The 8 types of homeowners insurance

Homeowners insurance is an important financial investment that can protect your property against unexpected events. When buying homeowners insurance, it’s important to note that you can choose from several different types of insurance policies. Since each home and personal situation is different, not all policies, or forms, will be right for your needs.

A homeowners insurance policy can be either a named-perils policy or open-perils policy, or a combination of the two. A named-perils policy covers a specific set of events (like flooding, fire, or wind damage), while an open-perils policy covers all potential hazards, except any specifically excluded in your policy.

Here’s what you need to know about the types of homeowners insurance.

• Types of homeowners insurance
• HO-1: Basic form
• HO-2: Broad form
• HO-3: Special form
• HO-4: Contents broad form
• HO-5: Comprehensive form
• HO-6: Unit-owners form
• HO-7: Mobile home form
• HO-8: Modified coverage form
• How to determine which type of homeowners insurance policy is right for you

Types of homeowners insurance

Your home insurance choice depends on the structure of your home and your needs. If you’re a renter, you may not need the same type of coverage as a homeowner, and if you’re a homeowner, you won’t need the same protection as a landlord. Here are the eight forms of homeowners policies:

HO-1: Basic form

Best for: Any homeowner who wants minimum coverage

An HO-1 policy covers your home and personal property inside your home (like furnishings, electronics, carpeting, and clothing). This insurance form typically offers financial protection against major natural disasters like fire, lightning, windstorms, and hail. In addition, an HO-1 policy provides coverage against volcanic eruption, theft, vandalism, broken glass, damage from aircraft, damage from rioting, explosions, and smoke.

This insurance typically won’t cover flooding or earthquakes. However, most homeowners insurance carriers have an option to add insurance riders for additional coverage at an extra cost.

It’s important to note that HO-1 insurance is uncommon, and few insurers sell this type of policy because it offers such minimal coverage.

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HO-2: Broad form

Best for: Homeowners who want a bit more coverage than an HO-1 or who live in higher-risk areas

An HO-2 policy covers damage from the same types of incidents as an HO-1 policy, in addition to other events, including falling objects, the weight of snow, sleet, or ice, accidental overflow of water from plumbing systems, accidental rupture of HVAC, freezing pipes, and damage from an electrical current.

The benefit of this policy is that it provides more coverage than an HO-1 policy. While some of these perils are less common, they can cause significant damage. If you live in a colder climate prone to freezing pipes or heavy snow, an HO-2 insurance policy may be beneficial.

HO-3: Special form

Best for: Homeowners who prefer open-perils coverage for their home

HO-3 insurance is the most common type of homeowners insurance in the U.S. This policy covers your home against all perils except specific incidents named as exclusions in your policy. Keep in mind that your personal property is still covered on a named-perils basis with an HO-3 policy.

You’ll get more coverage than you would with an HO-1 or HO-2 policy without paying for the most comprehensive policy. An HO-3 policy covers up to the replacement value of your home and the actual cash value of your personal items.

HO-4: Contents broad form

Best for: Renters

If you don’t own a home, you can still protect yourself from financial loss with a renters insurance policy. Some landlords require that tenants carry this insurance. An HO-4 policy only covers your personal items, since your landlord insures the property itself. This form of insurance includes coverage for the same events listed in an HO-2 policy.

HO-5: Comprehensive form

Best for: Homeowners who want maximum coverage

An HO-5 policy is the most comprehensive homeowners insurance policy available, but this also means it’s typically the most expensive. This insurance covers your home and personal belongings from all events except those specifically listed in your policy.

Comprehensive coverage is often more expensive because it covers the loss of your property and personal items at replacement cost value rather than actual cash value, which deducts for depreciation.

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HO-6: Unit-owners form

Best for: Condo owners

HO-6 insurance covers condominium units and an ownership interest in a co-op. It typically covers the standard perils, but only for the interior of your unit — it doesn’t cover shared areas in your complex. Your HO-6 policy supplements a master policy for the complex that your condominium association manages. As with home mortgages, your lender will likely require you to have condo insurance.

HO-7: Mobile home form

Best for: Mobile home owners

Mobile homes aren’t classified the same as traditional home structures, and they have their own type of insurance. An HO-7 policy provides open-perils coverage for your mobile home and named-perils coverage for the contents of your home. Your open-perils coverage will cover most events, but some things that it typically excludes are floods, mold, nuclear hazards, and acts of war.

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HO-8: Modified coverage form

Best for: Owners of older homes

HO-8 policies are specifically for older homes that are more difficult to insure since the cost to rebuild is often more than the market value. The policy has more restrictions, but it helps protect homes that may not otherwise qualify for homeowners insurance. An HO-8 policy covers both your home and personal property for actual cash value. It covers the same perils as an HO-1 policy.

How to determine which type of homeowners insurance policy is right for you

Purchasing the right homeowners insurance takes some consideration. You want a policy that provides the right amount of protection without breaking your budget. When you’re shopping for a homeowners insurance policy, some things you’ll want to think about include:

• Your home’s age — Older homes may qualify for less coverage. You’ll need to look into what insurance you can get to properly insure your home.
• The amount of coverage you need — Most insurance policies will cover either actual cash value or the replacement cost value of your home. The actual cash value is the cost to replace your home, minus depreciation. The replacement cost value is the amount of money you’d need to replace your home today, factoring in the current cost of materials. While replacement cost policies are typically more expensive than actual cash value policies, they’ll pay out more if you file a claim.
• Your deductible — Like car insurance and health insurance, you must pay a certain amount before your home insurance coverage will pay for the rest. A higher deductible will mean a lower monthly payment, whereas a lower deductible will likely result in a higher monthly premium. Before you choose a deductible, make sure you can actually afford the out-of-pocket costs should you need to file a claim.
• Your location — If your state or area is at a higher risk of certain types of natural disasters, like flooding or earthquakes, you’ll want to factor in the likelihood you’ll need that coverage. Even if you’re not in a high-risk area, these additional policies can give you peace of mind — between 2015 and 2019, more than 40% of all National Flood Insurance Program claims came from policyholders in low- or moderate-risk areas.

Paying for homeowners insurance might feel like a hassle, but when the unexpected happens, you’ll likely be grateful you don’t have to shoulder the expense on your own. Take the time to research policies and insurance providers to ensure you find a policy that best fits your needs.