Jeffrey Wade
Homeowners insurance is one of the most important purchases you can make to protect your home and family from unexpected expenses. There are eight types of home insurance policies to choose from, with HO-3 being the most common type, accounting for over 78% of home insurance policies in 2021. However, the HO-5 policy offers the broadest coverage of all policy types, covering personal property losses based on replacement cost rather than actual cash value. HO-5 insurance covers damage to your items from any peril that isn't explicitly excluded in the policy, providing more protection than any other type of homeowners insurance.
| Characteristics | Values |
|---|---|
| Type of Insurance | HO-5 |
| Coverage | Broadest coverage of all policy types. Covers personal property losses, damage to the home's structure, and damage to personal belongings. |
| Perils | Open peril coverage. Losses are covered unless specifically excluded. |
| Named Peril Coverage | Only named loss types are covered. |
| Replacement Cost | Higher coverage limits. |
| Exclusions | Earthquakes and floods |
| Additional Features | Liability coverage, identity theft coverage, dwelling/personal property replacement option. |
| Availability | Not available in all states. |
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What You'll Learn
HO-3 is the most common type of homeowners insurance
HO-3 policies cover a wide range of risks, including theft, fire, lightning, explosion, vandalism, and even falling aircraft. They also provide liability protection, covering you against lawsuits for bodily injury or property damage caused by you or your family members, including damage inflicted by pets. This liability coverage extends worldwide and typically starts at $100,000. You can also add an umbrella or excess liability policy for broader coverage, including libel and slander claims, and higher liability limits.
HO-3 insurance is suitable for single-family homes and provides coverage for the physical structure of your home, other structures on your property, and your personal belongings. It covers additional living expenses, personal liability, and medical payments to others. By default, HO-3 policies cover your home at its replacement cost and your personal property at its actual cash value. However, you can add a replacement cost personal property endorsement to your policy for a small fee.
HO-3 policies are also known as special form coverage, and they are the most common type of insurance held by most homeowners, along with HO-5 policies. HO-3 insurance is considered the standard coverage and is suitable for most homeowners' needs, offering broader coverage than HO-2 policies and protecting against a wide range of perils.
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HO-5 offers the broadest coverage
HO-5 policies are priced higher than HO-3 policies because of the breadth of their coverage. With an HO-5 policy, personal property losses are repaid based on the replacement cost for the item, instead of the actual cash value. This means that you will receive the amount of money it would take to replace the item, rather than its value minus depreciation. You will also have higher coverage limits and fewer restrictions on perils.
HO-5 policies are the second most common type of policy for single-family homes, after HO-3 policies. HO-3 policies are considered the standard coverage and account for more than 90% of all home policies written in the US. They cover the structure of the home, personal belongings, personal liability, additional living expenses, and medical payments. However, they only cover personal property against named perils listed in the policy.
HO-5 policies offer open peril coverage, which means that losses are covered unless specifically excluded. In contrast, named peril coverage, which applies to HO-1 and HO-2 policies, means that only named loss types are covered. HO-1 policies are the most basic type of home insurance and are not available in most states. They offer limited coverage and do not include liability or personal property coverage. HO-2 policies are also known as broad form insurance because they provide coverage for a broader variety of perils compared to HO-1 policies. However, they still only cover personal property at its actual cash value.
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HO-1 is the most basic type of homeowners insurance
HO-1 is a named perils policy, meaning it only covers specific loss events listed in the policy. Typically, these include fire, lightning, windstorms, and hail, explosions, riots, civil commotion, aircraft, vehicles, smoke, vandalism, theft, and volcanic eruptions. If damage occurs from something other than these specified perils, repairs will need to be paid out of pocket as claims for uncovered losses will be denied.
Because of these limitations, HO-1 insurance is not as popular as more comprehensive policy options. Many mortgage companies won't accept HO-1 policies as proof of home insurance. HO-2 policies, for example, offer a step up in coverage and protection by including additional perils such as damage from falling objects and water damage from accidental overflow.
HO-3 policies are the most common type of homeowners insurance, providing comprehensive protection against all perils except those specifically excluded, such as earthquakes and floods. HO-3 also offers personal liability coverage and protection for personal belongings from named perils. For even broader coverage, HO-5 policies offer the highest level of protection, covering personal property losses based on the replacement cost rather than the actual cash value.
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HO-2 covers more perils than HO-1
HO-1 policies are the most basic type of home insurance, offering limited coverage, and are not available in most states. They offer coverage for the structure of your home, attached structures, appliances, and home features, but do not include coverage for personal property, liability, or additional living expenses. HO-1 policies only cover specific perils named in the policy, such as fire, lightning, windstorms, and hail.
HO-2 policies are also known as broad form homeowners insurance because they provide coverage for a broader variety of perils compared to HO-1 policies. HO-2 policies cover all the common perils listed on a basic form, plus additional perils. These additional perils can include falling objects, certain sudden or accidental damage, and the weight of ice, snow, or sleet. HO-2 policies cover the structure of your home, personal belongings, and living expenses, but only in the event of a named peril.
While HO-2 policies offer more coverage than HO-1, they are still considered more limited than HO-3 policies, which are the most common type of homeowners insurance. HO-3 policies offer more expansive coverage, safeguarding your home's structure against all perils except those specifically excluded. They also protect against damage to your belongings from named perils and provide personal liability coverage.
HO-5 policies offer the broadest coverage of all policy types, providing protection against any peril unless specifically excluded. HO-5 policies cover damage to your home's structure and your personal belongings from any peril that is not excluded. These policies are priced higher due to their comprehensive nature.
In summary, while HO-2 policies offer more coverage than HO-1, there are still other policy options, such as HO-3 and HO-5, that provide even broader protection for homeowners.
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HO-6 is for condo owners
HO-6 insurance is for condominium or co-op unit owners. As a condo or co-op unit owner, you own and are likely responsible for any damage to your unit. Outside of your unit, you have rights and/or an interest in the common areas of the property, but the condo or co-op association may have primary responsibility for insuring that portion of the property.
HO-6 condo insurance protects your unit and everything it contains and provides liability coverage, loss of use coverage, and more. If you own a condo or co-op unit, the common areas like hallways, land, and other shared areas are typically covered by a collective homeowners association insurance policy. However, your unit is not always covered by this policy. That's why you need condo (also known as HO-6) insurance.
If you have a mortgage on your condo, your lender will typically mandate an HO-6 policy. Additionally, your homeowners or condo association may require certain coverages and limits. Even if your condo association has no stipulations and your condo is paid in full, condo insurance is highly recommended. After all, your condo is likely one of your most important and valuable assets.
Like homeowners insurance, HO-6 insurance safeguards against property losses and liability claims, except in cases where your condo association's master policy provides coverage. Perils are events that can cause damage to your condo unit or personal property. Your HO-6 insurance policy will have a list of coverage exclusions.
HO-6 insurance covers shared areas, including property owned by the condo/homeowners association, but won't extend to interior walls and fixtures in your unit. It insures common areas and association-owned property and offers coverage for fixtures in your unit and any part of your unit's structure from when it was originally built. While "all-in" master policies often cover more than just the bare structure of your condo, there are some basic differences between an association master policy and HO-6 insurance. 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.
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Frequently asked questions
HO-5 policies offer the broadest coverage of all policy types. It offers more protection than any other type of homeowners insurance. Personal property losses are repaid based on the replacement cost for the item, instead of the actual cash value.
The most common type of homeowners insurance is the HO-3 policy. HO-3 policies offer more expansive coverage than HO-2s, meaning that your home’s structure is safeguarded against all perils except for those specifically excluded (for example, earthquakes and floods) in your policy.
HO-1 policies are the most basic type of home insurance, offering limited coverage, and are not available in most states. Your home’s structure will be protected against specified perils, such as fire, lightning, windstorms and hail, but you won’t have liability or personal property coverage.
HO-2 insurance is also known as broad form homeowners insurance because it provides coverage for a broader variety of perils compared to an HO-1 policy. HO-2 policies will typically cover your home at its replacement cost.
HO-6 insurance applies to condo owners. The amount of dwelling coverage needed on an HO-6 policy depends on how much of the structure is covered by the condo/homeowners association. Like HO-3 policies, HO-6 covers personal property, personal liability, and additional living expenses.
