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Types of Homeowners Insurance Policies

Homeowners insurance is one of the most essential investments you can make to safeguard your house and, thus, your family, from unanticipated costs that you would otherwise have to pay yourself.

If you’re looking for homeowners insurance, you undoubtedly have a lot of questions. How much protection do you require? How much will insurance cost? What variables impact your deductible? Are there any home renovations, enhancements, or adjustments that may help you save money on your insurance?

These are all excellent questions to ask. Another critical issue to consider is: what kind of home insurance policy do I need?

Below, we go through six kinds of homeowners insurance plans and explain the major distinctions between them. This should help you understand what you need, but of course, speaking to an expert is the best thing you can do if you have further questions.

HO-1 Basic Form

HO-1 insurance is known as basic form homeowners insurance because it’s the most fundamental homeowners insurance available. Your house will usually be insured at its real cash value if you have an HO-1 policy. HO-1 insurance can cover personal items, however, this is not always the case.

HO-1 covers:

  • Lightning or fire
  • Windstorm or hail storm
  • Explosion
  • Riot or civil unrest
  • Aircraft
  • Vehicles
  • Smoke
  • Mischief and vandalism
  • Theft
  • Eruptions of volcanoes

Damage or loss caused by non-specifically mentioned occurrences is not covered.

Many insurance companies no longer sell these plans since they give so little coverage and do not cover certain commonplace occurrences (such as damage caused by falling items or the weight of snow or ice on a roof). Most individuals should avoid HO-1 insurance.

HO-2 Broad Form

HO-2 insurance is often known as broad form homeowners insurance since it covers a more extensive range of hazards than an HO-1 policy. Typically, HO-2 insurance will cover your house at its replacement cost. Personal property will be insured at its fair market value.

Typically, HO-2 insurance will cover everything that an HO-1 policy does, plus extra coverage for damage caused by:

  • The force exerted by ice or snow on a building
  • The unintentional release or excess of water or steam
  • Freezing
  • Cracking or swelling produced by an unexpected occurrence
  • An accidental discharge caused by an intentionally produced electrical current (i.e., a power surge)
  • Falling objects

HO-2 policies are more useful than HO-1 policies, although they’re still less common than HO-3 and HO-5 insurance. This is because of the limited coverage they provide in comparison.

HO-3 Special Form

The most popular kind of homeowners insurance is HO-3 coverage, which is sometimes referred to as special form coverage. Your house will usually be insured at its replacement cost under HO-3 insurance, while your personal property will be protected up to its real cash worth. In most instances, an endorsement may be added to your policy for a fee to offer replacement coverage for your personal goods.

When compared to HO-1 and HO-2 plans, HO-3 covers a considerably wider range of hazards. This is because, while HO-1 and HO-2 plans only offer coverage against particular specified dangers, HO-3 insurance will cover your house against losses caused by any hazard except those specifically excluded in the policy.

The following hazards are often excluded from an HO-3 policy:

  • Earthquake
  • Flood
  • Landslide/mudslide
  • Nuclear accident
  • Sinkhole
  • Neglect
  • Warfare or government action

Most homeowners will benefit from this kind of insurance. It’s no surprise that it’s the most popular home insurance coverage.

HO-4 Contents Broad Form

HO-4 is sometimes known as renter’s insurance. As a result, HO-4 insurance is intended especially for individuals who rent or lease an apartment, house, or condo.

Renters’ insurance protects a renter’s personal property (at replacement cost) against the same listed hazards as an HO-3 policy. Renter’s insurance will usually pay your living costs if your leased property becomes unlivable due to damage caused by a specified hazard, such as a fire, and you need to find a new place to live. Liability coverage may or may not be included in HO-4 insurance.

HO-5 Comprehensive Form

HO-5 insurance, often known as a comprehensive policy, is widely regarded as providing the greatest level of coverage for single-family houses. It is comparable to an HO-3 insurance policy in many respects, but with additional protection and a few significant distinctions.

An HO-3 only insures your house at its replacement cost, while your personal items are protected at their real cash worth. An HO-5 policy insures both your home and your personal possessions at replacement cost (which is typically higher than cash value).

Furthermore, while an HO-3 restricts coverage for personal items to just specified hazards, an HO-5 covers your belongings for all the same risks as your house. Finally, HO-5 insurance usually includes greater coverage limits for certain kinds of personal property, such as art, jewelry, and technology.

Because of the more significant coverage limits provided by HO-5 insurance, this is an excellent option if you have a lot of high-value personal property in your house or if you just want the most coverage available. HO-5 is the second most popular homeowners insurance coverage after HO-3.

HO-6 Unit Owners Form

An HO-6 policy, commonly known as condo insurance or unit owners insurance, is a kind of coverage explicitly intended for people who live in a co-op or condominium.

In most instances, the condo association will have HOA insurance, which will usually cover the condo building itself, as well as specific common spaces. While each HOA insurance will differ in terms of how much and what it covers, as the unit owner, you will need to buy coverage for anything the HOA does not cover. This will often contain protection for:

  • Any additions, renovations, or enhancements done to the unit after you bought it
  • The unit’s walls, floor, and ceiling
  • Personal belongings
  • Loss of use
  • Personal liability

Because HOA plans vary so much, it’s critical that you understand precisely what the master insurance covers so that you can buy sufficient coverage for your individual unit. If you own a condo or co-op, you’ll almost certainly require HO-6 coverage.

Renters’ insurance is required if you rent one of these condos (HO-4).