After understanding the four different areas of coverage in a typical homeowners policy (see “Insurance for Any Home”), it is important to learn about the different types of coverage. The types vary depending on the type of home you have (house, condominium, or rental unit), and on the level of desired coverage you want for your home, its contents, liability protection, and other costs.

First, the policy types are part of a standardized system in which the terms HO-1 through HO-8 describe the level of coverage. For instance, HO-1 is more basic homeowners insurance than HO-3 (see below). Additionally HO-4 and HO-6 policies are reserved for renters and condo owners (see “ Other Home Insurance Options” for more information).

As far as single family homes and multi-family dwellings, there are five types of policies that can be selected:

HO-1: The most basic of all homeowners insurance coverage, in which the only the items specifically mentioned in the policy are the ones covered, including valuables. Additionally, damage resulting from 10 major disasters--such as fire or lightning, explosions, theft, or vehicle- and aircraft-caused damage--is covered.

HO-2: Somewhat more expansive coverage than HO-1, the HO-2 policy covers a home against the 10 major disasters named in the HO-1 policy, but also includes 6 forms of damage related to malfunction or breakdown of home plumbing, heating and cooling, and electrical systems, as well as more uncommon disasters.

HO-3: Known as the most popular of homeowners insurance policies, the HO-3 policy covers the entire home, its contents, and offers liability protection. It includes much broader coverage for disasters and damage than the other policies.

HO-5: This policy has broader liability, disaster, property and contents coverage and covers a greater array of incidents than the HO-3.

HO-8: The HO-8 is designed for older homes, and offers different replacement coverage for damage due to increased replacement costs.

In addition to the types of policies, you also have options with regard to the monetary value of the reimbursement, including actual cash value (your home’s value less depreciation); replacement (entire cost of rebuilding and/or replacement of your home and its contents with no depreciation), or guaranteed/extended--which will cover all of the costs of replacement and repairs of the home to its pre-damaged condition beyond policy limits as necessary.


References

FHCSP. A Fair Housing Guide to Homeowners Insurance.
Utah State University. Take Charge of Your Money
Author, Unknown. Types of Insurance
Insurance Information Institute. What is Homeowners Insurance?