All You Need to Know About Home Insurance Coverage

Purchasing your home is about more than just buying a place to live. It’s an investment that will carry you through the years and provide physical and financial security for you and your loved ones.

That’s why home insurance is critically important. It will protect your valuable investment during unforeseen events if your home is damaged or destroyed beyond repair. 

This article is going to outline the types of home insurance coverage you need to know about. By the time you’re finished reading, you will understand the basics of what homeowner insurance covers, what types of policies are available, how they differ, and how to get the best policy at the most competitive price. 

Types of Home Insurance Coverages

First, it’s essential to understand what goes into a home insurance policy. Typically, they are comprised of different types of coverages which may  include: 

Dwelling Coverage 

Dwelling coverage protects your home from damages caused by covered perils to the actual house, along with any attached buildings, structures, and permanent internal fixtures or systems. These can include plumbing, heating, and permanently installed air conditioning systems, along with electrical wiring, permanently installed appliances, and even wired alarm systems in some cases. 

Personal Property Coverage

A home insurance policy also covers personal property that may be damaged from a covered peril. This can include furniture, appliances, equipment, electronics, clothing, and in some cases even items stored offsite in storage lockers or warehouses. 

Supplementary Structures

Supplementary structures are other buildings on the property that are not directly attached to the main dwelling. These can include free-standing garages, guest cottages, tool sheds, fences, and other structures of value which could suffer damage from a covered peril. 

Personal Liability Coverage

Personal liability coverage is designed to give you financial protection if you’re found responsible for injuries to other people on your property. In some cases, your policy can even extend this protection to other family members if someone from your household damages someone else’s property. 

Loss of Use

Some covered perils may damage your home to the point where it’s no longer habitable until repairs are made. In the event you must evacuate your house, some insurance policies may include coverage for living expenses incurred while your home is being repaired or replaced, such as rent and food costs. 

Home Insurance Coverage Forms

There are eight different forms of home insurance, each covering a different type of property or providing a different level of coverage.. 

HO-1: Most limited insurance policy for single-family homes that covers the structure and personal belongings at actual cash value.

HO-2: Slight upgrade from HO-1 to include more covered perils and sometimes replacement cost or limited replacement cost of the home.

HO-3: Most popular home insurance policy, covers most perils and can include replacement cost of personal property. 

HO-4: Renters insurance policy that covers losses such as personal property and liability, usually for people renting a home or apartment or living in a dorm or other non-owned residence

HO-5: Similar to HO-3, but normally has built-in replacement cost coverage and the broadest level of coverage for personal belongings, often includes higher coverage limits for specialty possessions such as jewelry, high-end electronics, and furs. 

HO-6: Coverage for condo owners that is designed to insure the parts of the structure that the Condo Association’s policy doesn’t cover

HO-7: Coverage for owners of manufactured or mobile homes.

HO-8: Homeowners insurance for homes that do not meet the standards for other policies.

1. HO-1 – Basic Form

HO-1 basic form insurance is the most basic home insurance policy on the market. It usually only offers dwelling coverage to protect the actual physical structure of the house from ten covered perils that include:

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

Most notably missing from that list is anything related to water damage.  HO-1 basic form insurance generally does not include any other coverages such as personal property, liability, medical payments, or additional living expenses coverage. It’s also important to note that most mortgage providers will not approve loans with limited HO-1 coverage. This is due to the high risk that comes with the limited coverage offered by this policy and because most HO-1 policies do not offer replacement cost coverage, meaning the homeowner may have to pay significantly more than the policy’s deductible to make repairs to the home in the event of a claim or catastrophe. 

What does HO-1 insurance cover?

Companies offering HO-1 insurance will typically pay to repair the dwelling, including any attached structures like a garage or front porch, but this coverage is limited to the 10 listed perils above, and it generally does not pay the full replacement cost.  For instance, if you have a 15-year-old roof that is destroyed by hail and you selected a $1000 deductible when you purchased the policy, you may have to pay $1000 plus half of the cost of the roof if the roof is designed to last 30 years because half of the useful life of the roof has already been used up.

What does HO-1 insurance NOT cover?

Often, the following items are not covered on an HO-1 policy, or they are severely limited:

• Personal property
• Other Structures
• Liability
• Medical payments
• Additional living expenses
• Neglect, failure to make repairs or maintenance
• Wear and tear
• Earthquakes
• Floods

Flood and earthquake insurance is typically purchased by homeowners living in high-risk areas through private insurers or government programs like the National Flood Insurance Program. 

2. HO-2 Broad Form

HO-2 insurance can go beyond the limitations of an HO-1 to cover the physical structure of your home along with personal property, liability, medical bills, and additional living expenses if your home becomes uninhabitable, depending on what carrier you purchase the policy from and what options you add to it. An HO-2 policy also covers your home from 16 named perils instead of the 10 that an HO-1 policy covers.  These include:

• Windstorm or hail
• Fire or lightning
• Vehicles
• Smoke
• Vandalism
• Theft
• Falling objects
• Explosions
• Riot or civil commotions
• Aircrafts
• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water or steam
• Sudden and accidental tearing apart, cracking, burning, or bulging of some household systems like a built-in appliance (water heater, centralized air conditioner, or heating system)
• Freezing
• Sudden and accidental damage from an artificially generated electrical current
• Volcanic eruption

Similar to an HO-1 policy, an HO-2 policy is referred to as a “named peril” policy, meaning it will cover your home and all other insured assets from specific damages defined by the policy. Although an HO-2 policy includes some coverage for certain water-related damages that are omitted on an HO-1 policy, it still is not common and offers much less coverage than the most common homeowners policies.

What does HO-2 insurance cover?

HO-2 insurance offers very basic coverage that usually includes: 

• Dwelling coverage
• Personal property
• Liability
• Medical payments
• Additional living expenses

What does HO-2 insurance NOT cover?

Here are some things an HO-2 insurance typically does not cover: 

• Neglect, failure to make repairs or maintenance
• Wear and tear
• Earthquakes
• Floods

3. HO-3 Special Form

HO-3 insurance is the most common type of insurance policy, provided by almost all home insurance companies. It generally includes coverage for the dwelling and attached structures, other structures, personal property, medical payments, liability, and loss of use. 

The most profound difference between HO-3 and HO-2/1 is that instead of providing named perils coverage, only insuring against a short list of specific types of events, an HO-3 provides “all-risks” or “open peril” coverage for the dwelling and attached structures, with the following notable exceptions: 

• Wear and tear
• Negligence
• Earthquakes
• Floods
• Building code enforcement
• Mold, rust, or corrosion
• Pet damage
• Pests or rodents
• Government action

Similarly to HO-2, HO-3 insurance usually includes named-peril coverage for personal property and unattached structures, with typical perils that include: 

• Fire and lightning
• Hail and wind
• Explosions
• Smoke
• Riots
• Vandalism
• Weight of ice, snow, or sleet
• Falling objects
• Theft
• Accidental or sudden water damage

What does HO-3 insurance cover?

Normally, HO-3 policies include varying levels of coverage for the following six categories:

• Dwelling and attached structures
• Other structures 
• Personal property 
• Medical payments 
• Liability coverage
• Additional living expenses coverage

What does HO-3 insurance not cover?

Here are some notable things that an HO-3 does not cover:

• Earthquakes
• Flooding
• Wear/tear
• Neglect

4. HO-5 – Comprehensive Form

HO-5 homeowners insurance is the most complete form of single-family home protection. While it has many of the same characteristics as  HO-3 insurance, HO-5 has some essential differences that include:

• Dwelling and personal property insured at replacement cost (most HO-3 policies require you add replacement cost protection for personal property)
• All-risks coverage for both dwelling and personal property, meaning if the policy doesn’t specifically exclude a peril, then the loss would be covered.
• Higher coverage limits for special personal property categories like jewelry, electronics, and fine furs.
• HO-5 policies often include other important coverages such as ordinance or law coverage, extended replacement cost, personal injury.

What’s covered by HO-5 Insurance?

HO-5 insurance covers everything covered by HO-3, plus all-risks coverage for personal property.  Basically, coverage is usually available up to the policy limits for any loss not excluded or limited by specific policy language.

What’s not covered by HO-5 Insurance?

As with all insurance, HO-5 policies also have some limitations.  A few of the common ones to be aware of are:

• Earthquakes
• Flooding
• Wear/tear
• Neglect 

How much home insurance coverage do I need? 

The amount of coverage you need depends on the form of insurance you buy, the types of coverage, the value of your property, and the cost to rebuild your home. 

Do I need specialized coverage based on where I live?

Most policies do not include earthquake or flood coverage. Homeowners that live in high-risk areas typically purchase specific add-ons to round out their coverage. 

Additionally, in some parts of the US, wind and or fire/smoke coverage must be purchased separately, so speaking with a licensed agent who is familiar with your state is very important in deciding how to insure your home and what types of special coverage you may need.

Comma Insurance can help you determine the coverage you need, at the best rates on the market

Let the insurance professionals at Comma Insurance help you find the best home insurance quote that fits your needs. We’re always conducting data analysis and tracking trends in the home insurance industry. We work hard to help you get the coverage you need at the most competitive rates with the deepest discounts. 

Comma is an independent agency that works with many insurance companies to find the best homeowner’s insurance coverage options at the best price. Whether it's life insurance, car insurance, or home insurance, we can find the custom solution to fit your unique needs.