Shopping for home insurance might feel like navigating a minefield of industry terms.  However, things make a lot more sense once you know the basic types of homeowners insurance policies.

The insurance industry offers eight forms of home property insurance policies. Policy types begin with an “HO”, an acronym for homeowners, and a number. Five of the eight types of policies cover single family residences, while the other three provide protection for condos, older homes and rental properties.

It’s important to know what types of protection you need, like coverage to protect your home’s structure, your personal belongings and your assets if someone sues you. It’s equally important to understand the different types of policies because some offer more comprehensive protection than others do and only one or two types of policies will best fit the type of home you own. 

What are the types of home insurance forms? 

You can only file a claim for damages caused by certain types of events, called “perils” within the insurance industry. Each home insurance form covers a set of perils. It’s important to know which perils your policy covers because if a non-covered calamity damages your home, the insurer likely won’t allow you to file a claim.

HO-1 (basic form)

HO-1 coverage is a “named perils” policy, which means it only covers damages when caused by specific disasters. This basic home insurance policy covers damages caused by just 10 perils, including:

• Aircraft
• Explosions
• Vehicles
• Fire or lightning
• Hailstorms and windstorms
• Malicious mischief or vandalism
• Riot and civil commotion
• Smoke
• Theft
• Volcanic eruption

The HO-1 policy doesn’t cover damages caused by earthquakes, falling objects or floods. Depending on the insurance carrier, an HO-1 policy may not include personal liability and personal property coverages. Personal liability coverage can help pay medical costs and legal bills if someone sustains an injury on your property. Personal property coverage helps pay to replace items like clothing, computers, electronics and furniture.

Most homeowners don’t prefer an HO-1 policy because it doesn’t provide comprehensive protection. According to the International Risk Management Institute, most states have discontinued HO-1 policies.

HO-2 (broad form)

An HO-2 policy covers the named perils included in a HO-1 policy plus a few more, including:

• Accidental steam or water discharge
• Accidental, sudden burning, bulging, cracking or tearing apart of home systems
• Accidental, sudden damage caused by artificially generated electrical current (power surges)
• Damage caused by the weight of ice, sleet or snow
• Falling objects
• Frozen systems such as air conditioning and heating systems

The HO-2 policy covers your home’s structure and usually includes personal liability and personal property coverages. It does not cover damages caused by earthquakes and floods.

HO-3 (special form)

HO-3 coverage is the most popular homeowners policy because it provides comprehensive protection. In addition to covering all the named perils of the HO-1 and HO-2 policies, as well as some unnamed perils, the HO-3 also includes:

• Medical payments to others
• Personal liability coverage
• Personal property coverage

Many HO-3 policies also include loss of use coverage. Following a covered peril, loss of use coverage can help pay temporary living expenses such as hotel bills, rent and meals. Some policies include medical payments to others in liability coverage. If a guest trips and falls in your home, medical payments coverage can help pay the medical bills.

When shopping for an HO-3 policy, find out if it covers “all perils” or “open perils” and to pay close attention to the exclusions. For example, an all-perils HO-3 policy may exclude damage caused by water backup from sewage systems or sinks. Most HO-3 policies exclude damages caused by earthquakes and floods, but many insurers offer separate earthquake and flood insurance policies. Typically, HO-3 policies also cover attached structures, like carports, decks and garages. Some also cover unattached structures such as fences and sheds.

HO-4 (contents broad form)

Designed for renters, the HO-4 policy doesn’t cover structures but includes:

• Personal liability coverage
• Personal property coverage

Some standard HO-4 policies also include loss of use and medical payments coverage. Typically called “renters insurance”, an HO-4 policy usually covers the same perils as HO-2 policies. 

HO-5 (comprehensive form) 

An HO-5 policy provides open-peril coverage, which means it covers your home and personal property caused by any type of disaster, unless specifically named as an exclusion. Often, these policies exclude earthquake, flood and water backup damage. Typically, HO-5 policies include:

• Dwelling coverage
• Other structures coverage
• Loss of use coverage
• Personal liability coverage
• Personal property coverage

Before purchasing an HO-5 policy, carefully review all exclusions and ask an agent if the carrier allows exceptions in certain cases. For example, an insurer may pay a claim for water damage caused by a leaky roof but not by a flood. HO-5 policies cost more than HO-3 policies because they provide more comprehensive coverage for your home and personal belongings.

HO-6 (unit owners form)

Commonly referred to as condo insurance, HO-6 policies usually cover the same perils as HO-2 policies. Condo insurance usually includes:

• Dwelling coverage
• Loss of use coverage
• Personal liability coverage
• Personal property coverage

Some HO-6 policies also include medical payments coverage. HO-6 policies only offer limited dwelling coverage, oftentimes limiting structural claims to $1,000. They only cover structural elements within the confines of your walls, floors and ceilings and don’t cover the building’s exterior. Although condominium associations usually carry property insurance to cover building exteriors and common areas, many condo owners still need to purchase optional coverages to increase the protections of their HO-6 policies. 

HO-7 (mobile home form) 

Typically, mobile home  and manufactured home insurance covers the same perils as an HO-3 policy. However, standard HO-7 policies usually only include:

• Dwelling coverage
• Personal liability coverage

HO-7 dwelling coverage only covers the mobile home and other structures such as decks and patios. They usually don’t cover rental lots. Because HO-7 policies don’t usually cover loss of use, medical payments to others or personal property, many mobile home owners must purchase optional coverages for maximum protection. 

HO-8 (modified form) 

Designed for older homes, like historic homes and houses on the national register, the HO-8 policy covers the same perils as an HO-1 policy. Typically, HO-8 policies include:

• Dwelling coverage
• Medical payments to others coverage
• Personal liability coverage
• Personal property coverage

HO-8 policies usually don’t cover damages caused by earthquakes, falling objects or floods. The insurance industry designed the HO-8 policy for properties that have a higher replacement value than their market value. Insurers often subtract depreciation when paying HO-8 dwelling claims, leaving homeowners with reduced payouts for their losses. 

Insurance types to get if you are a homeowner 

Homeowners have a few choices about which type they would prefer.

The HO-3 policy is the most popular homeowners insurance on the market because it provides comprehensive protection. Named-peril HO-3 policies cover most types of disasters, and some carriers offer an open-peril option. When shopping for an HO-3 policy, look for a provider that offers all the most important coverages in their standard policies, including dwelling, other structures, loss of use, medical payments to others, personal liability and personal property coverages.

Homes that have high replacement cost values can benefit from the protections of an HO-5 policy. HO-5 policies typically cover all perils but may have exclusions. Usually, insurers will allow you to determine the level of liability coverage you need in an HO-5 policy. That feature gives you maximum protection if you entertain often, have kids that host sleepovers or you employ domestic staff that could sustain an injury in your home.

HO-2 policies often provide enough coverage for vacation homes and second homes that have lower dwelling values than primary residences. Because HO-2 coverage is a named-perils policy, it usually costs less than an HO-3 policy. HO-1 policies aren’t available in most states, so HO-2 coverage provides the best protection for homes with low replacement cost values.

Insurance types to get if you rent a home 

Renters have just one home insurance option, an HO-4 policy. Renters insurance is relatively inexpensive, $20 per month or less in many areas, so it makes sense to purchase this protection. When shopping for renters insurance, look for an HO-4 policy that includes loss of use, medical payments, personal liability and personal property coverages.

Insurance types to get if you own a co-op or condo 

Condo and co-op owners can protect their units with an HO-6 policy. While condo insurance doesn’t offer the robust coverage of an HO-3 policy, you can purchase optional coverages to maximize your protection. In your search for an HO-6 policy, look for an insurer that will allow you to increase your dwelling coverage to the limit you need.

Insurance to get if you own a mobile home

Manufactured home and mobile home owners can build a foundation of coverage with an HO-7 policy. Many HO-7 policies only include dwelling and personal liability coverages, so speak with an agent about adding medical payments and personal property coverages. If a policy doesn’t cover the rental lot your mobile home occupies, you may need to purchase an umbrella policy.

The takeaway

Choosing the home insurance form that fits your property and needs isn’t difficult. Decide on the level of protection you need, and closely consider the types of perils that pose the greatest threats to your home. Most homeowners can choose between three levels of coverage, offered in HO-2, HO-3 and HO-5 policies.

Once you’ve decided on the home insurance form that fits your needs, shop the market for the best combination of coverages. Look for standard policies that include the most important protections, like dwelling, loss of use, medical payments, personal liability and personal property coverages. If a standard policy doesn’t offer enough protection, talk to an agent about raising limits on some coverages or purchasing optional coverages to better protect your assets.