Different Types of Home Insurance

Insurance Types

Insurance doesn’t matter until it does. For most people, their home is the biggest purchase they’ll ever make. Therefore, it’s important that you make sure that it remains safe in the event of any mishaps or accidents. From earthquakes to avalanches, dwellings to stand-alone structures, you can literally buy insurance for anything. Below are a few different ways to look at insurance:

important terms:

  • Open-peril policy – only those perils excluded in the policy will not be covered. Some will still be covered to a certain amount even if they are excluded if the incident occurs suddenly*
  • Peril policy – only those perils listed in the policy will be covered. Also known as named peril*
  • Replacement cost value (RCV) – pay the entire replacement amount
  • Actual cost value (ACV) – pay the replacement amount minus depreciation

*some policies have named peril for certain items and open peril for others. For example, an HO-3 has open peril for dwelling but named peril for contents/possessions

Different Homeowners Policies:

HO-1’s basic form

  • Includes insurance against fire and lightning, two of the unlikeliest occurrences, in addition to explosions, hail and windstorms, theft, vandalism, damage from vehicles, damage from aircraft, riots and civil commotion, and volcanic eruption
  • Usually don’t include personal possession or personal liability coverage
  • Many states no longer offer a basic form of home insurance since it is not very cost-effective and you can get a more comprehensive policy through an HO-3 form (which is usually only slightly more expensive).

HO-2’s broad form

  • Includes insurance against falling objects, weight of ice, snow, or sleet, freezing of household systems like AC or heating, sudden and accidental tearing apart, cracking, burning, or bulging of pipes and other household systems, accidental discharge or overflow of water or steam, sudden and accidental damage from artificially generated electrical current
  • Will cover personal belongings and sometimes personal liability

HO-3’s special form

  • Most common form of home insurance
  • Must meet structural and cosmetic update requirements to purchase this type of insurance (if too old may need to buy HO-8 insurance instead)
  • Covers everything EXCEPT damage caused by earth movement (like an earthquake, landslide, or mudslide), ordinance of law, water damage (although sudden and accidental water damage is included), power failure, neglect, war, nuclear hazard, intentional loss, government action, collapse (some coverage may be provided in your policy), theft to a dwelling under construction, vandalism or malicious mischief (only if vacant more than 60 days), mold, fungus, or wet rot (some coverage may be provided in your policy), wear & tear, deterioration, mechanical breakdown, smog, rust & corrosion, smoke from agricultural smudging and industrial operations, discharge, dispersal, seepage of pollutants, settling, shrinking, bulging, or expanding, or animals
  • HOB same as HO-3 except it is more for houses located on the coast that are at risk of water damage

HO-4 tenant’s form

  • Protects just your possessions
  • Does not include dwelling coverage. That is covered by the landlord’s insurance

HO-5 comprehensive form

  • Most expensive form of home insurance but covers the most perils since it is an open-peril policy
  • Generally for people with a new, higher-value home than other houses in the state
  • Some HO-3’s may not differ much in price from HO-5’s, making it worth it to go for the HO-5, the more comprehensive policy
  • Most offer replacement cost value (RCV) (see definition above) unlike HO-3’s
  • Not available at all insurance agencies
  • Covers everything EXCEPT damage caused by earth movement (like an earthquake, landslide, or mudslide), floods, water, infestation of birds, vermin, rodents, and insects, neglect, deterioration, and general wear-and-tear, settling, shrinking, bulging, or expanding of your home’s foundation, pets and other animals, mold, fungus, and rot, intentional loss, war, government action, and nuclear hazard, ordinance or law, or smog, rust, and corrosion

HO-6 condo form

  • Insurance policies will differ depending on your condo association’s master policy
  • Some associations only cover common areas, ceilings, walls, and landscaping so you may need to purchase personal insurance for your own unit, possessions, etc.

HO-7 mobile home form

  • Same as HO-3 except it covers mobile homes
  • Unlike HO-3, however, it is a peril policy not an open-peril policy

HO-8 older home form

  • Includes additional coverage specifically for older homes on top of normal HO-3 coverage
  • Will cover the costs of updating appliances, fixtures, and materials
  • Either for homes over 40 years old or for homes that don’t meet minimum HO-3 requirements for HVAC, electrical, plumbing, and roof
  • Reimbursement determined by the property’s actual cash value

Check with your insurance agent to see exactly what your insurance covers. For supplemental coverage (for instance for floods, earthquakes, or landslides), you can purchase additional insurance policies. Below are some supplemental policies you can purchase:

Supplemental Insurance:

Flood insurance

  • Covers any flood-related damages
  • While this is not required for everyone, it may be necessary for people who live in a designated flood zone

Earthquake insurance

  • Covers the repair/replacement of your house in the case of damages caused by an earthquake

Sewer backup

  • Covers damages from a sewer or drain backup
  • While some policies cover water damage, they might not cover any damages caused by broken pipes

Sinkhole insurance

  • Common in areas such as Florida

Animal Liability

  • Covers damages caused by your pets/animals

Umbrella policy

  • Has much higher liability limits
Scroll to Top