Types of Home Insurance Coverage: An Expert Guide (2024)

If you’re buying home insurance, you have likely noticed that while each company has some differences, the basics of the various homeowners’ insurance policies are the same. Each is made up of the same parts and coverages. That’s because homeowners’ insurance policies are standardized in what are known as policy forms.

There are a lot of different policy forms, from the broad form HO3 (the most popular choice) to the HO7 insurance policy form that’s designed for mobile homes. Each form outlines what’s included, what’s excluded, and which perils are covered. You may not have paid much attention to that code found on your declarations page, but it defines your policy.

So what are the policy forms, who creates them, and what do they mean to you? We’ll outline the different policy types and give you the lowdown on what each is designed to cover and how it works.

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What are the types of home insurance policy forms?

Homeowners’ insurance is well-regulated, and policy forms are created by the Insurance Services Office (ISO). ISO ensures that all policies conform to the same basic standards and requirements. One benefit of this standardization is that all insurance companies are required to offer the same basic types of policies, and these policies are always referred to by the same names.

The standards for each type of home insurance policy are called policy forms.

There are eight different policy forms for home insurance coverage, and each type has its standards. Each is designed to provide a specific type of protection for the different needs of each home and homeowner.

Policy forms for homeowners insurance start with the code HO followed by a number. The numbers range from one to eight. Here’s a quick table of HO codes and what type of policy they are. Not all policy forms are offered in every state or every insurance company. Ask agents in your state, because types of homeowners insurance in Texas will differ from those in California.

However, when they’re available they all follow the same standards, so you can be sure you are comparing apples to apples on a basic level. Insurance companies may offer a variety of endorsements and add-ons to bolster the coverage.

It’s important to note that homeowner’s insurance does not cover floods or earthquakes regardless of the policy form you choose.

These must be purchased as endorsements or, more commonly, as separate policies.

In the next section, we will break down what each of these policy forms means, what is covered, and what type of home is best suited to the policy. Before we move on, it’s worth noting that there is a second designation for home insurance, as well. This is the dwelling fire, which goes by the code DP (not DF, although that seems logical) and also comes in several numbered forms. We’ll also cover those in this article.

Read more: What does home insurance cover?

The NAIC gathers average insurance rates for various of the policy forms. Below you’ll see the nationwide average for each of the types of HO policies recorded by the NAIC. HO7 mobile home policies and renters insurance are not included in NAIC data.

Average Annual Homeowners Insurance Rates by Policy Type

You’ll notice that the HO1 policy is the most expensive on average. That might seem counterintuitive given it’s a lower level of coverage, but a home is only covered with that type of policy if it doesn’t qualify for a higher level, which usually means the insurance company sees it as a higher risk and therefore charges more for coverage.

What are named perils vs all perils home policies?

Each of the policy forms falls into one of two categories: a named perils policy or an all perils, also called all-risk, policy. These two designations provide some basic information about how the policy works.

First, what’s a peril? In insurance language, a peril is something that could cause a loss.

It can be something that damages your home and property or it could be something that happens to you, like theft.

A named-perils policy will pay claims only on the specific perils that are listed in the policy. Any peril that isn’t listed isn’t covered. An all-perils policy covers any peril that is not specifically excluded. These are called exclusions. While there are always exclusions listed on this type of policy, it still covers a broader range of possible risks than does a named perils policy.

There are all types of homeowners‘ insurance claims, such as wind and hail, fire and lightning, and water damage. There are also lots of types of homeowners insurance riders, so ask your agent for more details.

What is an HO1 basic form home policy?

HO-1 coverage against perils is the most basic type of home insurance policy for use in the event of damage and also the most limited in terms of coverage. It is a named perils policy, and the standard form for this policy covers the following dwelling damage perils:

• fire
• lightning
• hail
• windstorm
• theft
• vandalism
• damage from vehicles and aircraft
• riots and civil commotion
• volcanic eruption
• glass breakage
• non-flood water damage

This type of policy generally doesn’t cover the contents of the home, only the structure. However, contents can be added to the policy at the time it is written as extra coverage. Contents will also only be covered for the named perils.

An HO1 policy can be written as a replacement cost or actual cash value policy, although it’s usually replacement cost.

That means the home is covered for the amount required to rebuild it if it is a total loss. Actual cash value policies, on the other hand, only cover the home for the depreciated value. There are different types of homeowners insurance replacement cost formats, so bear in mind that personal property may not be covered for replacement cost, but for actual cash value, which includes depreciation. You may be able to upgrade that coverage.

Who would choose a basic form policy?

This type of basic coverage is generally only offered in certain circumstances, and it’s not a very common choice for obvious reasons. You may select an HO1 for a second home that doesn’t contain much in the way of contents or is used only seasonally to keep your rates low. In most cases, however, upgrading to better coverage doesn’t cost a lot more, so these options are very rare.

HO1 policies are most often a last resort.

Basic form policies are sometimes written when a property doesn’t qualify for a higher level of coverage.

This can be for a variety of reasons, including age, location, and vacancy.

What is an HO2 broad form home policy?

This is a more common type of homeowner’s insurance, and it’s one of the more likely options to be offered by all insurers. Broad form coverage is also a named perils policy but covers more perils than the HO1. In all, there are 17 perils listed on a broad form HO2 insurance policy.

In addition to the 11 covered under HO1, this policy also covers:

• falling objects
• the weight of ice or snow
• malfunctioning electrical and other household equipment

That makes it much more comprehensive than the HO1, but it will still leave you open to a number of perils not listed. Most HO2 policies do, however, cover personal property. The contents of your home will be covered for the same perils that are listed for the structure itself.

The HO2 policy is a replacement cost policy, which means it covers the home for the actual amount required to rebuild it should it be destroyed. As mentioned above, your personal property may not be automatically covered at replacement cost.

Who would choose a broad form policy?

Like the HO1, this is not the policy of choice for most people.

It’s often selected when the home doesn’t qualify for an all perils policy, for reasons similar to those mentioned above. It does offer better coverage than the HO1, which makes it the better choice if the home qualifies. Again, these policies are very rare.

What is an HO3 special form home policy?

The HO-3 policy, known as a special form policy, is the most popular type of homeowner’s insurance package policy according to the Insurance Information Institute (III).

HO-3 homeowners insurance is an all-perils policy, which means it covers anything that is not specifically excluded. The list of exclusions can differ, but here is a list of the most common exclusions:

• Ordinance or law – This includes anything that is required to bring your home up to code.
• Water damage – In addition to floods, which are excluded by all policies, an HO3 policy excludes water seepage and leakage and sewer backup.
• Power failure – This exclusion means damage caused by a power failure will not be covered.
• Neglect – Any damage to your home that is the result of failure to properly maintain and repair the home is excluded.
• War – Including civil war
• Nuclear hazard
• Intentional loss – This sounds obvious, but any damage done on purpose is not covered.
• Governmental action – This includes damage to or seizure of property by a government agency.
• Faulty Work – Faulty construction, bad repairs, and other faulty maintenance are not covered.

As with all home insurance policies, natural disasters like flood and earth movement (including earthquake insurance) damage are excluded. Some of these exclusions can be covered by adding an endorsement to the policy. Flood is usually only covered by a separate policy.

The HO3 policy also includes coverage for personal property, personal liability, and loss of use. That means it will pay for additional living expenses if you are unable to live in your home during a covered loss.

The personal property coverage on an HO3 policy is on named perils basis. The all perils coverage only applies to the dwelling.

This is a replacement cost policy, although personal property may still need an upgrade to replacement cost. Some companies will include extended replacement cost coverage or even guaranteed replacement cost. It’s important to read the fine print to find out exactly what’s included and what is available as an upgrade or add-on to the policy.

Who would choose a special form policy?

This is the package policy that is selected by most homeowners. It’s an affordable package that offers a lot of coverage and can be customized. The majority of single-family homes are good candidates for an HO-3 insurance policy. All the major home insurance companies offer this package.

This is the minimum policy that most mortgage companies will accept to meet the requirements in your loan.

If you have a mortgage, you most likely have an HO3.

What is an HO4 tenant’s form (renters) policy?

Also called renters insurance, this is a policy to protect people who are renting homes. Rather than offering dwelling coverage, which would be handled by the landlord, this protection only covers the tenant’s personal property and personal liability. It usually also includes loss of use coverage. Rental insurance is a named perils policy and covers the same perils as an HO2.

The coverage may or may not be at a replacement cost level. It’s important to verify this with the insurance company before you buy it. In many cases, you can choose to upgrade to replacement cost coverage for an additional premium.

Your landlord’s insurance policy does not cover your personal property nor does it extend any liability coverage to you personally.

Renters insurance is designed to protect you and you alone, just as the landlord buys a rental home policy to protect their interests specifically. In the event of a claim, such as a fire, the loss will be split between the two policies and what they cover.

For an example of renters insurance coverage, see our eRenterPlan renters insurance review.

Who would choose a tenant’s form policy?

This policy can cover anyone who is renting their home, regardless of the type of home. Whether you live in an apartment or rent a large home, a renter’s insurance policy is the only way to protect your personal property.

What is an HO5 comprehensive form home policy?

This policy is like an extended version of HO3.

Unlike other homeowners policies, the HO5 policy covers contents and dwelling on an all perils basis; other policies require named perils for personal property.

As long as the cause of damage is not excluded by the policy, any damage to the dwelling and its contents will be covered. This policy can be purchased as-is or the same level of coverage can be achieved by adding an endorsement to an existing HO3 policy.

The HO5 is generally considered to be the highest level of coverage of any policy form.

It covers the dwelling and personal property equally and on a replacement cost basis. It also frequently includes extra coverage at no added cost.

That includes higher limits on some high-value personal property.

Who would choose a comprehensive form policy?

While it is often seen as the policy of choice for higher-value homes, an HO5 is a good choice for anyone that wants the peace of mind of added coverage. It’s more costly than an HO3, which is why many people choose a special form policy instead. As with all policies, companies do have standards a house must meet to be covered under an HO5.

Some companies may have specific requirements for the age and condition of the house to qualify for an HO5, and types of homeowners insurance policies in Texas, for example, will differ from those in Rhode Island, so make sure to check the laws in your state.

What is an HO6 condominium form policy?

The HO-6 policy is specifically designed for the needs of condo owners and may also apply to some townhomes. This is a named perils policy and covers the same risks as an HO2 homeowners insurance policy. Much like renter’s insurance, this is a policy primarily designed to cover personal property and personal liability. Condo insurance, however, is a little more complex than renters insurance.

A renter has no responsibility for any part of the structure, while a condo owner has responsibility on what is referred to as a “walls-in” basis. That means everything from the walls in, such as fixtures and flooring, fall under the condo owner’s policy.

The condo association has its policy that covers the external parts of the structure and any common areas. There are times when a claim will involve both policies. There is also one more unique feature of a condo policy: loss assessment.

Loss assessment coverage kicks in when the condo owner is held partially responsible for a shared loss along with the association and other condo owners.

Like the other policies, condo insurance can be upgraded with add-ons and endorsements including things like replacement cost coverage.

Read more: Condo Insurance (HO-6) Coverage: An Expert Guide

Who would choose a condominium form policy?

This policy applies to anyone that owns their home but for whom the structure itself is covered by a group policy. This includes coverage limits for condos in large multiunit buildings, smaller duplex units, row houses, and townhouses.

What is an HO7 mobile home form policy?

This policy is essentially the same as an HO3 policy but provides protection for mobile and manufactured homes. Mobile homes have different needs than do traditional single-family homes, and this policy form is designed to reflect that.

Like the HO3, this policy is an all perils form for the coverage of the structure and named perils for personal property.

As with the HO3, there are plenty of add-ons and endorsements that can be included to upgrade the coverage. This includes replacement cost coverage and separate policies for flood and earthquake. An HO7 has the same exclusions as the special form policy, although there may be additional exclusions depending on the company. It’s not the same as an RV policy, which is more similar to an auto insurance policy than homeowners.

Who would choose a mobile home policy?

Anyone who owns a mobile or manufactured home, whether in or out of a park, should choose an HO7 homeowners insurance coverage policy to protect it.

Not all insurance companies write this form, but some do specialize in this type of coverage, so take your time and shop around.

What is an HO8 older house form policy?

What’s the best home insurance for older homes?

HO8 insurance is much the same as an HO3 policy, but it includes special provisions to meet the needs of HO8 coverage for older homes. This is mainly used for homes that have been designated as historic. These homes have construction materials and details that may not be easily be replaced or rebuilt, so they require special insurance.

This form is designed to provide extra coverage for those special details and allow bringing historic homes up to code while ensuring they retain the details that make them historic in the first place.

The HO8 policy form is an open perils policy for the dwelling with named perils coverage for personal property. There are a lot of add-ons and endorsements that can make the coverage on this policy more comprehensive.

Who would choose an older house policy?

Although the name implies that this is a policy for any old house, it applies to homes that are historic but in good condition. Homes that are older but have no special construction materials don’t require a special form of coverage.

It’s also important to note that an older, run-down home likely won’t qualify for this type of policy. It may need a specialty policy of a different type.

What are dwelling fire policies?

In addition to HO policies, some houses are best protected by what are known as dwelling fire policies. These use the DP designation mentioned at the start of this article. This type of policy is typically written for houses that don’t suit a homeowner’s policy.

The most common type of DP policy is written for a landlord. Often called a rental home policy, it operates similarly to an HO1.

The dwelling itself is covered, but there is little to no coverage for personal property.

A landlord policy also includes loss of rent coverage, which pays for the missed rent when the home can’t be occupied due to a covered loss. Dwelling fire policies may also be issued to owner-occupied homes, are usually named perils coverage, and can be replacement cost or actual cash value policies. Some other types of homes that may be insured as dwelling fire include:

• Seasonal homes
• Vacation rentals
• Vacant homes
• Homes that are in a state of disrepair

There are three levels of dwelling fire policies, although the DP-3 is the most common. It’s also the most comprehensive.

How much condo insurance do you need?

Your coverage selections and limits will depend on how your condo association’s master insurance policy functions, as well as the amount you need to protect your assets and personal property.

Coverage type Coverage limit

Dwelling Coverage limit If your association’s policy features “all-in” coverage, you may not need as much dwelling coverage. However, if your master policy indicates “bare walls” coverage,” you’ll need dwelling coverage for appliances, carpeting, and other fixtures.

Personal property Coverage limit Creating a home inventory is an ideal way to figure out the right limit for your personal property coverage. For example, if your belongings total $75,000, you need at least that much in coverage. Keep in mind, limits and options will vary by insurer.

Types of Home Insurance: What’s the bottom line?

The right homeowners’ insurance policy for you depends on a variety of factors. These include the type of home you own, the age and condition of your home, and the requirements set out by your mortgage company. There are tons of types of homeowners insurance plans out there. Find the one that works best for you.

Most stick-built, single-family homes are protected by an HO3 policy, while your mobile home is likely protected by an HO7.

For most people, the choice is obvious, because there is only one choice for each type of home. If your home qualifies for an HO3, there is no reason to consider lesser coverage. You may, however, find yourself weighing the pros and cons of an HO3 versus an HO5. Depending on the insurance company it might not cost much to upgrade, in which case the extra coverage certainly can’t hurt.

That said, most homes will be insured by the policy for which they qualify and for which the coverage is sufficient to protect both you and your mortgage company.

Before you buy a home, make sure to get the property inspected, including a property foundation inspection. An inspection will check for any damage or needed repairs that can help prevent further damage and insurance claims.

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Case Studies: Exploring Home Insurance Coverage

Case Study 1: HO3 Policy for a Traditional Home

Mr. and Mrs. Johnson recently purchased a traditional single-family home in a suburban area. They opted for an HO3 policy, which is the most popular choice for homeowners’ insurance. This policy provides coverage for the structure of their home against a wide range of perils, such as fire, theft, vandalism, and natural disasters, excluding floods and earthquakes.

Case Study 2: HO6 Policy for a Condominium Owner

Ms. Ramirez owns a condominium in a high-rise building in the city. As a condominium owner, she doesn’t need coverage for the entire building structure, as it is typically covered by the condominium association’s master policy. Instead, she chose an HO6 policy, which offers coverage for her personal belongings, improvements made to her unit, and liability protection.

Case Study 3: HO4 Policy for a Renter

Mr. Anderson is renting an apartment in an urban area. Since he doesn’t own the property, he doesn’t need coverage for the structure itself. Instead, he opted for an HO4 policy, also known as renter’s insurance. This policy provides coverage for his personal belongings, liability protection, and additional living expenses in case his apartment becomes uninhabitable due to a covered event.