What Is an HO-2 Insurance Policy?

An HO-2, also known as a broad form policy, is one of the least common types of homeowners insurance available today. 

It covers four main areas: dwelling coverage for the structure of your home, detached structures on your property, personal property and personal liability. Additional living expenses are also included if a covered loss makes your home uninhabitable. The critical limitation is that all of this protection applies only on a named peril basis: every covered cause of damage has to appear on the policy’s list of 16 perils, or the claim won’t be paid.

An HO-2 policy only pays for damage caused by the following 16 perils. Any cause of loss that doesn’t appear on this list isn’t covered, regardless of how severe the damage is.

1. Fire or lightning
2. Windstorm or hail
3. Explosion
4. Riot or civil commotion
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism or malicious mischief
9. Theft
10. Falling objects
11. Weight of ice, snow or sleet
12. Accidental discharge or overflow of water or steam
13. Sudden and accidental tearing, cracking, burning or bulging of a steam or hot water heating system, air conditioning system or household appliance
14. Freezing of plumbing, heating, air conditioning or sprinkler systems, or household appliances
15. Sudden and accidental damage from an artificially generated electrical current
16. Volcanic eruption

An HO-2’s named peril structure leaves out a wide range of risks that cause real financial losses for homeowners. Some of these, like flooding and earthquakes, require separate policies regardless of which homeowners coverage you hold. Others, like sewer backup and mold, are available as endorsements on broader policies but aren’t included in an HO-2 by default.

Common HO-2 exclusions:

• Flooding (available separately through FEMA’s National Flood Insurance Program or private insurers)
• Earthquakes (available as a standalone policy or as an endorsement through some carriers)
• Sewer or drain backup
• Power failure
• Neglect
• War and nuclear hazard
• Intentional acts
• Government action
• Theft from a home under construction
• Vandalism to a home that’s been vacant more than 60 days
• Mold, fungus or wet rot, unless caused by a covered accidental water discharge
• Wear and tear or mechanical breakdown
• Settling, cracking, bulging or expanding of foundations or walls
• Damage from animals, including pets

According to the National Association of Insurance Commissioners’ 2023 homeowners insurance report, the average HO-2 premium is $1,323 per year for policies with average coverage of $225,000 to $250,000. The lower premium reflects the policy’s narrower scope: covering 16 named perils reduces the insurer’s risk exposure compared to an open peril HO-3, and that difference shows in the rate.

The biggest difference between an HO-2 and an HO-3 is how they cover the dwelling. An HO-3 covers the structure of your home on an open peril basis, meaning it pays for all damage except what the policy lists as excluded. An HO-2 covers the dwelling on a named peril basis, so only damage from one of 16 listed perils is covered. Both policies cover personal property on a named peril basis, so that part of the coverage is the same.

The other key difference is who carries the burden of proof at claim time. Under an HO-2, the policyholder has to show that one of the 16 named perils caused the damage before the insurer pays. Under an HO-3, the insurer has to demonstrate that an exclusion applies before denying a claim. That distinction matters most when the cause of a loss isn’t obvious, like water intrusion that could be traced to more than one source.

Most homeowners who have an HO-2 were placed on it rather than choosing it. It’s what insurers write when a property doesn’t meet the bar for a broader HO-3, often because of the home’s age, condition or prior claims history. The situations below are the most common reasons an insurer writes an HO-2.

An HO-2 covers your home and belongings against 16 named perils, and that’s the full extent of it. Most homeowners end up on one because their property didn’t qualify for the broader coverage of an HO-3, not because they chose it. The clearest path to better coverage is fixing whatever made the home ineligible, whether that’s roofing condition, deferred maintenance or prior claims history, and then shopping other carriers.