Older homes can present major challenges from a homeowner’s perspective. They may require constant maintenance to prevent small problems from escalating into major repairs. Repairing some older homes requires finding special materials and workers who specialize in building techniques from past decades. 

Insuring an older home can be a challenge, too. Often, the value of older homes is lower than what it would take to repair or rebuild them, due to historic and potentially unique features. This is where an HO-8 insurance policy form could come in handy. Also called a “modified policy,” these home insurance forms are specifically designed for older or architecturally significant homes. 

What is HO-8 insurance?

An HO-8 homeowners insurance policy — sometimes referred to as the modified coverage form — is a type of home insurance designed for owner-occupied homes with an actual cash value, also known as a depreciated value, less than the current cost to replace or repair damages. This can mean homes over 40 years old, homes with architecturally unique features, registered landmarks or homes made with hard-to-find materials. 

HO-8 coverage is a “named-perils” policy for both the structure of the home and the personal belongings inside it. A named-perils policy only covers the specific types of damage listed; everything else is excluded. HO-8 policies cover losses caused by 10 specific perils:

• Aircraft
• Civil unrest and riots
• Explosions
• Hailstorms and windstorms
• Lightning and fire
• Smoke
• Theft
• Vandalism and malicious mischief
• Vehicles
• Volcanic eruptions

HO-3 and HO-5 homeowners policies, in contrast, cover more conventional homes. The biggest difference between these policies and an HO-8 policy is that HO-3 and HO-5 policies cover your home (and in the case of the HO-5, your belongings) for “open perils” coverage. This means that all types of damage are covered unless specifically excluded. This is a stark contrast to the HO-8, which only covers your home and belongings for the 10 perils listed above. 

Compared to the HO-3 and HO-5 policies, an HO-8 policy form offers far less coverage. HO-8 forms also settle claims on an “actual cash value” basis, meaning that depreciation will be taken out of any claim settlements. Some carriers offer functional replacement cost, meaning, they will pay to repair the damage using modern materials, like replacing plaster with drywall. HO-3 and HO-5 policies often have replacement cost options, which means you’d get the full cost needed to repair or replace damages. It’s not surprising, then, that HO-8 policies are not all that common.

Who needs HO-8 insurance?

Although relatively uncommon, HO-8 forms are designed for older or more unique homes, so they could still be good for some homeowners who cannot qualify for a more common HO-3 policy. Older homes may have a high rebuild cost due to the older building methods. For example, outdated electrical and plumbing systems could lead to replacing these items to bring them up to current building codes. And non-standard lumber sizes and historical features, like decorative plasterwork, can all add a significant amount to repair costs. For some homes, insurers may only be able to offer an HO-8 policy.

Alternatively, some homeowners may not want to insure their home for the rebuild cost and may choose an HO-8 policy to help keep their insurance costs down. Remember, though, that with an HO-8 policy, you’re only covered for those 10 named perils and your claims checks will have deprecation removed. HO-8 policies can be a good fit for some homeowners, but knowing the benefits and drawbacks is important.

What does HO-8 insurance cover?

Typically, HO-8 policies provide the same coverages as conventional homeowners policies, including:

Dwelling

Dwelling coverage pays to repair or rebuild the structure of your home following a covered loss. But remember, HO-8 policies don’t cover as many perils as other home policies. While an HO-8 policy would help pay repair costs following a fire, it wouldn’t cover damage caused by your pipes freezing and bursting. Additionally, remember that HO-8 policies only cover you for the actual cash value of your home, so you will not get the full cost to repair or replace damages. 

Loss of use

When a covered loss causes significant damage to your home, you may need to relocate while the house is being repaired. Loss of use coverage can help pay living expenses such as rental fees, the cost of a hotel room and the price of meals. Typically, loss of use coverage only pays the difference between your usual expenses and your post-loss costs. For example, if you typically do your laundry at home, but at your temporary residence you have to use a laundromat, these additional costs might be covered by your loss of use coverage.

Medical expenses of others

This type of coverage helps pay the medical expenses of a guest if they sustain an injury on your property, regardless if you are found to be at fault for that injury or not. However, medical payments to others doesn’t cover the medical expenses of people living within your household, only guests.

Other structures

When a covered peril causes damage to structures on your property that aren’t attached to your home — like a fence, garage or guest house — your other structures coverage can help pay the repair or rebuild costs, up to the policy limit.

Personal liability

Liability coverage protects you against the cost of injuries or damages that you are found at fault for. For example, if someone trips on uneven flooring and breaks their arm, you could be found negligent if you knew the flooring could pose a risk and didn’t take steps to fix it. Liability coverage may kick in to help cover the costs of the guest’s medical bills, along with legal fees and court costs if you are sued.

Personal property

Your personal property includes your clothing, furniture, home decor and electronics. HO-8 policies cover your personal property for its actual cash value rather than its replacement cost. For example, if you have a 10-year-old couch that was damaged by a fire, your HO-8 policy will pay for the depreciated value of the couch rather than the cost of replacing it with a similar new model. 

What does HO-8 insurance not cover?

HO-8 policies won’t cover losses caused by perils that are not specifically named in the policy, including:

Earthquake damage

Standard HO-8 policies won’t cover damage to your home or personal property caused by an earthquake. However, many insurance carriers offer optional earthquake insurance. If your home sits on or near a fault line, you may desire earthquake coverage.

Falling objects

HO-8 policies exclude damage to your home or personal belongings caused by falling objects. If the unlikely happens and a tree crashes into your roof, there won’t be any coverage under an HO-8 policy form. 

Flood damage

HO-8 policies don’t cover damages caused by floods. Some providers offer separate flood insurance policies, which you can add to supplement your HO-8 policy. If your insurer doesn’t offer flood insurance, you can purchase it through the National Flood Insurance Program.

Water damage

There are many ways that water can damage your home, but an HO-8 covers very few of them. Frozen and burst pipes, accidental discharge and water backup are all automatically excluded from HO-8 policies, although you may be able to buy an endorsement for backup coverage. However, if your roof or siding is damaged by a windstorm or hail storm and water enters your home, that resulting water damage could be covered. 

Weight of ice, sleet or snow

When ice and snow accumulate on top of a home, the weight and potential collapse of your roof can cause major damage to your home. However, damage caused by the weight of ice, sleet or snow is excluded under an HO-8 policy.  

How much HO-8 insurance do I need?

Your insurance company will generally use a valuation tool to determine your home’s rebuild cost, typically serving as your dwelling amount for a common HO-3 or HO-5 policy. However, if your home’s rebuilding cost outweighs the actual value due to its older or custom features, you may have to accept a modified or HO-8 form. The value of your dwelling coverage will be determined based on the replacement cost but deduct the cost of depreciation. This is because HO-8 policies cover your home for its actual cash value rather than its replacement cost. The exact amount of coverage will depend on the size of your home and its features. Your other structures, personal property or loss of use coverage amounts are all percentages of the dwelling amount, although you may be able to increase coverage if you need to.

You will have to choose a liability level, though. Most insurance quotes default to $100,000 or $300,000 in personal liability coverage, but you may be able to go up to $500,000 or even $1,000,000 in some cases. If you need or want more liability coverage — for example, if you have a pool, trampoline or swing set or if you host guests often — you could consider buying an umbrella policy. 

Choosing an HO-8 insurance policy

Homeowners insurance policies don’t come in one-size-fits-all coverage packages. When shopping for home insurance, consider your individual needs. 

If you need an HO-8 policy or decide that policy form is best for your needs, you may have to research to find an insurer that offers one. You could also look for an insurer that offers good discount programs, such as bundling auto and home policies, and some offer discounts for not filing a claim for a specified period or for consistently paying your bill on time. You can also find a wide array of discounts for installing safety and security devices and making home improvements.

The takeaway: 

• HO-8 policies provide coverage for historic or older homes (40 years or older, typically) that may not qualify for other coverage.
• HO-8 home insurance doesn’t cover as many perils as HO-3 policies.
• HO-8 policies typically pay the actual cash value of your home, often not enough to cover all rebuild costs.
• Like all standard home insurance policies, HO-8 policies don’t cover earthquake damage or flood damage. 

HO-8 policies may be good for some situations, but they don’t provide the same level of home insurance protection as the more popular HO-3 policy. HO-8 policies may be the only choice for people who own older homes with original systems or for those who own homes on the historic register.

Because HO-8 policies are not super common, you may need to search for a company that sells them. Once you choose a company, you may want to work closely with an agent to determine the proper amount of coverage for your situation.