Solved! What Are the 8 Types of Homeowners Insurance Policies?

There are eight different types of homeowners insurance policies designed to cover a variety of needs and property types. Learn about which type might make sense for you.

By Michelle Honeyager | Published Jul 20, 2022 11:20 AM

Types of Homeowners Insurance Policies

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Q: I’m looking at buying my first home and know that I will need a homeowners insurance policy, but I’m at a bit of a loss as to what kind of policy I need. What are the different types of homeowners insurance, and what does homeowners insurance cover? How do I know which one is right for me and my home?  

A: There are eight different types of homeowners insurance policies, ranging from HO-1 to HO-8 policies. These insurance products each have different coverage limits and insure different types of properties. For instance, an HO-1 policy offers the most basic coverage for a home against only 10 perils, while an HO-6 policy is specifically for condo owners. Read on to learn more about the different types of insurance for homeowners so that you can find out which type is the best home insurance product for your situation and compare homeowners insurance quotes from different providers.

There are eight different types of homeowners insurance policies, and the one you need depends on the type of home you have and the amount of coverage you need.

There are eight different types of homeowner insurance policies, each with its own specific type of coverage. Homeowners can choose an insurance policy that only covers the basic perils, or they might look for a product that covers a wider range of potential situations. Some products are even available for harder-to-insure homes.

Types of Homeowners Insurance Policies

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Each home insurance type has differences in coverage limits, and policyholders can add additional coverage as necessary for certain types of valuable property. Homeowners may be able to choose between actual cash value or replacement cost to cover their items (the former reimburses the policyholder for the depreciated value of the item, while the latter reimburses the policyholder for the full replacement cost of the item in today’s prices, after the deductible has been paid). In addition, homeowners can choose to increase coverage limits or add on additional coverage for certain perils not already included in the policy. Some homeowners may also choose to increase personal property coverage or even raise their limits of liability. Homeowners will want to research the different insurance products available to them to ensure they’re getting the appropriate coverage before they obtain home insurance quotes.

At the forefront of many shoppers’ minds is the question of how much is homeowners insurance? The cost of homeowners insurance can depend on the type and level of coverage. Basic policies tend to be less expensive, while policies that offer higher coverage come with more expensive premiums. It can pay to get a homeowners insurance quote to find the best homeowners insurance company for you.

HO-1 insurance is a basic policy that insures a home and personal belongings at cash value against a limited number of perils.

HO-1 is also called a basic form policy because it offers the most basic level of coverage. It insures dwellings at actual cash value, which means the policy covers the value of the home minus depreciation once the deductible has been paid. This is an important point to consider; not getting the full current value of the home could impact the funds available for rebuilding or repairing.

Another hallmark of HO-1 policies is that they only offer coverage for 10 named perils: fire/lightning, windstorm/hail, explosion, riots, aircraft, home damage from vehicles, smoke, vandalism, theft, or volcanic eruptions. If a peril other than these events occurs, it would not be covered under an HO-1 policy.

HO-2 is a broad form policy that covers a home at replacement value and belongings at cash value against a wider range of perils.

Most homeowners don’t choose HO-1 policies since the coverage is so limited (and is rarely offered by insurance providers), and while the HO-2 is a step up, it makes up only a small percentage of the total homeowners insurance policies sold. This level of insurance increases the number of perils covered to 16,including weight of snow or ice, cracking or bulging of the home, electrical discharge, falling objects, freezing, or accidental overflow of a water system.

 types of homeowners insurance

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This type of policy offers replacement cost coverage for the dwelling, which means the amount of money it costs to repair or replace the home is paid without deducting for depreciation, less the deductible. However, it’s important to keep in mind that this type of policy only replaces belongings at actual cash value, so a drawback with this policy is that it still might not fully reimburse for lost or damaged possessions. An HO-2 policy may also include liability coverage, medical payments, and additional living expenses.

HO-3, or special form insurance, offers open-perils dwelling coverage and is one of the two most common types of homeowners insurance.

HO-3 insurance offers open-perils coverage dwelling coverage, which means that any damage to the home will be covered under the policy except what the policy specifically lists as excluded. The commonly excluded perils for HO-3 policies include floods, earthquakes, landslides, sinkholes, neglect, nuclear accidents, and war. It’s common for homeowners in high-risk areas to purchase separate flood or earthquake insurance for these perils.

This type of policy covers damage to the home at replacement cost, while personal possessions are often reimbursed by cash value. It’s important to note that personal property is only covered for named perils. However, homeowners may be able to add endorsements to convert actual cash value coverage to replacement cost coverage.

Types of Homeowners Insurance

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An HO-4 policy is also known as renters insurance, and it offers coverage for personal property, liability, and loss of use only.

The HO-4 policy is designed for renters rather than homeowners. This type of policy covers a renter’s personal property at either actual cash value or replacement cost, depending on the policy, after the renter has paid their deductible. This type of policy also offers liability coverage, which would apply if the renter or their family accidentally caused property damage or injury to someone else. HO-4 insurance can also provide coverage to renters if they’re found legally responsible for injuries or property damage, and it can provide medical payments if someone is injured on the property regardless of fault. The best renters insurance can also cover loss of use, which would apply if the renter could not use their apartment while repairs were being made and needed to move out temporarily. The policy may provide coverage for costs that go above normal living expenses, such as hotel fees. Damage that occurs to the building itself is covered by the landlord’s insurance, unless the renter is found legally liable for causing the damage, in which case the liability portion of their insurance could provide some coverage.

Renters insurance is generally affordable to purchase, and many (though not all) landlords require renters to carry insurance. Even if a landlord doesn’t require it, renters insurance is a good idea for renters because of its affordable price and the coverage it offers.

An HO-5 policy, or comprehensive form insurance, is similar to HO-3 but has open-perils coverage for personal property.

The HO-5 policy is similar to an HO-3 policy as it insures the home itself at replacement cost. However, HO-5 insurance covers personal possessions at replacement cost as well, while HO-3 policies only cover personal possessions at actual cash value. For instance, this type of policy covers both the dwelling and personal property at replacement cost. HO-5 policies also expand coverage so both personal property and the dwelling have more comprehensive coverage, meaning unless an event is specifically excluded from the policy, it is covered.

Types of Homeowners Insurance

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A hallmark of the HO-5 policy is that it can also increase coverage limits for more expensive items. Homeowners who have valuable jewelry, art collections, high-end electronics, musical instruments, or sporting equipment will likely want to choose an HO-5 policy over an HO-3.

HO-6 is also known as condo insurance, and it offers coverage for dwelling, personal property, loss of use, liability, and more.

Condo owners generally need a specific type of insurance coverage because of the nature of how the building and the condo owner’s property and individual unit is covered. This type of insurance is also known as the unit-owners form and can cover those who live in a condo or a co-op. Condo insurance costs can vary depending on the amount of coverage needed, the location of the unit, and more.

The condo association will often have an HOA insurance policy that covers the building itself or shared spaces. HO-6 condo insurance is meant to fill in the gaps of what the HOA insurance policy does not cover. This might include the actual part of the building owned by the condo owner, like the walls, floor, or ceiling in the unit. It is similar to renters insurance in that it provides coverage for loss of use, liability, and personal property. HO-6 policies can also cover renovations and upgrades to the unit in some cases.

HO-7 insurance is similar to an HO-3 policy but is designed specifically for owners of mobile homes.

HO-7, also called the mobile home form, is a type of insurance product designed for anyone who has a home that is not considered a fixed traditional home. These policies can cover manufactured homes, mobile homes, trailers, park model homes, sectional homes, or modular homes.

It’s important to note that this type of policy covers a home while it is stationary, not in transit. Additionally, these policies typically offer the same coverage that an HO-3 policy provides. Talk to an insurance agent about the best mobile home insurance options.

HO-8 insurance offers basic coverage for homes that would not qualify for HO-3 insurance due to a higher risk of loss.

HO-8 insurance offers coverage for older or historic homes that might not qualify for a traditional homeowners insurance policy. Certain homes would be very expensive to replace and their repair costs could be higher than the value of the home itself. These types of policies offer cash value reimbursement after the homeowner has paid their deductible, and they cover fewer perils; the same ones covered by the very basic HO-1 policy.

Homes can be hard to insure for a number of reasons. Older homes that were not built to modern safety codes or have more wear and tear are often considered a higher risk to insure. There is a higher chance that something could happen to the home, such as a house fire caused by old wiring. Homeowners can upgrade or repair these potential risks and may be able to qualify for a different type of homeowners insurance. However, some homeowners may not want to upgrade because the home is historic or they cannot afford repairs. An HO-8 policy can fit these circumstances.

With eight types of homeowners insurance available for different types of homes and situations, it’s important for homeowners to consider the type of coverage they need before choosing a policy. Comparing quotes and coverage from different homeowners insurance companies is a good place for homeowners to start, as it will allow them to find the best coverage for them at a price that fits into their budget.