8 Types of Homeowners Insurance

Before you can compare home insurance quotes, it helps to know that not every homeowners policy is the same type. The eight home insurance types cover different things, pay out claims differently, and are each designed with a specific kind of home or living situation in mind.

HO-1 is as bare-bones as home insurance gets, and most insurers don't sell it anymore. It covers only 10 named perils, pays out at actual cash value (so depreciation gets subtracted from your check), and doesn't include liability, additional living expenses, or medical payments to others. It made up just 1.8% of single-family home insurance policies in 2021, based on data from the National Association of Insurance Commissioners. If you come across an HO-1, there are better options available.

The 10 perils an HO-1 policy covers:

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Aircraft
• Vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Falling objects

HO-2 is a step up from HO-1, covering the same 10 perils plus six more, bringing the total to 16. It also fills in what HO-1 was missing: personal liability, medical payments to others, and additional living expenses. Your home is paid at replacement cost, but your belongings are still covered at actual cash value. HO-2 covered just 6.7% of single-family homes in 2021, but it's a legitimate option if HO-3 isn't available in your area.

The six perils HO-2 adds to its coverage are:

• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water or steam
• Sudden and accidental tearing apart, cracking, burning, or bulging of a built-in appliance like a water heater or HVAC system
• Freezing of plumbing, heating, or air conditioning systems
• Sudden and accidental damage from artificially generated electrical current, like power surges
• Volcanic eruption

HO-3 is the home insurance type most people end up with, and for most single-family homeowners, it balances coverage and cost well. It covered 78.2% of single-family home insurance policies in 2021.

Your home's structure gets open-peril protection, meaning it's covered against everything except the listed exclusions. Your personal belongings default to the same 16 named perils as HO-2, though you can add a replacement-cost endorsement for a small additional cost.

Since HO-3 covers your structure against everything except its exclusions, those exclusions are worth knowing:

• Flooding, sewer backups or groundwater seepage
• Earth movement, including earthquakes and sinkholes
• Ordinance or law
• Neglect, wear and tear or mechanical breakdown
• Mold, fungus or wet rot (unless caused by accidental water discharge)
• War or nuclear hazard
• Settling, shrinking, or bulging of your foundation or walls
• Birds, vermin, rodents or insects

HO-4, better known as renters insurance, is the home insurance type made for people who rent. It covers your personal belongings against the same 16 named perils as HO-3, including theft away from home. If your laptop is stolen from a hotel room, renters insurance may have you covered. It also includes personal liability and additional living expenses if your rental becomes uninhabitable after a covered loss. The building itself is your landlord's responsibility.

Since renters don't need dwelling coverage, the average cost of HO-4 is $12 a month, compared to $296 for a typical HO-3 policy.

HO-5 is the most comprehensive home insurance type you can get, and the difference from HO-3 is real. Carriers like Chubb and AIG are known for HO-5-level policies, and it's the right call for high-value homes. HO-5 made up 13% of home insurance policies in 2021.

HO-6 is the home insurance type for condo and co-op owners. It covers the same 16 named perils as HO-3, applied to your unit's interior and belongings rather than a full home. Your condo association's master policy handles the building's exterior and shared spaces. Know what the master policy covers before you decide how much HO-6 you need; at minimum, protect any renovations you've made to the unit.

What HO-6 covers:

• Interior of your unit (dwelling coverage)
• Personal belongings
• Personal liability
• Medical payments to others
• Additional living expenses
• Loss assessment coverage

HO-7 insurance covers mobile and manufactured homes that don't qualify for standard HO-1 through HO-5 policies. Like an HO-3 policy, it pays for open-peril damage to the dwelling itself, while personal property is covered under named perils only.

Factory-built or prefabricated homes moved to a permanent site qualify for HO-7 coverage. Eligible properties include:

• Manufactured homes built after June 15, 1976, that meet U.S. Department of Housing and Urban Development (HUD) construction standards
• Mobile homes built before that date, anchored and used as a primary residence
• Modular homes assembled in sections off-site and attached to a foundation on delivery
• Tiny homes on permanent foundations that meet local zoning and building codes

Fire, theft and wind damage are covered under HO-7 policies for the home's structure, attached fixtures such as decks or porches and personal belongings inside.

HO-8 insurance covers older or historic homes where replacement cost exceeds current market value. Claims under an HO-8 policy are paid at actual cash value (ACV) rather than replacement cost value.

Named-peril coverage applies under an HO-8, protecting against the same 10 hazards listed under an HO-1 policy.

An HO-8 policy applies to:

• Homes more than 40 years old
• Historic properties or custom-built structures
• Homes that don’t meet current building codes

Homeowners preserving unique or historic structures often choose HO-8 coverage for this reason. HO-8 policies made up just 0.32% of all homeowners insurance policies written in 2022, according to the NAIC's study.

• Replacement cost value (RCV) pays the cost to replace damaged items with new, similar quality items. A five-year-old $1,200 refrigerator would be replaced with a new $1,200 model.
• Actual cash value (ACV) pays your property's current value minus depreciation. That same refrigerator might only be worth $600 after depreciation, so that's what you'd receive.

Most dwelling coverage uses replacement cost, but personal property often defaults to actual cash value. You can upgrade personal property to replacement cost for higher premiums. Replacement cost coverage means fewer out-of-pocket costs at claim time; actual cash value leaves you covering the gap between what the item is worth now and what it costs to replace.

Homeowners insurance comes in eight types: HO-1 through HO-8. HO-3 covers about 79% of single-family homes nationwide, according to the NAIC, balancing coverage breadth with cost. HO-5 offers the broadest financial protection with open-peril coverage for dwelling and personal property.

HO-4, HO-6 and HO-7 cover renters, condo owners and mobile homeowners, while HO-8 suits owners of older or historic properties.