What Are the Different Types of Homeowners Insurance That Exist Today?
Buying homeowners insurance isn’t just wishful thinking. It’s a requirement in most cases. In the United States, nearly 93% of homeowners have a homeowners insurance policy.
If you’ve just bought a home on a mortgage loan, you’ll likely be required to buy a homeowners insurance plan before moving in. If you’re going to spend this kind of money, you might as well make sure you buy the best homeowners insurance on the market.
To do that, you’ll first need to learn about the different types of homeowners insurance. Luckily, understanding this concept is a bit straightforward. In this article, we’ll dig deep into the subject so you can make the best buying decision.
What are the Different Types of Homeowners Insurance
In general, there are eight different types of homeowners insurance. These types are traditionally labeled as “HO” with a corresponding number at the end. Here is every type of home insurance you’ll find on the market:
- HO-1: This is by far the most basic type of home insurance for single-family residences
- HO-2: This policy is an upgrade from HO-1 and a popular option for homeowners
- HO-3: This is the most popular form of homeowners insurance, with some noticeable upgrades from HO-2
- HO-4: This type is for renters, commonly called renter’s insurance
- HO-5: This is the most comprehensive form of insurance for single-family homes
- HO-6: This type is geared towards condo owners
- HO-7: This type is for manufactured or mobile homes
- HO-8: This is a special type of homeowners insurance made for older homes
Each of these types is significantly different from the other. Below, we’ll explain each form of coverage in detail.
HO-1: Extremely Basic
HO-1 is the most basic and limited form of home insurance coverage. When you purchase this form of insurance, all of your belongings will only be covered at their original cash value.
Also, this form of coverage will only protect your home against what’s called the “10 named perils“. These include:
- Lightning or fire
- Hail and windstorm
- Riot or civil unrest
- Aircraft crash
- Vehicle crash
- Falling objects
Being that HO-1 only covers real object value, it’s not very popular anymore. In fact, many insurance providers don’t carry this coverage anymore.
HO-2 is a significant upgrade from HO-1 and is more popular as a standard form of homeowners insurance. It’s important to mention that HO-2 covers the actual structure of the home at its replacement cost value.
It covers your personal belongings at their actual cash value. HO-2 also protects your property against six more natural disasters that include:
- Damage from ice, snow, or sleet
- Damage from the run-off of nearby water
- Damage to home appliances, like air conditioners or heating systems
- Freezing temperatures
- Sudden damage from power surges
- Volcanic eruption
Since HO-1 has become fazed out over the years, this is the lowest form of homeowners insurance. The next product is extremely popular.
HO-3: Most Popular Option
HO-3 is the most common form of homeowners insurance. This is because it’s ideal for single-family homes. It protects your home from the perils listed in HO-1 and HO-2 policies.
This is called all-risks coverage, meaning your home will be covered from anything except:
- Congressional laws
- The movement of the Earth
- Water damage from sewer backup or flooding
- Power outage
- Nuclear hazard
HO-3 insurance policies automatically cover your home at its replacement cost value and your belongings at their actual cash value. HO-3 insurance policies also include liability and loss-of-use coverage.
This will pay for medical and legal fees if you’re found liable for an accident at your home. loss-of-use coverage will pay for living arrangements you need to make if your home needs to be repaired, such as hotel costs.
Still, the major drawback is that you won’t be able to get a flood insurance quote since this type of damage isn’t covered in your policy.
HO-4: Renter’s Insurance
HO-4 is commonly known as renter’s insurance. It’s designed for people renting a home or apartment. The reason we’re listing HO-4 is that many landlords will require tenants to purchase insurance for valuable residences.
HO-4 provides comprehensive coverage, paying the expenses of liability and additional living expenses. It’s important to mention that HO-4 does not cover the actual structure of the home. It’s up to the landlord to purchase this coverage.
HO-5: Comprehensive Option
This insurance option does exactly what it’s labeled to do, and that is to provide all the coverage you need as a homeowner. HO-5 insurance may look similar to HO-3, but there are some noticeable differences like:
- Both the home’s structure and personal belongings are automatically covered by their replacement cost
- You’ll receive all-risks coverage for both your home and personal belongings
- You’ll be provided high coverage limits for certain valuable items, such as furs, jewelry, and expensive technology
As you can see, HO-5 insurance policies are for high-net-worth individuals living in valuable areas of high risk. If you need extra protection for your property, this is the coverage you should buy.
HO-6: Condo Insurance
HO-6 is commonly known as condo insurance, reserved for people living in a co-op or condominium. The coverage amount you need to buy will depend on the condo’s homeowners association.
Unlike renter’s insurance, condo insurance will cover the structure, personal liability, loss-of-use, and medical payments. This policy also provides loss assessment coverage.
HO-7: Mobile Home Insurance
This form of insurance is essentially just like HO-3, but it’s designed for people owning a mobile home. This form of coverage extends to mobile homes and other structures that don’t qualify as single-family homes.
- Modular homes
- Sectional homes
HO-7 is considered a special form of insurance, much like HO-8, which we’ll describe below.
HO-8: Modified Coverage
HO-8 is designed for homes that don’t qualify as single-family residences. It’s also meant for homes that don’t meet the standards of most insurance companies. You really can only qualify for this insurance if you have an older home that will likely suffer massive repairs.
Learn More About Insurance
As you can see, there are many different types of homeowners insurance to choose from. Each is designed to accommodate a specific type of home and homeowner.
Are you ready to learn more about insurance policies? If so, check out our blog for more helpful articles.
How to Choose Property Managers: The Complete Guide for Landlords
Are you trying to find a manager that will take good care of your property? Is this the first time…