Types of Homeowners Insurance: Which is Right for You?

The eight homeowners insurance policy types include:

• HO-1: Basic coverage for dwelling only against 10 named perils (not available from most insurers)
• HO-2: Broad coverage for all property types against 16 named perils (rarely offered today)
• HO-3: Open perils for dwelling, named perils for belongings (most popular at 79%)
• HO-4: Renters insurance covering personal property and liability only
• HO-5: Comprehensive open perils coverage for dwelling and belongings
• HO-6: Condo insurance for unit improvements and personal property
• HO-7: Mobile home coverage designed for manufactured and mobile homes
• HO-8: Historic home coverage with market value limits for older properties

Basic and Broad Coverage: HO-1 covers only 10 named perils for your dwelling with no personal property protection - it's nearly obsolete with just 1.8% market share. HO-2 expands this to include all coverage types but still only covers 16 named perils, chosen by 6.5% of homeowners mainly for budget reasons.

Most Popular Options: HO-3 dominates the market at 79% because it provides open perils coverage for your dwelling and named perils for belongings. HO-5 offers open perils for everything with maximum protection, chosen by 12.4% of homeowners willing to pay premium prices.

Specialty Coverage: HO-4 (renters insurance) covers personal property and liability only, representing 76% of the tenant/condo market. HO-6 (condo insurance) covers unit improvements and personal belongings, making up 24% of tenant/condo policies. HO-7 provides open perils coverage designed specifically for mobile and manufactured homes. HO-8 offers named perils with market value limits for historic properties, used by just 0.3% of homeowners.

HO-1 is the most basic homeowners insurance, covering only your dwelling against 10 specific perils. This policy doesn't include personal property, liability, or additional living expense coverage.

Popularity: This type is virtually extinct. Progressive notes it's "not available in most states" and most insurers don't offer it.

What HO-1 covers:

• Fire or lightning
• Windstorm or hail
• Explosion, riot or civil commotion
• Aircraft and vehicle damage
• Smoke, vandalism, theft
• Falling objects

Pros:

• Lowest cost available
• Simple coverage structure

Cons:

• No liability protection
• No personal property coverage
• No additional living expenses
• Very limited peril coverage
• Hard to find insurers offering it

Best for almost no one. This policy provides inadequate protection and many mortgage lenders won't accept it.  We do not recommend considering this policy type.

HO-2 expands HO-1 coverage to include all six standard coverage types (dwelling, other structures, personal property, liability, medical payments, additional living expenses) but only covers 16 named perils.

Popularity: Rarely available.  Approximately 6.5% of homeowners choose HO-2, but most major insurers have discontinued it.

What HO-2 adds to HO-1:

• Personal property coverage
• Liability and medical payments coverage
• Additional living expenses
• Six additional perils: ice/snow weight, water discharge, appliance damage, freezing, electrical surges, volcanic eruption

Pros:

• Lower cost than HO-3
• Full coverage types included
• Better protection than HO-1

Cons:

• Named perils only (limited coverage)
• Many risks not covered
• Less comprehensive than most homeowners need

Best for very few homeowners.  Limited availability makes this hard to find, and HO-3 provides better value.  We don't recommend this coverage type.

HO-3 insurance provides open peril coverage for your dwelling (covered against all risks except exclusions) and named peril coverage for personal property. This policy dominates the market for good reasons.

Popularity: Chosen by 79% of homeowners.  It's the clear market favorite for its coverage-to-cost balance.

What makes HO-3 special:

• Open perils for your home structure
• Replacement cost dwelling coverage
• Comprehensive liability protection
• All standard coverage types included

Pros:

• Broad dwelling protection
• Available from most insurers
• Good value for comprehensive coverage
• Standard features most homeowners need

Cons:

• Personal property has named perils only
• High-value items have sub-limits
• Doesn't include flood or earthquake coverage

Best for most homeowners, especially first-time buyers, standard single-family homes, and anyone wanting solid coverage without premium pricing.

While an HO-3 insurance policy offers comprehensive coverage, certain events and situations fall outside its scope. These exclusions are standard and reflect the limits of the policy. Here are common exclusions in an HO-3 policy:

HO-4 insurance, known as renters insurance, is a named peril policy specifically designed for renters. Renters insurance differs from home insurance in that it doesn't include dwelling coverage and it focuses on personal property coverage.
Popularity: A good value for renters but often overlooked.  Only about 37% of renters have coverage despite its low cost.

What HO-4 includes:

• Personal property against named perils
• Liability coverage for accidents in your rental
• Additional living expenses if rental becomes uninhabitable
• Medical payments to others

Pros:

• Very affordable ($15-$30 monthly average)
• Protects belongings and provides liability coverage
• Covers belongings even outside your rental
• Available with replacement cost coverage

Cons:

• No dwelling coverage
• Named perils only for belongings
• Coverage limits may be low for expensive items

Best for anyone renting apartments, houses, dorm rooms, or even living with family but wanting their own protection.

HO-5 offers the most comprehensive protection available, with open peril coverage for both dwelling and personal property, plus replacement cost coverage for everything.

Popularity: Premium option chosen by 12.4% of homeowners, mainly those with high-value properties or extensive personal belongings.

What sets HO-5 apart:

• Open perils for dwelling AND personal property
• Replacement cost for all covered property
• Higher limits for valuables
• Fewer exclusions and restrictions

Pros:

• Maximum protection available
• Covers belongings against more perils
• No depreciation on claim payments
• Better coverage for high-value items

Cons:

• Higher premiums (10-20% more than HO-3)
• May include coverage you don't need
• Still excludes flood and earthquake

Best for: Homeowners with properties worth $500,000+, expensive personal belongings, or those wanting maximum protection regardless of cost.

There are key distinctions between HO-5 and HO-3 policies that affect which policy you might choose.

HO-6 fills gaps left by your condo building's master policy, covering your unit's interior improvements, personal belongings, and liability within your unit.

Popularity: Standard for condo owners, though coverage needs vary significantly based on the building's master policy structure.

What HO-6 covers:

• Interior improvements and fixtures you've added
• Personal property
• Liability for accidents in your unit
• Additional living expenses during repairs
• Loss assessment coverage for building expenses

Pros:

• Designed for condo ownership specifics
• Supplements building master policy
• Includes loss assessment coverage
• Moderate cost

Cons:

• Coverage complexity requires understanding master policy
• May duplicate some master policy coverage
• Limited dwelling coverage compared to houses

Best for all condo owners who need protection beyond their building's master policy coverage.

HO-7 provides open peril coverage specifically designed for mobile homes, manufactured homes, and trailers, addressing their unique risks and characteristics.

Popularity: Used by 2-3% of homeowners, mainly those living in mobile or manufactured homes as primary residences.

What makes HO-7 different:

• Coverage designed for mobile home construction
• May include transportation coverage
• Covers tie-down systems and mobile home-specific features
• Open peril protection similar to HO-3

Pros:

• Tailored for mobile home risks
• Comprehensive coverage for qualifying homes
• May cover some transportation situations

Cons:

• Limited to specific home types
• May have restrictions on home age or condition
• Not all insurers offer this coverage

Best for owners of mobile homes, manufactured homes, and some RVs used as primary residences where standard homeowners policies aren't available.

HO-8 covers older homes where full replacement cost would exceed the property's market value, using modified replacement cost that considers practical restoration approaches.

Popularity: Specialized coverage used by 0.3% of homeowners, mainly those with historic properties or unique architectural features.

When you need HO-8:

• Historic homes with expensive-to-replicate features
• Properties where rebuilding cost significantly exceeds market value
• Older homes (typically 40+ years) where insurers require actual cash value coverage

Pros:

• Designed for unique property situations
• Considers market value limitations
• May work with historic preservation requirements

Cons:

• Named perils only
• Modified replacement cost may not fully restore original features
• Limited availability from insurers

Best for owners of older homes (40+ years) where replacement cost exceeds market value, or when insurers require actual cash value coverage due to the home's age or condition.

Here is a home insurance policy comparison chart to help you decide which is right for you.

This fundamental difference helps you choose appropriate coverage for your situation.

• Named Peril Policies (HO-1, HO-2, HO-4, HO-8) list specific covered events. If damage isn't from a listed peril, you're not covered. Standard named perils include fire, lightning, windstorm, hail, explosion, theft, vandalism, and vehicle damage.
• Open Peril Policies (HO-3, HO-5, HO-6, HO-7) cover all damage except specifically excluded events. Common exclusions include flood, earthquake, normal wear and tear, government action, and intentional damage.  Open peril policies provide broader protection

The difference: Named peril policies require you to prove that damage came from a covered event. Open peril policies assume coverage unless the insurer can prove an exclusion applies. Open peril coverage costs more but provides broader protection with fewer coverage gaps.

How your policy type calculates payments significantly affects your claim settlements.

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

Policy applications: 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 eliminates out-of-pocket costs when replacing belongings, while actual cash value requires you to pay the difference between depreciated value and replacement cost.

Use this guide to quickly identify the right policy type for your situation:

By Property and Situation

• Own a house: HO-3 for most homes, HO-5 for properties worth $500,000+
• Own a condo: HO-6
• Rent your home: HO-4 (only $15-$30 monthly)
• Own a mobile/manufactured home: HO-7
• Own a historic home (40+ years) where rebuilding costs exceed market value: HO-8

By Budget Preference and Risk Tolerance

• Want maximum protection: HO-5 comprehensive coverage
• Want good coverage at reasonable cost: HO-3 (chosen by 79% of homeowners)
• Need basic budget coverage: HO-2 (limited availability)

Choose HO-5 over HO-3 if you:

• Own a home worth $500,000 or more
• Want open peril coverage for both dwelling and belongings
• Prefer maximum protection regardless of cost

Don't Forget

• High-risk areas need additional coverage (flood, earthquake, windstorm)
• Business activities from home require policy endorsements
• Vacation homes need special occupancy provisions
• Valuable collections need scheduled personal property coverage regardless of policy type

Below are answers to frequently asked questions about homeowners insurance policy types, including common coverage forms and what each includes to help determine the right fit for your home.