Types of Homeowners Insurance

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Buying a house is a big investment. To protect your new home, it’s important to get homeowners insurance. Basic insurance policies cover your home and your belongings against damage and destruction from certain events, like fires or extreme weather. Without homeowners insurance, you would have out-of-pocket expenses to repair or rebuild your home.

However, not all homeowners insurance is created equal. Personal finance and insurance expert Laura Adam explains, “There are different types of homeowners insurance for various property types, such as single-family homes, condos, co-ops, mobile homes and older homes. Depending on the home you own, you may also choose your coverage type based on the range of protection you want.”

HO–1

An HO-1 policy is the most basic of all the types of homeowners insurance policies. It only provides coverage for the structure of your home. It doesn’t include coverage for personal property, liability or additional living expenses. Because of those limitations, it’s not a popular choice for home insurance.

HO-1 insurance is a named perils policy, meaning it only covers your home in specific situations, which typically include:

  • Damage from aircrafts or vehicles
  • Explosions
  • Fire and lightning
  • Hail and windstorms
  • Riots
  • Smoke
  • Theft
  • Vandalism
  • Volcanic eruption

HO–2

An HO-2 insurance policy covers your home and your personal belongings. Most insurance companies will cover your personal belongings no matter where they are at home, in your car or somewhere else. But because HO-2 policies don’t offer liability coverage, it’s not recommended for most homeowners.

Like an HO-1 policy, HO-2 insurance is a named perils policy that covers your home and your personal items from the same circumstances covered by an HO-1 policy. This policy type also covers a few additional perils:

  • Accidental discharge or overflow of water or steam within the home
  • Tearing apart, burning, cracking from some household systems
  • Freezing of pipes and heating and air conditioning systems
  • Sudden and accidental damage from certain electrical currents
  • A falling object
  • Weight from ice, snow or sleet

HO-3

The most common type of homeowners insurance is an HO-3 policy, which covers your home, your personal property, liability, additional living expenses and medical payments. If you take out a home loan, most mortgage lenders will require you to have at least HO-3 coverage.

Adams says, “An HO-3 is considered the standard coverage. It gives you “open perils” coverage for your home structure, which protects you from all disasters unless the policy lists exceptions. However, you receive “named perils” coverage for personal possessions, which applies to disasters named in the policy.”

Your home and other structures typically have the following perils excluded:

  • Defective construction or maintenance
  • Foundation issues
  • Government actions
  • Pet or animal damage
  • Pollution and corrosion
  • Theft, vandalism and frozen pipes in vacant houses
  • Wear and tear
  • Flood
  • Earth movement

Since your personal property is covered under named perils, your personal items are usually covered under the following circumstances:

  • Damage from aircrafts or vehicles
  • Damage from snow or ice
  • Damages caused by an electrical current
  • Explosions
  • Falling objects
  • Fire and lightning
  • Hail and windstorms
  • Pipes freezing
  • Riots
  • Smoke
  • Theft
  • Vandalism
  • Water damage from plumbing or HVAC overflow
  • Water heater damage

HO–4

An HO-4 insurance policy is another name for standard renters insurance. Renters insurance protects your personal property and offers liability coverage. Some policies also include additional living expenses, which could help you pay for food and hotel bills if your home were damaged and you had to move out temporarily. Because renters don’t own their homes, it doesn’t offer any coverage for the building’s structure.

Renters insurance policies are usually named perils policies that cover the following events:

  • Damage from aircrafts or vehicles
  • Damage from snow or ice
  • Damages caused by an electrical current
  • Explosions
  • Falling objects
  • Fire and lightning
  • Hail and windstorms
  • Pipes freezing
  • Riots
  • Smoke
  • Theft
  • Vandalism
  • Water damage from plumbing or HVAC overflow
  • Water heater damage

HO–5

If you’re looking for the gold standard of home insurance, an HO-5 policy is it. This type of home insurance is the most comprehensive option available, covering your home, your personal belongings, liability, additional living expenses and medical payments for others. These policies also have higher available limits for things like jewelry.

Of all the types of homeowners insurance policies, Adams recommends HO-5 for individuals with high-value items. She says, “It typically costs more and may not be offered by every insurer but could be worth it if you have many valuable possessions.”

With an HO-5 policy, your home and your personal items are both covered under an open perils policy, which means that it will protect you from anything not specifically excluded in your policy. Some common exclusions include:

  • Earth movement
  • Government actions or laws
  • Infestation of birds, rodents or insects
  • Intentional loss
  • Mechanical breakdown
  • Mold
  • Nuclear hazard
  • Pets
  • Vandalism if the property is vacant more than two months
  • War
  • Water damages from floods or sewer backup

Because an HO-5 policy is open peril instead of named peril, it covers more things and can make it easier to file a claim because you don’t have to prove that a covered peril caused the damage.

HO–6

HO-6 insurance is specifically for condo owners. It covers everything inside your unit, as well as personal liability and additional living expenses. Because condo residents only own their unit, and not the whole building, the condo association has its own insurance policy that protects common areas, grounds and external parts of the building. Condo owners help pay for the association’s insurance in the form of condo or HOA fees.

HO-6 policies are named perils policies which generally protect coverage for:

  • Fire and lightning
  • Smoke
  • Hail and windstorms
  • Explosions
  • Riots
  • Damage from aircrafts or vehicles
  • Vandalism
  • Theft
  • Explosions

HO–7

An HO-7 insurance policy covers mobile or manufactured homes, including trailers, RVs and modular homes. It provides coverage for your home’s structure, your personal belongings, liability, additional living expenses and medical payments.

The exterior of your home is covered under an open perils policy, which covers any situation that is not explicitly stated in your insurance policy.

However, HO-7 policies cover your personal belongings under a named perils policy. That means your personal items are only covered under a specific list of circumstances, including:

  • Damage from aircrafts or vehicles
  • Explosions
  • Explosions
  • Fire and lightning
  • Hail and windstorms
  • Riots
  • Smoke
  • Theft
  • Vandalism

HO–8

The last type of homeowners insurance is the HO-8 policy, which is ideal for homeowners who have older homes or homes that would be difficult to replace. This includes architecturally significant houses, historic landmark homes or homes built with materials and methods that aren’t common today. If it would cost more to repair your damaged home than its current value, an HO-8 policy is your best option.

HO-8 policies include the standard coverage for dwelling, personal property, liability, additional living expenses and medical payments. Both your home’s structure and your personal property are covered under a named perils policy. This includes events such as:

  • Damage from aircraft or vehicles
  • Explosions
  • Explosions
  • Fire and lightning
  • Hail and windstorms
  • Riots
  • Smoke
  • Theft
  • Vandalism

Frequently asked questions

What is the cheapest home insurance?

The cheapest type of home insurance is technically renters insurance, which can cost less than $20 per month for some people. However, traditional homeowners insurance tends to be much more expensive. Even then, the amount you pay for home insurance varies. Where you live, how old you are, the value of your home and your credit score are all factors that can raise or lower your rate. Still, you can try to find the providers with the cheapest home insurance for your situation.

How much should I be paying for homeowners insurance?

Homeowners insurance costs vary significantly between people. However, the average cost of home insurance in the United States is $1,211. You should get an idea of how much homeowners insurance costs in your area by doing research and getting several quotes.

How many types of home insurance are there?

There are eight types of home insurance. They are classified as HO-1 through HO-8. Each category is designed for a different type of home with its own coverages.

Is everything covered by the different types of homeowners insurance policies?

Each type of homeowners insurance is geared towards a different homeowner, and each has limitations. According to Adams, “No matter which type of home insurance you have, the peril must be accidental and sudden. If you have damage caused by negligence on your part, it won’t be covered.”