more unique, such as a mobile home or historic home, H0-7 and HO-8 plans are worth looking into.
Other Points To Consider
While all policies in a particular “HO” category share the common features detailed above, they can still vary significantly. In particular, they may have different deductibles, both for claims overall and for specific covered items. They may also have different payout limits, again for total claims and for individual items. This means that even when comparing within a particular “HO” category, it’s important to check the details of a policy rather than simply opt for the cheapest premium.