When buying home insurance, the different policy types may be referred to as HO-3 or HO-8, for example. The initials of HO stand for homeowners. The varying types of coverage for condos, standard homes or mobile/manufactured housing determine the number that follows.
An HO-8 insurance policy usually refers to coverage for an older home. However, just because you live in an older house does not mean you do not qualify for a standard, possibly more affordable HO-3. Knowing the difference between these policies can help you know which policy meets your needs best.
What is an HO-8 policy?
An HO-8 policy is often referred to as a modified coverage form. HO-8 insurance has a unique aspect — the repair/replacement cost may be higher than the home’s resale value. Older or historical homes often fit the bill. They may not have been updated over time and could potentially be out of code (based on modern standards). As a result, they may not qualify for more common homeowners insurance coverage.
Although an HO-8 policy may be ideal for someone who owns an older or historical house that could cost more in building materials and craftsmanship to rebuild than it is worth at resale, it is not exclusively insurance for old houses. If your home is architecturally significant or features high-end materials that would be expensive to replace, a modified coverage homeowners insurance policy could also be the best type of coverage.
What does HO-8 insurance cover?
An HO-8 policy is more limited in coverage than a standard homeowners insurance HO-3. Here is a breakdown of what is covered in an HO-8 policy.
Homes older than 40 years
An HO-8 policy typically covers dwellings that are 40 years or older. As mentioned, older homes may not qualify for a standard HO-3 because of issues such as old electrical wiring. Outdated wiring may need a major update to reduce the risk of fire and can therefore push the house out of qualifying for a standard homeowners policy.
If you own a historical home that may be listed in the National Register of Historic Places, an HO-8 may be the best option for home insurance. Historical homes are more expensive to repair and/or rebuild. Many historical districts set limits to what types of building materials can be used to keep the area original. Costs may be higher because more expensive specialized laborers may have to do the work, using potentially pricier building materials.
Ten named perils
An HO-8 policy names ten specific perils. However, HO-8 insurance does not cover as many perils as a standard homeowners policy, which includes 16 named perils. HO-8 insurance will typically cover losses caused by:
- Civil unrest/riots
- Fire or lightning
- Hailstorms and windstorms
- Vandalism/malicious mischief
- Volcanic eruptions
Losses not on this list are likely not covered, but you should talk to your provider for details.
What does HO-8 insurance not cover?
An HO-8 policy falls short in some aspects. As mentioned, an HO-8 only covers 10 perils, compared to the 16 an HO-3 includes. Watch out for other shortfalls in coverage such as the following.
Standard home insurance don’t cover earthquakes and seismic activity, but it is important to point out, especially if you live in an area at risk for earthquakes. You would need to purchase optional earthquake insurance to protect your house and contents against damages or loss from an earthquake.
If a tree branch breaks and falls on your house, damaging the roof, carport and vehicle parked inside, it would be covered in a standard HO-3 policy under the peril of falling objects. However, an HO-8 does not cover falling objects.
Water damage coverage is rarely included as part of a standard home insurance policy. Although many carriers offer flood insurance as an add-on, an HO-8 has further exclusions you should know about. Water damage caused by sudden events such as burst pipes is not covered either as it would be with an HO-3.
Who typically chooses an HO-8 policy?
Based on the coverage limitations of an HO-8, these are the people most likely to benefit from this kind of policy.
Someone who owns an older house
A homeowner who is unable to buy a standard home insurance policy because their home is older may opt for an HO-8. Older homes may have outdated electrical or plumbing that could present a hazard. Unless the house’s most important systems have been updated and brought up to code, an HO-8 may be your only option.
Owner of a historical home
Another homeowner who may elect to purchase HO-8 coverage is one that owns a historical house or one that has important architectural significance. Both types of homes are costly to rebuild and replace. Therefore, the home’s replacement value may be more than the current market value. An HO-8 policy allows the policyholder to set higher limits for replacement cost than for property value.
Owners of a home with high-end features and finishes
Not all HO-8 policyholders own an older house. A homeowner with a house that was built with rare or expensive building materials and finishes may find it best to go with an HO-8.
Frequently asked questions
What is the difference between an HO-3 vs. an HO-8?
Both policies provide you with coverage for your home. An HO-3 is the most common type of homeowners insurance and covers you against 16 perils. An HO-8 is meant for owners of older or historical houses. The policy does not have expansive coverage when compared to other types of home insurance. But it may be the only type of home insurance you can get.
How are HO-8 claims paid?
HO-8 claims are typically paid as actual cash value unless you paid extra for replacement cost coverage. Actual cash value means that insurance companies will adjust what is owed to you by subtracting depreciation from the amount you will be reimbursed.
What type of home insurance do I need for a historical home?
If your home is historical and listed in the National Register of Historic Places, an HO-8 policy may be the best type of coverage. HO-8s allow for higher limits for replacement cost than market value.