8 Types of Homeowners Insurance Policies

Homeowners insurance policy types are as varied as the property they insure. Choosing the right home insurance coverage for your needs can be daunting. Understanding how each policy type works can help. 

Key Takeaways

• There are eight different policy forms that meet varying types of property coverage needs.
• Single-family homeowners, renters, mobile homeowners, and condo owners each have unique insurance needs and require different policy forms. 
• Replacement cost versus actual cash value (ACV) and what happens during a covered loss is one of the main differences in homeowners insurance policy types. 
• Homeowners policies pay claims on a named peril or open peril basis, depending on the homeowners insurance form. 

The 8 Types of Homeowners Insurance Policies

There are eight types of homeowners insurance policies, each varying in what and how they insure.

HO-1: Basic Form Policy

An HO-1 home insurance policy is the most basic of all homeowners insurance types. HO-1 policies only cover the home structure at actual cash value (ACV), meaning depreciation is considered when calculating the cost to repair or replace damages. 

In addition, HO-1 policies only cover ten specific perils (causes of loss):

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Damage from aircraft
• Damage from vehicles
• Smoke damage
• Vandalism or malicious mischief
• Theft
• Volcanic eruption

Because this policy provides limited coverage in scope and payout, most mortgage lenders will not accept HO-1 policies, and many states do not authorize the sale of HO-1 homeowners policies. 

HO-2: Broad Form Policy

HO-2 homeowners insurance policies provide additional coverage areas and named perils above what is offered by HO-1 policy forms. An HO-2 policy may provide replacement cost coverage for the home structure but only pays out actual cash value for personal property.

HO-2 policies provide coverage for personal belongings, personal liability, loss of use (additional living expenses), and medical payments to others in addition to the home structure and include these six additional named perils:

• Water damage from an accidental overflow or discharge of water 
• Freezing of plumbing or air conditioning
• Weight of ice and snow
• Falling objects
• Bulging or cracking caused by a sudden and accidental event
• Sudden, accidental damage from an artificially generated electrical current

While an HO-2 provides more coverage than an HO-1, most lenders require coverage under an open peril policy rather than a named peril policy. For homeowners without a mortgage willing to take on added risk and depreciated payout for personal property, HO-2 policy forms may be a consideration. 

HO-3: Special Form Policy

An HO-3 special form policy is the most common homeowners insurance policy type. An HO-3 policy covers the dwelling, other structures, personal property, personal liability, medical payments coverage, and loss of use coverage. Dwelling coverage is provided on an open peril basis, meaning all causes of loss are covered except the ones explicitly excluded. 

Common HO-3 policy exclusions for dwelling and property damage include: 

• Floods
• Earthquakes
• Sewer backup
• Government intervention
• Damage from pests or rodents
• Rust, mold, and corrosion
• Pet damage
• Damage from lack of maintenance
• Earthquakes
• Sinkholes
• Wear and tear

Most claims on an HO-3 are paid based on replacement cost, the actual cost to repair or replace damage, and are limited to the 16 named perils included in HO-2 policies. 

In addition, personal property coverage is paid out based on actual cash value (replacement cost minus depreciation). HO-3 homeowners policies meet mortgage lender requirements and offer endorsements to extend coverage for additional perils or coverage limits. Other perils, like flood, must be purchased through a separate flood insurance policy. 

HO-4: Renters Insurance

An HO-4 policy is available for people renting houses or apartments. Personal property is paid out much the same way as for HO-3 personal property. No coverage is provided for the building structure, but loss of use and liability coverages are included. 

HO-5: Comprehensive Form Policy

The most comprehensive of the homeowners insurance forms, HO-5 home insurance policies offer coverage similar to HO-3 policies for single-family homes but payout based on replacement cost for both dwelling and personal property. 

HO-5 policies offer more endorsement opportunities to customize your homeowners policy and can be a good choice for new home construction or high-value homes. 

HO-6: Condo Insurance

Condominium, condo-unit, and co-op owners are usually provided coverage for the outside structure of the building through a condo association policy. Therefore, condo coverage usually includes “walls-in” coverage. 

Typical HO-6 policy coverages:

• Owner renovations
• Walls, floors, and ceilings
• Personal Liability
• Medical payments to others
• Loss of Use

An HO-6 is much like an HO-3 in the perils covered and the claims payment methods. Additional coverage may be available for condo-specific coverage needs. 

HO-7: Mobile Home Insurance

An HO-7 policy covers single and double-wide mobile homes, manufactured homes, sectional homes, and modular homes. 

Coverage begins when the home is properly secured, not while it’s in transit. Mobile home insurance coverage applies much like it would for an HO-3 policy. 

HO-8: Modified Form for Older Homes

HO-8 home insurance policies are designed for older, historic, and registered landmark homes. These homes often cost more to rebuild than their current market value and it may be difficult for you to qualify for other homeowners insurance types. 

With an HO-8 policy, you’ll have coverage for the same ten named perils as an HO-1, plus liability, medical payments to others, and loss of use coverage. 

Tips for Buying Homeowners Insurance

Deciding on the right type of homeowners insurance for your needs may seem challenging, but it is crucial in providing the financial protections necessary to protect your assets. Ask questions about the coverage provided and what is excluded. 

Endorsements or riders can help fill any gaps, like flood or earthquake coverage. Determine whether claims will cover damage based on replacement cost or actual cash value and evaluate how those differences could impact you. 

Get insurance quotes from multiple home insurance companies and compare them based on all factors, not just price alone. Ask your insurance agent about discount opportunities that can help reduce premiums and make the best home insurance policy type for your home and family more affordable. 

FAQ: Types of Homeowners Insurance

What are the three main types of homeowners insurance?

While there are eight different types of homeowners insurance policies, they all boil down to three different types of claims payment: replacement cost, actual cash value, and extended replacement cost. 

Replacement costs pay claims based on repairing or replacing damage at today’s costs, up to the policy limits. Extended replacement cost pays out similarly to replacement cost but will pay up to a certain percentage over your coverage limits if needed. Actual cash value pays out a depreciated amount of the replacement cost amount due to age and wear and tear. 

Additionally, these three types of home insurance will cover perils on a named or open perils basis. An open peril policy pays for all causes of loss except for exclusions. A named-peril policy only pays for the causes of loss listed in the policy. It's important to note that a deductible will apply to all eight policy types. 

What is the most common home insurance policy?

The most common homeowners insurance policy is form HO-3. While not as comprehensive as an HO-5 policy, HO-3 homeowners policies provide coverage that meets most mortgage lender requirements at a lower price than an HO-5.

What is the difference between an HO-1 and an HO-2 policy?

An HO-1 policy is the simplest and least comprehensive homeowners policy form available and is not offered in many states. An HO-2 provides broader coverage with more named perils than an HO-1, although it still falls short in providing comprehensive coverage for the needs of most homeowners. 

What is the difference between an HO-3 and an HO-6 policy?

An HO-6 policy is specifically designed for condo owners. Although it works much the same way as an HO-3, condo owners have unique responsibilities and risks that are very different from standard single-family dwellings. Condo unit owners have some coverage under their Condo Association’s insurance policy and are typically only responsible for the wall coverings inward. HO-6 policies are designed to meet the specific coverage needs of condo owners.

Article written by Shawnette Good. 

Shawnette is an insurance professional with 30 years of industry experience helping consumers understand complex insurance topics. Outside of writing, Shawnette enjoys long nature walks and volunteering in her community.