9 Types of Home Insurance Policies – NerdWallet

Home insurance is meant to protect your finances: your house, your belongings and your assets. But not all policies are created equal. What they cover depends on whether you own or rent, and whether the residence is a house, a condo or a mobile home.

Many homeowners insurance policies are based on a set of templates issued by the Insurance Services Office (ISO), which is why these templates are sometimes called ISO forms. (The Insurance Services Office is now part of analytics firm Verisk.) Although you may not see technical terms like “HO-3” or “named perils” when you’re shopping for a policy, knowing the different coverage types can help you better understand what you’re buying.

This guide breaks down the different types of home insurance policies to help you understand which policy is right for your needs.

Before diving into the different types of home insurance and what they cover, it’s helpful to understand how perils work. A “peril” is an event that can cause damage or loss to your home and your belongings.

Some parts of your home insurance policy may operate on a “named perils” basis, meaning you’re only insured against the specific events listed in your policy. Others may operate on an “open perils” or “all-risk” basis, meaning you’re insured against all events except listed exclusions.

Understanding what types of perils a home insurance policy covers is vital. Generally, open peril policies provide the most coverage.

Standard homeowners insurance policies generally include these six types of coverage, unless otherwise noted in the policy:

Insurance providers typically sell several types of home insurance policies, each of which offers varying levels of coverage. It’s important to read the details of your policy to understand what is and isn’t covered.

An HO-1 policy is the most bare-bones type of home insurance. It generally covers the physical structure of your house. It may sometimes include coverage for other structures, personal property, additional living costs and liability.

An HO-1 policy typically covers damage caused by these 10 named perils:

• Damage caused by aircraft or vehicles.

Even if an HO-1 policy is available to you, many homeowners opt for an HO-3 policy instead because it offers more coverage.

HO-2 policies are sometimes known as “broad form” policies because they cover more perils than HO-1 policies, but their coverage is still limited. In addition to the 10 perils covered by HO-1 policies, the HO-2 policy adds coverage for:

• Weight of ice, snow or sleet.

• Accidental overflow or discharge of water or steam.

• Freezing of plumbing, heating or air conditioning.

• Sudden and accidental tearing apart, cracking, burning or bulging of certain household systems.

• Sudden and accidental damage from artificially generated electrical current.

If a peril that damages your house or belongings isn’t explicitly named in the policy, the loss won’t be covered.

Some HO-2 policies also provide personal liability coverage.

An HO-3 policy is the most popular type of home insurance. It’s known as a “special form” or “open perils” policy. It insures the structure of your home against all causes of damage except those specifically listed as exclusions in your policy.

Here are common exclusions:

• War and nuclear accidents.

• Birds, vermin, rodents or insects.

• Damage caused by your pets.

Personal belongings like furniture, electronics and clothes are covered on a “named perils” basis. That means only damage caused by events specifically listed in your policy are covered. These typically include:

• Damage caused by aircraft or vehicles.

• Weight of snow, ice or sleet.

• Accidental discharge or overflow of water or steam.

• Sudden or accidental tearing, cracking, burning or bulging.

• Freezing of plumbing or HVAC systems.

• Damage due to artificially generated electrical current.

An HO-4 policy is commonly referred to as renters insurance. It’s designed specifically for individuals who are renting a home or an apartment. The main purpose of this policy is to cover your belongings, not the building itself.

An HO-4 policy safeguards your stuff — like furniture, clothes and electronics — against the same 16 perils covered by an HO-3 policy. It also includes personal liability and additional living expenses coverage.

The actual building you live in is not covered under your HO-4 policy. It’s your landlord’s responsibility to insure the structure of the building and to have it fixed if it’s damaged.

An HO-5 policy is like the gold standard of home insurance. It’s also called a comprehensive policy because it typically offers higher coverage limits for personal belongings and personal liability than an HO-3 policy.

An HO-5 policy covers your personal belongings on a replacement cost basis. So if something happens to them, you get the amount it costs to replace them, not just their current depreciated value. In addition, an HO-5 policy covers your belongings on an open perils basis. It also provides coverage for loss-of-use and medical payments for others.

An HO-6 policy is for condo owners. It’s often called “walls-in coverage” because it protects what’s inside your condo, like the floors, ceilings, walls and any renovations you’ve made. It insures against the same perils as an HO-3 policy and includes coverage for your personal belongings, additional living expenses and personal liability.

But here’s the catch — this policy doesn’t cover the entire building or common areas. That’s usually handled by your condo association’s insurance. You pay for this through your condo or HOA fees. Check what your association’s policy covers to avoid any gaps or overlaps.

An HO-7 policy is for mobile homes. It includes coverage for your home, your personal property, other structures, loss of use, personal liability and medical payments.

Similar to HO-3 policies, HO-7 policies work on an open perils basis for your mobile home’s structure and a named perils basis for your belongings. Read more about mobile home insurance.

HO-8 insurance is for homes more than 40 years old where it might cost more to rebuild than the house is worth. This includes historic houses or ones built in unique ways.

HO-8 insurance covers your dwelling and personal property on a named perils basis. Instead of paying the full replacement cost for damages to your home’s structure, an HO-8 policy typically reimburses the actual cash value. This means it pays you what your home is worth in cash at the time of the claim, not what it costs to rebuild.

The HO-14 policy is an advanced version of the traditional HO-4 renters insurance. Unlike the HO-4, which covers named perils, the HO-14 operates on an open perils basis, meaning it covers all risks unless they’re specifically excluded. Also, while the HO-4 provides actual cash value coverage, the HO-14 insures your items at their full replacement cost.

HO-14 insurance may come with unique features like coverage for home-sharing activities, a $500 allowance for bed bug treatments and a $300 provision for hard drive data recovery.

Both HO-3 and HO-5 policies cover your home’s structure, personal belongings, liability, medical payments and additional living expense coverage. The big difference is how they insure your belongings.

HO-3 policies use open perils for the house’s structure but named perils for personal belongings. If the policy doesn’t specifically exclude a risk for the house, it’s covered. But for belongings, it only covers listed events.

HO-5 policies are more comprehensive. They use open perils for both the home and personal belongings, covering all risks unless specifically excluded. Because HO-5 offers broader coverage, it’s often more expensive than HO-3.