HO-1 Insurance

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Choosing the right homeowners insurance is an important decision to protect your home, belongings and other assets. If you are looking for basic coverage, HO-1 might be what you want.

What is HO-1 insurance?

HO-1 insurance is considered to be the most basic form of insurance. It financially protects you should your home be damaged by perils that are listed on the policy.

It 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 your home is protected with an HO-1 policy.

As you can see, it’s a bare essentials 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 events that are likely to damage your home. The perils usually covered by an HO-1 policy include:

  • Damage from aircraft
  • Damage from vehicles
  • Explosions
  • Fire or smoke
  • Hail and windstorms
  • Lightning
  • Riots and civil commotion
  • Theft/malicious mischief
  • Vandalism
  • Volcanic eruptions

When one of these events causes damage to your home, you can file a claim with your insurance company. Once they determine that the damage is covered by your policy, they’ll issue payment for the estimated damage. However, first they’ll subtract your deductible amount. So if the estimated repairs for the damage comes to $5,000 but you have a $500 deductible, you’ll receive $4,500 from your insurance company.

To receive coverage for your home, it is essential for the damage to have been caused by one of the perils listed above. If it’s not, you won’t receive compensation for needed repairs.

HO-1 policy exclusions

The main thing to keep in mind with an HO-1 policy is that it doesn’t offer liability protection. This means if someone gets hurt or killed on your policy, medical expenses, funeral expenses and court costs will all fall on you. If you don’t have the money to pay for these things, it’s possible you could lose your personal assets, including your home.

In the event your home is completely destroyed in a disaster, you also won’t get any compensation for all of your possessions that you lose. Depending on what you own and keep in your home, this could set you back substantially.

Lastly, an HO-1 policy doesn’t protect you from some fairly common perils. These include damage caused by:

  • Falling objects
  • Weight of snow or ice
  • Water overflow from plumbing, HVAC, indoor sprinklers, or appliance
  • Breakage of AC or hot water heater
  • 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. Coverage for damage from disasters such as floods, 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 the lack of liability or personal possession coverage. Because it’s so basic, many states don’t even allow insurance carriers to offer HO-1 coverage.

In states where HO-1 policies are available, they don’t typically meet the coverage standards lenders require for homeowners insurance. In other words, if you have a mortgage on your home, you’ll need a more comprehensive policy than HO-1 insurance.

Frequently asked questions

What does HO-1 insurance cover?

HO-1 provides a minimum amount of coverage. The 10 perils included in a standard policy include fire or lightning, windstorm or hail, an explosion, rioting or civil commotion, aircraft, vehicles, smoke, vandalism, theft, and volcanic eruption.

You may be able to choose between getting a replacement cost policy or an actual cash value policy. Replacement cost may be more expensive, but gives you better coverage. That’s because it provides reimbursement based on how much it would cost to replace or repair using today’s material costs.

Actual cash value, on the other hand, only reimburses you for today’s value of the item’s existing condition. If you have 20-year linoleum that needs to be replaced due to a covered event, for example, you’d only receive the estimated cost for the current value of old linoleum. This can be much less than what you’ll actually have to spend for a modern day replacement.

Where can I get HO-1 insurance?

Because HO-1 insurance is so basic, many insurance carriers no longer offer this type of 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.

Most states do not allow for an HO-1 policy, so you’re more likely to find HO-3 coverage instead. Check to see what your options are in your state, then compare insurance carriers. Also remember to check with your lender to make sure your policy meets the minimum requirements. If you’re in the process of buying a home, your mortgage lender will review your policy before closing to make sure your coverage is sufficient.

How much does HO-1 insurance cost?

If you live in a state that allows for HO-1 insurance, you can expect to pay less than a standard HO-3 policy. There are many variables that factor into the cost of your insurance policy. Some include the state in which you live, the size and condition of your home, and your claims history. Your deductible amount is also a contributing factor for cost. The larger deductible you have, the less expensive your annual premium will be.

You may also be able to qualify for discounts on your policy. Common reasons for savings include installing a security system, bundling multiple plans with the same carrier (like home and auto) and not having previous home insurance claims. Always compare policies from multiple companies before choosing one to make sure you’re getting the best deal.