HO-1 policies are a basic type of homeowners insurance coverage. In fact, these policies offer the most limited homeowners insurance coverage that you can purchase. Because of the strict limitations on HO-1 policies, they are not commonly offered by home insurance companies. But an HO-1 policy might be a good fit for some people if it is available.
What is HO-1 insurance?
HO-1 insurance is considered to be the most basic form of homeowners insurance. HO-1 policies financially protect you should your home be damaged by perils that are listed on the policy.
HO-1 insurance differs from other policies in that it doesn’t offer liability protection, nor does it cover your personal belongings or offer compensation for additional living expenses. Only the structure of your home is protected with an HO-1 policy.
As you can see, it’s a bare-essential homeowners insurance option.
What does an HO-1 policy cover?
An HO-1 insurance policy only covers specifically named perils. At first glance, you might think it’s a fairly robust list. But in reality, these are only a few of the events that are likely to damage your home. The perils usually covered by an HO-1 policy include:
- Damage from aircraft
- Damage from vehicles
- Fire or lightning
- Hail and windstorms
- Riots and civil commotion
- Vandalism or malicious mischief
- Volcanic eruptions
When one of these events causes damage to your home, you can file a claim with your insurance company. Once the company determines that your policy covers the damage, they will likely issue payment for the estimated damage. However, first, they’ll subtract your deductible amount. So if the estimated repairs for the damage come to $5,000, but you have a $1000 deductible, you’ll receive $4,000 from your insurance company. If the damage to your home is caused by a peril that is not covered — like damage caused by the weight of ice, snow or sleet — your insurance company will not issue a claim payout.
HO-1 policy exclusions
HO-1 policies exclude damage from a variety of sources. You may want to keep in mind that an HO-1 policy doesn’t offer liability protection. This means if someone gets hurt on your property, medical expenses and any court costs would be your responsibility to pay. If you don’t have the money to pay for these things, you could lose your personal assets, including your home.
If your home is destroyed in a disaster, you also won’t get compensation for all of your possessions that you lose, because HO-1 policies do not include personal property coverage. Depending on what you own and keep in your home, this could set you back substantially.
HO-1 policies also do not include additional living expenses coverage, which is designed to pay for expenses if you are displaced from your home following a covered loss. Commonly covered expenses include hotel or rental fees, pet boarding and restaurant bills. Most other homeowners insurance policy forms include coverage for additional living expenses.
Lastly, an HO-1 policy doesn’t protect you from some fairly common perils. These include damage caused by:
- Falling objects
- Weight of snow, ice or sleet
- Water overflow from plumbing, HVAC, indoor sprinklers or appliance
- Sudden and accidental tearing apart, burning, cracking or bulging of a steam or hot water system, AC unit or fire-protection system
- Frozen plumbing, HVAC, sprinkler system or appliances
- Artificially generated electrical currents
There are additional perils you won’t find in most homeowners insurance policies, including HO-1 policy forms. Coverage for damage from disasters such as floods and earthquakes, maintenance damage and sewer backup require additional insurance.
Who needs HO-1 coverage?
HO-1 insurance misses the mark on a lot of disasters that can cause costly damages to your home, not to mention that it lacks liability and personal possession coverage. Because it is so basic, many states don’t allow insurance carriers to offer HO-1 coverage.
In states where HO-1 policies are available, they don’t typically meet the coverage standards mortgage lenders require for homeowners insurance. In other words, if you have a mortgage on your home, you’ll probably need a more comprehensive policy than HO-1 insurance. HO-3 policies are the most common type of homeowners insurance, and HO-5 policies offer the most robust coverage.
Where can I get HO-1 insurance?
Most insurance carriers no longer offer HO-1 insurance. Instead, you’re more likely to find an HO-3 policy, which includes coverage for 16 perils rather than just 10. Those additional perils include things like falling objects and the weight of ice, snow or sleet.
If you are looking for HO-1 coverage, you may need to do some research to find a home insurance company that offers it, which may not be available in your state. If you can purchase an HO-1 policy, remember to check with your lender to make sure your policy meets the minimum requirements. HO-1 policies may not satisfy a mortgage company’s insurance requirements.
How much does HO-1 insurance cost?
If an HO-1 is available, you can generally expect it to cost less than a standard HO-3 policy because it offers less coverage.
However, many variables affect the cost of your home insurance policy. The state in which you live, the size and condition of your home, your claims history and the coverage and limits you purchase will all change how much you pay. Your deductible amount is also a contributing factor. Typically, the higher your deductible, the less expensive your premium.
You may also be able to qualify for discounts on your policy. Common savings include installing a security system, bundling multiple policies with the same carrier (like home and auto) and not having previous home insurance claims. Comparing quotes from multiple companies before choosing one could help you find the right fit for your needs.
Frequently asked questions
What is the best home insurance company?
The best home insurance company depends on your needs. You may be looking for the best price, certain coverages or unique policy features. Making a list of features you want in a company and then getting quotes from several companies that fit your needs might be a good way to find the right company for you.
Are there different kinds of home insurance?
Home insurance policies are written with different levels of coverage, usually called policy forms. HO-1 is the first policy form, and the other coverage forms follow a similar format (HO-2, HO-3, etc.). Each policy type covers a different set of perils, but you can also probably add endorsements to customize your coverage to your needs.
What is the difference between an HO-1 and an HO-2 policy?
HO-1 policies are considered “basic,” and HO-2 policies are considered “broad.” HO-2 policies add a few more perils and typically include personal property and liability coverage, but they are still fairly stripped-back coverage options. Like HO-1 policies, HO-2 policies are relatively uncommon.
What does “named perils” mean?
An insurance peril is a cause of damage. Fire is a commonly covered peril, for example, as is wind. When a policy is covered for “named perils,” your home is only covered for the specific causes of loss listed on your policy’s declaration page. If a peril not listed in your policy damages your home, there will not likely be coverage. In opposition to named perils is an “open perils” policy. Open perils policies cover anything that is not specifically excluded, rather than naming every peril that is covered.