Around 95 percent of Americans have some form of property insurance. Given that most lenders require homeowners to hold insurance as a condition of their mortgage, this is unsurprising. But just having an insurance policy doesn’t mean your home or property is truly well-protected.
Choosing the right kind of property insurance for your needs is crucial. Here are the seven main types of property insurance, what they cover, and how to determine which kind is best for you.
1. Broad (HO-2)
Renters and homeowners often encounter the question “do I need property insurance” for the first time when getting ready to sign a lease or mortgage paperwork. In most cases, the answer is a firm “yes.”
Faced with the need to secure insurance to move forward with their purchase or rental, Americans often select whatever policy is:
- Most available
- Least expensive
- Sufficient to satisfy the minimum legal and lender requirements
This is usually a “Broad Form” or HO-2 policy. These policies cover all 16 standard perils recognized and named by the insurance industry. That includes damage caused by:
- Some weather and natural disaster-related incidents
- Crimes such as theft and vandalism
- Breakdowns or ruptures of plumbing and electrical systems
While these policies offer a fairly wide range of protections, they cover only damages caused by listed events. Damages of any kind outside those specifications are not covered.
2. Basic (HO-1)
In rare cases, lenders and leasing agents may allow households to select “Basic Form” or HO-1 policies instead of requiring an HO-2 policy. These policies, where insurers offer them, provide bare minimum coverage for damages caused by:
- Storms (including hail, wind, and lightning damage)
- Fire and smoke
- Theft, riots, and vandalism
- Volcanic eruptions
- Explosions
- Aircraft or automative vehicles
HO-1 policies exclusively cover your home or physical property. They offer no liability coverage and often do not include coverage for personal belongings within the home or elsewhere on the property. For most households, this makes them among the least appealing property insurance options.
3. Special (HO-3)
When property owners really sit down to find insurance that offers them peace of mind and protection instead of the minimum coverage, they tend to land on a “Special” or HO-3 policy. These policies offer broader protections, including:
- Coverage for damage from all 16 standard perils
- Personal liability coverage
- Coverage for secondary structures on a property such as garages, decks, and sheds
Property owners choosing such policies should read the fine print carefully, however, as most policies specifically exclude some types of common damage. Examples of popular exclusions are:
- Flood damage
- Damage caused by animals (wild or domestic)
- Damage caused by lack of maintenance, including mold, infestations, and rot
- Problems caused by faulty construction or home maintenance
- Damage inflicted intentionally
- Wear and tear
- Acts of war or actions taken by law enforcement authorities
Property owners concerned about any of these things will need to purchase different or additional coverage. Owners of manufactured or mobile homes will need an HO-7 policy, which covers these same terms for that particular type of property.
4. Comprehensive (HO-5)
For property owners concerned about the things an HO-3 policy does not cover, the next step up in standard options for property insurance is an HO-5 policy. As with HO-3 policies, “Comprehensive” HO-5 policies cover nearly everything they do not explicitly exclude. Among other things, this vastly expands policyholders’ coverage for personal belongings.
Importantly, these policies still do not provide coverage for common hazards such as:
- Floods
- Failure to maintain a home
- Damage caused by animals (wild or domestic)
Also, due to the extensive nature of their coverage, HO-5 policies are not available to all property owners. Insurers may restrict them to applicants whose properties are newer, in excellent condition, and located within easy access of emergency services.
5. Renters or Content Broad (HO-4)
Not all property insurance types require policyholders to own their property. HO-4 policies offer renters standard protections such as:
- Personal liability coverage
- Coverage for personal belongings
- Coverage for expenses that may result from being forced out of an apartment due to emergency circumstances
Such coverage is essential as landlord policies typically cover only building structures and accidents in public areas of the site. Landlord policies do not cover tenants’ personal belongings or expenses in the event of damage or emergency.
Renters’ policies do not cover business-related items or expenses, so renters working from home or storing business materials in their apartments will need separate riders for those things, as well.
6. Condo (HO-6)
An HO-6 or Condo policy walks the middle ground between homeowners’ and renters policies. Like an HO-4 policy, it covers personal belongs, liability, and temporary relocation expenses. Like any of the homeowners’ policies, it also covers the interior portions of a condo that residents are responsible for, such as floors, walls, and ceilings.
When choosing a policy:
- Carefully review what the HOA or managing company’s policy does and does not cover
- Look at specific exclusions, such as plumbing and electrical systems
- Explore how to get property insurance through the plan if the landlord’s insurance falls short of paying for what it should cover and leaves you in the lurch
7. Historic (HO-8)
Most homeowners exploring the question of “what does homeowners insurance cover?” will find that an HO-3 or HO-5 policy fits the bill and covers their needs. Owners of historic homes or properties, however, may find that they need an HO-8 policy instead.
Also called “Modified Coverage” policies, HO-8 plans are tailored to the needs of historic or “landmark” properties. “Named peril” policies, they cover only the types of perils spelled out in the plan. They may also limit the amount of coverage a homeowner can receive, since it is not always possible to replace one-of-a-kind pieces or components of historic homes.
Property owners may be able to customize the plan to suit their specific situations, however, offering the best coverage overall.
Choosing the Right Types of Property Insurance Choosing the right types of property insurance for your home is key to protecting yourself, your family, and your home. Learn more about putting in the place the protections you need by checking out the other great articles in our Safety and Security section today.
