Types of Homeowners Insurance

The Standard Types of Homeowners Insurance

The types of homeowners insurance available to you are fairly standard throughout the United States. There are basically seven types, all beginning with the letters HO.

HO-1 is an older type of policy that is no longer popular these days. It typically provides very limited coverage against specific types of damage to items listed in the policy. Because this type of policy offers such limited protection, it is rarely sold today.

An HO-2 policy offers broader coverage than an HO-1 policy, but its coverage is limited to specified parts of your home. It is called a "named perils" policy because it protects you only against the hazards that the policy specifies.

An HO-3 policy is the most common type of homeowners insurance. It covers all parts of your home against all hazards except those specifically excluded in the policy. Because of its broad-based coverage, it is sometimes called an "all risk" policy. An HO-3 policy also includes liability coverage for visitors who may be injured on your property. HO-3 policies typically exclude a few specific types of loss, such as damage from floods, earthquakes, and sink holes. You can purchase separate coverage for these hazards.

An HO-4 policy is commonly called renters insurance. If you rent your home, your landlord's insurance probably provides some coverage for your personal property. But for your peace of mind, you will probably want to have your own policy as well, especially if you have some valuable possessions. Renters insurance also provides liability protection for injuries to visitors and passers-by.

An HO-5 policy is similar to an HO-3, but it provides even broader coverage. For example, an HO-5 policy might include coverage for unusually valuable property such as art, jewelry, or antiques. This type of policy might also include protection against hazards excluded in most HO-3 policies. Because of its broad coverage, an HO-5 policy is more expensive than the more common HO-3.

An HO-6 policy is designed specifically for condo owners. Condo owners are in a tricky position because they own just part of a building. This type of policy covers their personal property and the portion of the building they own. The condo owners association typically provides some coverage for these things, but it may have significant limitations. Most condo owners choose to buy their own coverage in addition to what the association provides. HO-6 policies also provide liability protection for visitors who are injured on your property.

An HO-8 policy is sometimes called "older home" insurance. Many older homes have a lower market value than replacement value. That is, the price you could get for the home is much less than the cost of replacing it. An HO-8 policy allows you to insure your home for its market value rather than its replacement value.

In addition to these seven types of policies, you may also be able to buy a type of insurance called "extended replacement cost." Most policies cover the full cost of replacing your home under normal conditions. But if you lose your home as the result of a natural disaster such as a hurricane, the cost of replacing it may be significantly higher. After a natural disaster, the cost of building materials and construction services usually goes up dramatically. Policies that cover extended replacement costs take these higher prices into account.