What Is HO-4 Insurance?

An HO-4 policy provides three coverage types: personal property, liability and additional living expenses. Each is a separate component with its own limit and conditions.

Personal property coverage reimburses losses to your belongings caused by a named peril, a specific type of damage your policy explicitly lists. If the cause isn't on that list, the loss isn't covered, no matter the circumstances.

Standard HO-4 policies name 16 covered perils:

• Fire or lightning
• Overflow of water or steam from plumbing or HVAC
• Windstorm or hail
• Sudden breakage of a hot water heater
• Explosion
• Frozen pipes
• Riot or civil commotion
• Electrical currents
• Damage from aircraft
• Theft
• Damage from vehicles
• Volcanic eruption
• Smoke
• Falling objects
• Vandalism or malicious mischief
• Weight of snow, ice, or sleet

Policies also differ on how they calculate the payout. Actual cash value pays the item's depreciated worth at the time of loss: a three-year-old laptop worth $400 today pays out $400, not the $900 it costs to replace. Replacement cost coverage pays the current purchase price of an equivalent item and produces a larger payout, at a higher premium.

Some categories carry sublimits: lower payout caps within your total coverage limit that apply to specific item types such as jewelry, cameras, fine art and musical instruments. A scheduled personal property rider insures specific items above those sublimits for their full replacement value, each listed individually in the policy.

Liability coverage pays legal defense costs and any court-ordered damages if you are found responsible for a bodily injury or property damage claim. Standard policies include $100,000 in liability coverage, which covers most residential claims a renter is likely to encounter.

Higher limits are available at an added cost. Many policies also include medical payments to others: a provision that pays a third party's medical bills directly without requiring a liability determination first.

Additional living expenses coverage, also called loss of use, pays the difference between a policyholder's normal living costs and the costs incurred when the rental unit becomes uninhabitable after a covered loss. Eligible expenses include temporary housing, restaurant meals when kitchen access is unavailable, and similar costs above the usual baseline.

Coverage applies only during the repair period. Reimbursement is based on documented receipts. Losses caused by excluded perils don't qualify for additional living expenses coverage.

Not every disaster is covered. A flood from outside your building is not a named peril on any HO-4 policy. Neither is earthquake damage. Common exclusions across all carriers include:

• Flood
• Earthquake
• War
• Nuclear accident
• Mudslide
• Sinkhole

These aren't covered even if the loss is catastrophic. Standalone flood and earthquake policies are available separately for renters in higher-risk areas. Some carriers also offer endorsements, add-ons that attach coverage for specific excluded events to a base HO-4 policy.

Picture two people in the same building: one rents her unit, the other owns his as a condo. Both need coverage for their belongings and liability. But the condo owner also needs coverage for his countertops, flooring, and interior fixtures, because the HOA's master policy doesn't include those.

That is the difference between HO-4 and HO-6. HO-4 is for renters. HO-6 is for condo owners and adds interior finishings coverage that HO-4 doesn't include.

In both cases, the building's structure falls to someone else: the landlord's policy for renters, the HOA's master policy for condo owners. HO-4 and HO-6 each start where that coverage ends.

An HO-4 policy averages $15 a month or $182 a year, per our analysis, based on $20,000 in personal property coverage, $100,000 in liability and a $1,000 deductible.

Coverage amount is the main factor that affects costs, similar to home insurance. For instance, renters carrying $20,000 in personal property coverage average $182 a year, while those carrying $100,000 average $517. Insuring more costs more. How much more depends on your actual belongings.

HO-4 insurance covers the three things your landlord's policy doesn't: your belongings, your liability, and your temporary housing costs if a covered loss temporarily displaces you. At $15 a month on average, a standard policy covers losses that can easily reach thousands of dollars. Liability coverage is the component most renters underestimate: $100,000 is what stands between you and a court judgment if a guest is injured at your rental. Before buying, do a room-by-room inventory at replacement cost and compare at least three quotes.