A homeowner insurance policy is a type of insurance coverage that provides financial protection to homeowners. It typically includes coverage for the structure of the home itself, personal belongings, liability protection, and additional living expenses in case the home becomes uninhabitable due to covered events like fire, theft, or natural disasters like hurricanes.
Homeowner policies can vary in terms of coverage options and limits, so it's important to choose a policy that suits your specific needs and property.
Types of Policy
HO-1: is the most basic form of homeowner’s coverage. It protects the physical structure of a home from circumstances specifically listed on the policy. An HO-1 home insurance policy does not provide coverage for liability, personal belongings, or additional living expenses — only the dwelling itself. Only 10 named perils are always the same and have no coverage for water damage.
HO-2: is the technical term for a particular homeowners policy tier. An HO-2 home insurance policy covers only the home and personal property against threats specifically named on the policy's declarations page. An HO-2 policy is often called a named peril policy — the covered threats are specifically listed. Only 16 named perils are always the same, including water damages.
HO-3: is the most common form of home insurance coverage in the US. Among other things, this policy form covers the dwelling, personal property and liability in the event of a covered loss. HO-3 coverage — also known as a special form homeowners insurance policy — is an open peril policy that covers the physical structure of the home against all perils (a cause of loss) except for those specifically excluded listed on the policy. Almost every home insurance company provides HO-3 coverage, though you will want to carefully study the homeowner’s policy to see exactly what is and isn’t covered. The coverage A Dwelling is all-risk, and the coverage C: Personal property is named perils.
Common perils named on most HO-3 policies include:
Lightning or fire
Hail or windstorm
Damage caused by aircraft
Explosions
Riots or civil disturbances
Smoke damage
Damage caused by vehicles
Theft
Vandalism
Falling objects
Volcanic eruption
Damage from the weight of snow, ice, or sleet
Water damage from plumbing, heating, or air conditioning overflow
Water heater cracking, tearing, and burning
Damage from electrical current
Pipe freezing
Pay close attention to which perils are covered by your policy:
this can have consequences down the line.
HO-4: Simply speaking, this policy type describes a renters insurance policy. Typically, with these policies, your liability and your personal property are covered up to the policy limits. This is an ideal policy for someone renting an apartment or house.
HO-5: this policy covers the physical structure of the home as well as any other structures, like fences, sheds, or a detached garage. It also covers personal belongings, insuring them against all threats unless specifically named by the policy. The coverage A: Dwelling and the coverage C: Personal property is all-risk coverage, unless it’s specifically excluded.
Furthermore, an HO-5 policy basically removes the need to prove that damages were caused by a named peril, which can simplify the entire claims process.
In order to provide ample coverage and protect the investment, many insurance agents often encourage clients to opt for an HO-3 (Special Form Policy) or an HO-5 (Comprehensive Form Policy). The HO-5 policy can be more restrictive than the HO-3 and is usually reserved for newer or more expensive homes in areas that are better protected from fires.
HO-6 : Designates a condo insurance policy. These policies generally cover the personal property and the structure of the condo from the wall studs in. You should still consult with the agent quoting a policy for your home and ask about the specifics of how that policy would apply.
HO-7: this policy specifically covers mobile or manufactured homes, including trailers, single- and double-wide mobile homes, sectional homes, Recreational vehicles, and modular homes. It offers the same broad form of coverage seen in an HO-3 for open perils — it provides "all risk" coverage for perils (causes of loss) not specifically named in the policy. It's important to note that while an HO-7 policy provides open peril coverage for the dwelling and other structures, any personal property (the contents of the mobile home) is only covered for named perils — perils that are specifically listed on your policy.
HO-8: this policy is for homes built before 1975.
What is a homeowners insurance declaration page?
Each section in the homeowner’s policy is important, but the declaration page is likely the go-to source for most information like coverage amounts, coverage limits, and insurance premiums.
Insurance company: The name of the insurance provider.
Named insured: Holder of the policy.
Policy number: This unique policy number is needed anytime to file a claim.
Policy period: Lists the start and end dates of your policy.
Policyholder address: Location of the insured property.
Coverages: This section details the specific coverages included in the policy.
Limits: Signifies the limits of each coverage.
Deductibles: The amount for which you're responsible for paying before your insurance coverage kicks in. A higher deductible can lead to lower monthly insurance rates.
Replacement cost value/actual cash value: This signifies whether or not the insurance company will factor in depreciation when covering your losses or replace them at the full value.
Total premium: The total amount due over the duration of the policy term.
Endorsements: Additional coverages and customizations
Section One
Coverage A: Dwelling
Dwelling coverage pertains to the primary dwelling and attaches structures such as fences or garages.
The dwelling coverage extends to the home and any attached structures, covering them up to the replacement cost of the policy on an open peril basis. Refer to this list for the perils for which your dwelling won't be covered with an HO-3 policy. It’s important to note that the replacement cost and market value of your home are two very different amounts. The market value of your home includes the value of real estate and land. The replacement cost is only designed to rebuild your home in the event it is destroyed.
Coverage B: Other structures
This includes detached structures such as sheds or detached garages. The limit of this coverage is 10% of your Coverage A limit.
Coverage C: Personal property
This covers your home’s contents or other personal property. This also covers personal belongings you carry while traveling. The limit of this coverage is 50% of your Coverage A limit. Another important thing to consider is the amount at which your belongings will be replaced. Actual cash value is standard amongst many policies, though full replacement cost coverage can typically be added at an additional cost.
Coverage D: Loss of use
Loss of use provides coverage in the event your home is rendered unfit to live in. It covers additional living expenses and will pay for temporary living arrangements up to the policy limit.
Section Two
Coverage E: Personal liability
Liability coverage is a vital component of a homeowners insurance policy. It protects you against damages or injuries caused by you or occurring on your property. Liability insurance follows you around the world as well, meaning you would be covered— in most cases — if you were to accidentally injure someone else while on vacation. In some cases, an umbrella policy can be added to provide increased personal liability protection.
Coverage F: Medical payments to others
This coverage covers some of the medical expenses of others who may have suffered bodily injury or property damage at your home. Sometimes known as guest medical coverage, it usually provides a baseline of $1,000 in coverage that can often be increased for an additional premium.
Actual cash value/replacement cost value
Many basic policies cover a home and the personal property therein at actual cash value. Actual cash value factors in depreciation when considering how much to pay out for a covered loss. On the other hand, replacement cost value covers the actual cost to replace your dwelling or personal property without factoring in depreciation. This can be added for an additional premium.
Home insurance endorsements
Endorsements to a home insurance policy allow you to customize your coverage to fit your individual needs. These add-ons can provide additional coverage to allow for unique needs to your lifestyle or geographic location. Common endorsements can include coverage for windstorms, identity theft, and home daycare coverage, to name a few.
You can also add personal property endorsements — known as scheduled endorsements — that can increase the limits of coverage for high-value items such as antiques or jewelry. This often requires an appraisal of the items and an agreement from the insurance company on the payout amount.
Home insurance policy exclusions
Every home insurance policy has exclusions. While an HO-3 policy covers your personal belongings against named perils, it covers your primary dwelling on an open peril basis. This means that it will cover damage caused by all perils except those explicitly listed in this section of the policy.
An HO-3 policy specifically excludes damages caused by the following perils:
Freezing pipes and systems in vacant dwellings
Damage to foundations or pavements from ice and water weight
Theft from a dwelling under construction
Vandalism to vacant dwellings
Latent defects, corrosion, industrial smoke, pollution
Settling, wear, and tear
Pets, other animals, and pests
Weather conditions that aggravate other excluded causes of loss
Government and association actions
Defective construction, design, and maintenance
Flood insurance:
This covers damage resulting from flooding. Flood coverage is generally an excluded peril, as most standard homeowner’s policies do not include it. While it is offered by some specialty insurers, it is most often purchased through the National Flood Insurance Program (NFIP).
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