What Does Homeowners Insurance Cover?

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Having homeowners insurance is an important way to protect your home and belongings. But your protection extends only to those damages or losses that are caused by events your policy covers.

In this article, I’ll take a close look at the types of homeowners insurance policies available and what events are typically covered by these policies. That way, you can make sure your policy offers you the best protection for your needs.

What Are the Types of Homeowners Insurance Policies?

There are eight different types, or “forms,” of homeowners insurance policies. Each offers protection for specific types of properties and provides different levels of protection.

Homeowners insurance policies refer to unexpected events as “perils.” Most policies will have either “named” peril protection or “open” peril protection, but some policies offer a combination of both.

A named peril policy will offer protection only against events that are specifically included, or “named,” by your insurer.

An open peril policy will offer protection against any event, except for those that are specifically excluded by your insurer.

Policies that include both named and open peril protection will specify what type of property has protection against named perils and what property has open peril protection.

Let’s look at the policy types.

PolicyTypePerils
HO-1BasicNamed
HO-2BroadNamed
HO-3SpecialNamed/Open
HO-4Contents Broad
(Renters)
Named
HO-5ComprehensiveOpen
HO-6Unit Owners
(Condos)
Named
HO-7Mobile HomesNamed/Open
HO-8Modified Coverage
(Older Homes)
Named

HO-1: Basic Form

A basic form, or HO-1, policy is the most basic homeowners insurance policy available and offers the least amount of protection. This policy provides dwelling coverage against ten named perils:

  • Aircraft
  • Civic commotion or riot
  • Explosion
  • Fire or lightning
  • Hail or windstorm
  • Smoke
  • Theft
  • Vandalism and mischief
  • Vehicle
  • Volcanic eruptions

This protection may also be applied to structures attached to your home, such as a garage, but HO-1 insurance will not provide liability, personal property, loss of use or medical payment protection.

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Most insurance companies no longer sell HO-1 policies, and if you have a mortgage, your lender might not allow you to select an HO-1 policy since it offers minimal protection.

HO-2: Broad Form

A broad form, or HO-2, policy offers more protection than an HO-1 policy. Broad form insurance provides protection against 16 named perils. In addition to the ten perils covered by an HO-1 policy, HO-2 offers protection against damages or loss caused by:

  • Accidental discharge or overflow of water (not including water from a sump)
  • Accidental and sudden ruptures of built-in appliances
  • Artificially generated electrical currents
  • Falling objects
  • Freezing
  • Weight of ice, sleet or snow

An HO-2 policy provides coverage against the named perils for your dwelling, personal property, loss of use, liability and medical payments.

However, many insurers no longer sell HO-2 policies, and your lender might not accept it as enough coverage for your home loan.

HO-3: Special Form

A special form, or HO-3, policy is the most common type of homeowners insurance policy. This type of policy provides coverage for your dwelling, other structures, liability, loss of use, medical payments, and personal property.

With an HO-3 policy, your dwelling will have what’s known as “open peril” coverage. So, unless an event is explicitly excluded, you are protected against any perils that cause damage or loss to your dwelling. Some perils that are commonly excluded from HO-3 policies are:

  • Earthquakes
  • Floods
  • Mold and/or fungus
  • Negligence and/or wear and tear
  • Pests, rodents, birds and pets
  • Rust and/or corrosion
  • War and/or government action

While your dwelling will have open peril protection, your personal property will have named peril coverage. With an HO-3 policy, your belongings are protected against all of the perils named in an HO-1 and HO-2 policy.

HO-4: Contents Broad Form

A contents broad form, or HO-4, policy is also known as renters insurance. If you’re renting a home, condominium or apartment, an HO-4 policy will provide protection for your belongings along with liability and loss of use coverage.

Since this policy is for renters, HO-4 does not include dwelling coverage. Landlords are responsible for insurance policies that will cover the structure of the property.

Renters insurance will provide named peril coverage against the same 16 perils listed in an HO-1 and HO-2 policies. Any damages or loss caused by events that are not listed will not be covered.

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HO-5: Comprehensive Form

A comprehensive form, or HO-5, policy provides the most complete coverage for your home and belongings. This form of homeowners insurance offers open peril coverage for both dwelling and personal property.

To compare, HO-1 and HO-2 policies offer just named peril protection, while an HO-3 policy offers open peril coverage for your dwelling and named peril protection for your belongings. Because HO-5 policies offer the most comprehensive coverage, you should expect to pay more for this form of insurance than you would for an HO-1, HO-2 or HO-3 policy.

An HO-5 policy will offer protection for dwelling, liability, loss of use, medical payments, other structures and personal property.

HO-6: Unit Owners Form

A unit owners form, or HO-6, policy is known as condominium insurance. Because condos are part of larger, connected communities, your insurance needs for this type of property will slightly differ from what a standard homeowners insurance policy provides.

Condominium associations have insurance policies, known as master policies, that provide coverage for certain perils to units within their community. HO-6 policies are meant to step in and protect individual units against damages or loss that are not already covered by a master policy. So, your individual coverage needs will vary depending on your condo association’s master policy. At the minimum, master policies will provide some level of protection for exterior structural elements of condo units.

For interior structures, HO-6 policies include named peril protection against the same 16 perils listed in the HO-1 and HO-2 policies. In addition, HO-6 policies also include liability, loss of use, medical payments, and personal property. You may also add loss assessment coverage to an HO-6 policy, which will cover you if you’re responsible for damages or loss to common areas within your community.

HO-7: Mobile Home Form

A mobile home form, or HO-7, policy is designed to meet the needs of mobile homes, which are defined as homes that are built in a factory then transported to a living site. Manufactured homes, trailers, sectional homes, and RVs are examples of mobile homes that can be covered by an HO-7 policy. Typically, however, mobile home insurance will not cover your home while it is in motion.

This form of insurance provides protection for your dwelling, liability, loss of use, medical payments, and personal property. Like an HO-3 policy, mobile home insurance provides open peril coverage for your dwelling and named peril protection for personal property.

HO-8: Modified Coverage Form

A modified coverage form, or HO-8, policy is sometimes called “older homes insurance”. This type of policy is for older homes that don’t qualify for coverage under a standard homeowners insurance policy.

Like HO-3 policies, an HO-8 policy offers coverage for your dwelling, other structures, liability, loss of use, medical payments, and personal property. But an HO-8 policy provides only named peril protection against ten perils including:

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  • Aircraft
  • Civic commotion or riot
  • Explosion
  • Fire or lightning
  • Hail or windstorm
  • Smoke
  • Theft
  • Vandalism and mischief
  • Vehicle
  • Volcanic eruptions

Older homes are often considered risky for insurance companies because they may have architecturally outdated features and require special materials or skills to repair. Older homes might also require more regular maintenance than newer homes in order to prevent major problems as a result of general wear and tear from aging. Additionally, some older homes may have an actual cash value that is lower than the cost it would take to repair or rebuild.

Another difference between an HO-8 and HO-3 policy is that an HO-8 policy will cover your home and belongings only at the actual cash value.

What Does Homeowners Insurance Cover?

There are six key kinds of coverage that most homeowners insurance policies will offer:

  • Dwelling: coverage for repair or replacement to the main structure of your home
  • Other Structures: coverage for repair or replacement of structures that are separate from the main building of your property
  • Personal Property: coverage for repair or replacement of property such as clothing, equipment or furniture in your home
  • Liability: coverage for medical and/or legal fees if someone is injured (or something they own is damaged) as a result of something that happens on your property
  • Loss of Use: coverage for living expenses in the event that you are not able to use your home
  • Medical Payments: coverage for medical bills if someone gets hurt on your property, even if you’re not at fault

As part of these coverages, most homeowners insurance policies will provide protection against the following perils:

  • Accidental discharge or overflow of water (excludes water from a sump)
  • Accidental and sudden ruptures of built-in appliances
  • Aircraft
  • Artificially generated electrical currents
  • Civic commotion or riot
  • Explosion
  • Falling objects
  • Fire or lightning
  • Freezing
  • Hail or windstorm
  • Smoke
  • Theft
  • Vandalism and mischief
  • Vehicle
  • Volcanic eruptions
  • Weight of ice, sleet or snow

Again, it’s important to know whether you have a named or open peril policy to be sure about what events your property is protected against.

What Is Not Covered by Homeowners Insurance?

If you have a named peril policy, your homeowners insurance will not provide protection against damages or loss caused by any events that are not explicitly listed, or named, in your policy.

With an open peril policy, your homeowners insurance will provide protection for damages or loss caused by all events unless they are specifically excluded from your policy. Perils that are typically excluded from protection by standard homeowners insurance policies include:

  • Earthquakes
  • Floods
  • Mold and/or fungus
  • Negligence and/or wear and tear
  • Pet damages
  • Rust and/or corrosion
  • Termites, pests, rodents
  • War and/or government action

If you live in an area that is considered a high-risk zone for natural disasters, you may be required to purchase separate insurance for coverage against certain perils. Or your insurance policy may include certain perils that are more common to your geographic area – but typically at a higher premium.

It’s important to note that homeowners insurance does not provide protection against damages or loss that are caused because of aging or neglect. Intentional damage caused by the homeowner or another resident of the home is also not covered.

Frequently Asked Questions

Can I add coverage for damages or losses that are not included in my policy?

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You may be able to purchase separate policies. Flood insurance and earthquake insurance policies are examples. Your insurer might also offer endorsements, which allow you to personalize your coverage by adding, removing or changing who and what is covered by your policy. As an example, water backup coverage is an endorsement that may be added to protect your property against water damage from a sump pump or sewer.

Does my homeowners insurance policy cover business uses of my home?

Depending on your insurer, your homeowners insurance policy may provide limited protection for this. When included, the standard amount of coverage is $2,500 for business equipment. You may also be able to purchase an endorsement for increased protection of up to $10,000 for business-related equipment. But a home-based business endorsement is meant to provide protection for minimal property needs, and not all insurers will allow you to increase your coverage. Homeowners insurance policies will not extend liability protection against claims that are made by visitors to your business or visitors for business related purposes. Your homeowners insurance policy will not cover lost income either.

Final Thoughts

There are eight different types of homeowners insurance policies. If you live in a mobile home, condominium, or are renting, you will have only one type of policy that applies to your property.

For most standard homes, you may have 2-4 policy options to choose from: HO-1, HO-2, HO-3 or HO-5.

The most common type of policy is an HO-3, which offers open peril protection for your dwelling and named peril protection for your personal property. If you’re looking for open peril protection for your dwelling and your property, an HO-5 policy offers the most comprehensive coverage.

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