All you want is insurance…why is it so hard to choose?
Let’s review the different types of home insurance policies to help you narrow down your options.
When people talk about “home insurance,” they often make it sound like it’s just an insurance policy. But there are actually several types of home insurance policies, and the right choice depends on the type of home you live in, how you use it, and the type of coverage you have.
This doesn’t mean you have to memorize every insurance form there is. (Please don’t!) But it’s helpful to understand the basics before choosing an insurance policy, especially if you live in Florida.
In this article, we’ll review the eight main types of home insurance policies, what they typically cover, and how to start narrowing down the right option for your home.
The reality is that there are several types of home 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, covering only losses caused by 10 perils: fire, lightning, windstorm/hail, explosion, riot or civil unrest, falling objects (such as trees), vehicles, smoke, vandalism and theft.
- HO2 (“broad form”) – HO2 policies are similar to HO1 in that 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, plus the weight of ice, snow or sleet; accidental overflow of water or stream; freeze; sudden electrical surges; sudden tearing, burning, cracking or swelling of electrical appliances; and volcanic eruption.
- HO3 (“special form”) – The most common home insurance contract, HO3 is called “all risks”, because it offers coverage against all risks except those specifically excluded from the contract. However, personal effects are only protected against named risks.
- HO4 (“broad form of content”) – Also known as renters insurance, this policy covers 16 named perils for personal property only. The building itself is covered by the owner’s insurance.
- HO5 (“full form”) – HO5 policies are similar to HO3 policies. Both offer “all risks” coverage for the structure, but HO5 policies also offer all risks coverage for personal property.
- HO6 (“Unit Owners Form”) – Typically called condo insurance, this policy provides “wall coverage” against 16 named perils.
- HO7 (“mobile home form”) – This type of home insurance contract is specifically designed for tiny houses, mobile homes and caravans.
- HO8 (“Modified Coverage Form”) – HO8 policies can be particularly beneficial for older homes that do not qualify for an HO3 policy. It covers 10 risks, with reimbursement based on the actual value rather than the replacement cost.
If you’ve recently become a Florida resident, you might be surprised by what your homeowner’s insurance covers. Almost all carriers have an endorsement titled something like “Special Modifications for Florida” that narrows the scope of coverage compared to the national standard. These endorsements often apply to outdoor properties where there is a windstorm risk, such as fences, antennas, satellite dishes, and similar items.
Which home insurance to choose?
Although there are eight types of coverage, your choices are often limited by the type of home you own as well as what’s available on the market.
For example, renters and condo owners would purchase a HO4 or HO6 politics, respectively. Likewise, mobile homes can be covered by a HO7.
For single-family homes, you have a little more choice.
Although rare, some Florida carriers sell HO1 and HO2 policies. Our advice? Stay away! These are sometimes marketed as “Basic Choice” policies, but they provide much less coverage than is safe.
HO8 The policies are best for older or historic homes that would be difficult or impossible to rebuild exactly as they were, as some materials may simply no longer be available. Rather than insuring the home based on replacement value (the cost of rebuilding the home exactly as it was), HO8 policies would pay out based on an agreed-upon value.
For single-family homes (which are not listed on the National Historic Register!), the choice is between a HO3 and an HO5.
If you live in Florida, you may have a hard time finding an insurer that offers an HO5 policy, but they exist! If this added protection is worth it, 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. This is 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 may incur if your home becomes temporarily uninhabitable;
- Civil liability coverage (for damage caused to a third party for which you are held responsible);
- Medical payments for injuries caused to a third party for which you are not held responsible.
Just because you’re limited to HO3 doesn’t mean you don’t have choices when it comes to home insurance coverage. Most carriers offer several options for coverage limits, deductibles, and endorsements.
HO3 vs HO5: what is the difference?
At first glance, HO3 and HO5 policies appear almost identical. But there is a key difference between the two, and it all depends on how they treat personal property.
HO3 and HO5 policies offer “all risks” coverage, meaning they provide protection against any risk that is not specifically excluded in your policy. But in an HO3 policy, this “all risks” protection only applies to damage to your home and not to your personal belongings. Your personal property under an HO3 policy is covered only for the named perils.
An HO5 policy extends this protection by also providing comprehensive coverage for personal property. This can be helpful if you want broader protection for your assets, but availability may vary, particularly in Florida.
So, is HO5 still better? Not necessarily. It depends on your needs, your risk and your budget.
What about condo, renter, mobile home and older home insurance?
Not everyone looking for homeowners insurance owns a single-family home. This is why there are several types of home insurance!
If you rent your house or apartment, you’ll typically look for an HO4 policy, better known as renters insurance, to cover your personal belongings (which aren’t covered by your landlord’s policy).
If you own a condo, you typically look for an HO6 policy. Condominium insurance is often described as “wall” coverage because it is designed around the parts of the unit for which you are responsible.
If you own a mobile home, tiny house, or trailer, you may need an HO7 policy designed for this type of home.
If you own an older home, especially one with unique construction or materials, you may need to look into an HO8 policy. Older homes can create roofing issues 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 ran a business from home?
Homeowners insurance is designed to protect your personal property and your home. It is not designed to cover your business.
This is important if you run a home business, even if the business seems small. Selling craft products online, storing inventory in a spare room, meeting clients at your home, keeping professional equipment at home, or using your vehicle for business errands can all create coverage issues.
Commercial property, professional liability, loss of business income, product claims and cyber risks are not what a home insurance policy is designed to cover.
So if you run a home business, tell your insurance agent exactly what you do. The point is not to guess on your own which policy you need. This is to make sure your agent understands how the home is used so they can help you identify the right coverage before there is a claim.
Optional Covers
In our professional opinion, there are very few cases in which the standard home insurance policy provides adequate coverage. Fortunately, there are a selection of different riders (or secondary policies) to help you create the perfect safety net.
Some optional coverages we frequently encounter:
This is by no means an exhaustive list of all additional policies available on the market. There are hundreds of insurance coverages that protect against all kinds of risks.
Talk to an Independent Agent Before Choosing
The insurance market can be confusing and overwhelming 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 of the types of auto, life, business and home insurance policies available, and they know how to help you search for a policy that fits your budget and individual needs.
The right home insurance is not always the cheapest. It’s the one that fits your home, your assets, your risks and the way you actually live.
If you’re trying to decide 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 you!
