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.

When people talk about “home insurance,” they often make it sound like one simple policy. But there are actually several types of home insurance policies, and the right one depends on what kind of home you live in, how you use it, and what kind of coverage is available to you.

That doesn’t mean you need to memorize every insurance form in existence. (Please don’t!) But it does help to understand the basics before you choose a policy, especially if you live in Florida.

In this article, we’ll go over the eight main types of home insurance policies, what they generally cover, and how to start narrowing down the right option for your home.

What Are the Different Types of Home Insurance?

The reality is that there are multiple types of homeowners insurance, each with its own set of coverages and exclusions.

Here’s the quick version:

• 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 because they only cover losses caused 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, because it provides coverage against all risks except for those specifically excluded in the policy. Personal belongings, however, 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 building itself is covered under the 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 all risk personal property coverage.
• 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 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 what your homeowners insurance covers. Nearly every carrier has an endorsement titled something like “Special Changes for Florida” that narrows the scope of coverage versus the national standard. These endorsements often apply to outdoor property for the peril of windstorm, such as fences, antennas, satellite dishes, and similar items.

Which Home Insurance Policy Should You Choose?

Although there are eight types of coverage, 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 difficult or 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 (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?

For many homeowners, the HO3 policy is the one they are most likely to encounter. That’s why it deserves a closer look.

The standard HO3 policy offers:

• Dwelling coverage for the physical structure of your home;
• Other Structures (such as a shed or detached garage);
• Personal property coverage;
• Additional living expenses you might incur if your home becomes temporarily uninhabitable;
• Personal liability coverage (for injuries to a third party for which you are held liable);
• Medical payments for injuries to a third party for which you are not held liable.

Just because you are limited to HO3 doesn’t mean you have no choice when it comes to your home insurance coverage. Most carriers offer multiple options of coverage limits, deductibles, and endorsements.

HO3 vs. HO5: What’s the Difference?

At first glance, HO3 and HO5 policies seem nearly identical. But there is a key difference between the two, and it all comes down to how they deal with personal property.

Both HO3 and HO5 policies provide “all risk” coverage, which means they provide protection against any risk that isn’t specifically excluded in your policy. But in a HO3 policy, this “all risk” protection only applies to damage to your home—not your personal belongings. Your personal property under an HO3 policy is covered only for named perils.

An HO5 policy expands that protection by offering all risk coverage for personal property as well. That can be valuable if you want broader protection for your belongings, but availability can vary, especially in Florida.

So is HO5 always better? Not necessarily. It depends on your needs, your risk and your budget.

What About Condo, Renters, Mobile Home, and Older Home Insurance?

Not everyone searching for home insurance owns a single-family home. That’s why there are multiple types of home insurance!

If you rent your home or apartment, you are usually looking for an HO4 policy, better known as renter’s insurance, to cover your personal belongings (which aren’t covered by your landlord’s policy).

If you own a condo, you are usually looking for an HO6 policy. Condo insurance is often described as “walls-in” coverage because it is designed around the parts of the unit you are responsible for.

If you own a mobile home, tiny home, or trailer, you may need an HO7 policy designed for that type of dwelling.

If you own an older home, especially one with unique construction or materials, you may need to look at an HO8 policy. Older homes can create coverage challenges because rebuilding them exactly as they were may not be realistic.

This is where it helps to slow down and ask questions before you buy. The type of building you live in has a major impact on the type of policy you need.

What If You Run a Business From Home?

Home insurance is designed to protect your personal property and residence. It is not designed to cover your business.

That matters if you run a business from home, even if the business seems small. Selling handmade products online, storing inventory in a spare room, meeting clients at your house, keeping business equipment at home, or using your vehicle for business errands can all create coverage issues.

Business property, business-related liability, lost business income, product-related claims, and cyber risks are not what a homeowners policy is built to cover.

So if you run any kind of business from home, tell your insurance agent exactly what you do. The goal is not to guess which policy you need on your own. It is to make sure your agent understands how the home is being used so they can help you identify the right coverage before there is a claim.

Optional Coverages

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.

Talk To an Independent Agent Before You Choose

The insurance marketplace can be confusing and overwhelming if you do not 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, business, and home insurance policies that are available, and they know how to help you look for a policy that fits your budget and your individual needs.

The right home insurance policy is not always the cheapest one. It is the one that fits your home, your belongings, your risks, and the way you actually live.

If you are trying to choose between different types of home insurance policies, Harry Levine Insurance can help you sort through your options and ask the right questions before you buy.

Call today to see how we can help!