An HO-1 policy is a type of homeowners insurance that offers basic coverage. This type of policy is the most limited homeowners insurance policy that can be purchased, meaning that there are strict limitations related to the named perils that are covered. Due to the strict limitations, these types of policies aren’t commonly offered by home insurance companies, but a HO-1 policy may still be a good fit in certain situations.

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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 named perils that are specifically 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, an HO-1 policy is basically 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
  • Explosions
  • Fire or lightning
  • Hail and windstorms
  • Smoke
  • Riots and civil commotion
  • Vandalism or malicious mischief
  • Theft
  • 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. Many homeowners prefer to purchase a policy with liability coverage for this reason.

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.

However, an HO-1 policy may be an option for an older structure that is considered high-risk for an insurance loss. If you own a building that houses limited belongings and is not a primary residence, an HO-1 policy may be an option if you are looking to insure the structure.

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.

Learn more: Affordable home insurance companies

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.

Learn more: Average cost of homeowners insurance

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