All you want is insurance…why is it so hard to choose?
Let’s go over the different types of home insurance policies to help narrow down your options.
Purchasing insurance can be one of the most difficult decisions to make as a homeowner.
From analyzing your budget to deciphering your Declarations page (what does all that jargon mean?!), you might be tempted to pick the cheapest policy and call it a day.
Not so fast!
In this article, we’ll go over the eight different types of home insurance and how to find the right policy for you.
There Are Different Types of Home Insurance Policies?
You’ve probably heard people (including insurance agents) refer to “home insurance” as if it were a single product distinct from, say, auto or life insurance.
The reality is that there are multiple types of home insurance policies, each with its own set of coverages and exclusions.
- HO1 (“basic form”) – This is the most basic home insurance policy available, only covering losses caused by 10 perils: fire, lightning, windstorm/hail, explosion, riot or civil commotion, falling objects (such as trees), vehicles, smoke, vandalism, and theft.
- HO2 (“broad form”) – HO2 policies are similar to HO1 policies, in that they cover losses caused only by perils specifically named in the policy. The difference is that HO2 covers a total of 16—the 10 covered by the HO1 policy, as well as the weight of ice, snow, or sleet; accidental overflow of water or stream; freezing; sudden electrical surges; sudden tearing, burning, cracking, or bulging of electrical appliances; and volcanic eruption.
- HO3 (“special form”) – The most common home insurance policy, HO3 is known as an “all risk” policy, as it provides coverage against all risks except for those specifically excluded in the policy. (Personal belongings are only protected against named risks.)
- HO4 (“contents broad form”) – Also known as renter’s insurance, this policy covers 16 named perils for personal property only. The structure itself is covered under property owner’s insurance.
- HO5 (“comprehensive form”) – HO5 policies are similar to HO3 policies. Both offer “all risk” coverage for the structure, but HO5 policies also offer it on personal belongings as well.
- HO6 (“unit owners form”) – Typically referred to as condo insurance, this policy offers “walls-in coverage” against 16 named perils.
- HO7 (“mobile home form”) – This type of home insurance policy is specifically designed for tiny homes, mobile homes, and trailers.
- HO8 (“modified coverage form”) – HO8 policies offer a unique form of coverage that can be especially beneficial for older homes that don’t qualify for an HO3 policy. It covers 10 perils, with reimbursement on actual cash value rather than replacement cost.
If you’ve only recently become a Florida resident, you might be surprised by the scope of coverage listed on your policy. Nearly every carrier has an endorsement titled something like “Special Changes for Florida” that narrows the scope of coverage versus the national standard. They aim at (but are not limited to) outdoor property for the peril of a windstorm (i.e. fences, antennas, satellite dishes, etc.).
Which Home Insurance Policy Should You Choose?
Although there are eight types of coverage available, your choices are often limited by the type of dwelling you own as well as what’s available in the marketplace.
For example, renters and condo owners would purchase an HO4 or HO6 policy, respectively. Similarly, mobile homes can be covered by an HO7.
For single family homes, you have a bit more choice.
While rare, there are some Florida carriers that sell HO1 and HO2 policies. Our advice? Stay away! These are sometimes marketed as “Basic Choice” policies but they offer far less coverage than is safe.
HO8 policies are best for older or historic homes that would be impossible to rebuild exactly as they were, as certain materials simply may not be available anymore. Rather than insuring the home according to the replacement value (i.e. the cost to rebuild the home exactly as it was), HO8 policies would reimburse according to an agreed-upon value.
For single family homes (that aren’t on the National Historic Register!), the choice is between an HO3 and an HO5.
If you live in Florida, you might find it difficult to find a carrier that offers an HO5 policy, but they do exist! If having the extra protection is worth it to you, discuss your options with your independent insurance agent, so they can point you in the right direction.
What Does an HO3 Policy Cover?
The standard HO3 policy covers:
- The Dwelling (i.e. the physical structure of the house);
- Other Structures (such as a shed or detached garage);
- Personal Property;
- Loss of Use (i.e. any living expenses you might incur if your home becomes temporarily uninhabitable);
- Personal Liability (for injuries to a third party for which you are held liable);
- Medical Payments to Others (for injuries to a third party for which you are not held liable).
Just because you are limited to HO3 doesn’t mean you don’t have any choice when it comes to your home insurance coverage. Most carriers offer multiple options of coverage limits, deductibles, and more.
In our professional opinion, there are very few instances in which the standard homeowners policy is adequate coverage. Luckily, there are a selection of different riders or secondary policies to help you create the perfect safety net.
Some optional coverages that we encounter frequently:
- Flood Insurance (usually a separate policy offered through the National Flood Insurance Program)
- Umbrella Insurance (available as a secondary policy)
- Ordinance or Law Coverage
- Personal Injury
- Jewelry (available as both a rider and a stand-alone policy)
- Water Back-Up and Sump Pump Overflow
- Fungi, Wet or Dry Rot, Bacteria
By no means is this an all-inclusive list of every additional policy on the marketplace. There are hundreds of insurance coverages that protect against all kinds of risks—even weird ones, like ghosts!
Talk To an Independent Agent
The insurance marketplace can be a confusing and overwhelming place…if you don’t have access to the right resources.
As a second-generation insurance agency, insurance is literally in our blood. Our agents have extensive knowledge about the types of auto, life, and home insurance policies that are available and know exactly how to find a policy that fits your budget and your individual needs.
Call today to see how we can help!