Key Takeaways
- HO-3 (Special Form) is the MOST COMMON homeowners policy — provides open perils on building, named perils on contents
- HO-4 (Contents Broad Form) is RENTERS INSURANCE — covers personal property only with no dwelling coverage
- HO-6 (Unit-Owners Form) is CONDO INSURANCE — provides 'walls-in' coverage for condo owners
- HO-5 (Comprehensive Form) provides OPEN PERILS coverage on BOTH the building AND contents — most expensive but broadest
- HO-8 (Modified Coverage Form) is for OLDER HOMES where replacement cost exceeds market value — uses functional replacement cost
Homeowners Policy Forms (HO-2 through HO-8)
The Insurance Services Office (ISO) developed standardized homeowners policy forms for different situations. Understanding which form applies to which situation is heavily tested on the P&C exam.
Overview of All HO Forms
| Form | Name | Building Coverage | Contents Coverage | Best For |
|---|---|---|---|---|
| HO-2 | Broad Form | Named Perils | Named Perils | Budget-conscious owners |
| HO-3 | Special Form | Open Perils | Named Perils | MOST COMMON — typical homeowners |
| HO-4 | Contents Broad | N/A (no building) | Named Perils | RENTERS |
| HO-5 | Comprehensive | Open Perils | Open Perils | Maximum protection |
| HO-6 | Unit-Owners | Named Perils | Named Perils | CONDO OWNERS |
| HO-8 | Modified Coverage | Named Perils | Named Perils | OLDER HOMES |
Exam Tip: HO-1 (Basic Form) has been discontinued by most insurers and is NOT tested on modern exams.
HO-2: Broad Form
Named perils on BOTH dwelling and contents
Covered Named Perils (16 perils)
- Fire or lightning
- Windstorm or hail
- Explosion
- Riot or civil commotion
- Aircraft
- Vehicles
- Smoke
- Vandalism or malicious mischief
- Theft
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge of water or steam
- Sudden cracking/tearing of heating/AC/water heating
- Freezing of plumbing, heating, AC
- Sudden accidental damage from electrical current
- Volcanic eruption
Best For: Homeowners wanting basic protection at lower premium.
HO-3: Special Form (MOST COMMON)
Open perils on dwelling, Named perils on contents
This is the standard homeowners policy used by approximately 80% of homeowners.
Why HO-3 Is Most Popular
| Feature | Benefit |
|---|---|
| Open perils on dwelling | Broadest building protection |
| Named perils on contents | Lower premium than HO-5 |
| Balance of coverage and cost | Best value for most homeowners |
Coverage Structure
- Dwelling (Coverage A): Open perils — covered unless specifically excluded
- Other Structures (B): Open perils
- Personal Property (C): Named perils (16 perils from HO-2)
- Loss of Use (D): Covered
Key Point: If a question asks about the "most common" or "standard" homeowners form, the answer is HO-3.
HO-4: Contents Broad Form (RENTERS)
Named perils on contents only — NO dwelling coverage
Who Needs HO-4?
- Tenants/Renters who don't own the building
- The landlord's dwelling policy covers the building
- Tenant needs coverage for their personal property and liability
What HO-4 Covers
| Coverage | Included? |
|---|---|
| Dwelling (A) | NO |
| Other Structures (B) | NO |
| Personal Property (C) | YES — Named perils |
| Loss of Use (D) | YES |
| Personal Liability (E) | YES |
| Medical Payments (F) | YES |
Cost: Average $180-$300/year — very affordable protection.
HO-5: Comprehensive Form
Open perils on BOTH dwelling AND contents
The Broadest Protection Available
- Dwelling: Open perils
- Contents: Open perils (unlike HO-3)
Why Choose HO-5?
- Maximum coverage for high-value homes
- Open perils on contents provides broader protection
- Burden of proof on insurer for ALL claims
Trade-off
- Higher premium than HO-3 (typically 10-20% more)
- Worth it for valuable personal property collections
HO-6: Unit-Owners Form (CONDO)
For condominium unit owners
Understanding Condo Insurance
Condo buildings have two insurance layers:
- Master Policy (HOA): Covers common areas, exterior, structure
- HO-6 (Unit Owner): Covers individual unit interior, contents, liability
HO-6 "Walls-In" Coverage
| Coverage | What It Protects |
|---|---|
| Building Property | Improvements, fixtures, alterations YOU made |
| Personal Property | Your contents and belongings |
| Loss Assessment | Your share of master policy deductible |
| Liability | Same as other HO forms |
Example: You renovate your condo kitchen ($30,000). The master policy covers the original structure, but HO-6 covers YOUR improvements.
HO-8: Modified Coverage Form
For older homes where replacement cost exceeds market value
The Problem HO-8 Solves
- Historic Victorian home worth $200,000 market value
- Replacement cost with original materials: $500,000
- Standard policy would either overinsure or underinsure
How HO-8 Works
| Feature | HO-8 Approach |
|---|---|
| Valuation method | Functional replacement cost |
| Coverage type | Named perils only |
| Settlement | Repair with modern equivalent materials |
Functional Replacement Cost Example:
- Original: Hand-carved wood molding
- Functional equivalent: Modern molding that serves same purpose
- Insurer pays for functional equivalent, not exact restoration
When HO-8 Is Used
- Homes built before 1940
- Historic or architecturally significant homes
- Properties where RC > Market Value
Which homeowners form provides open perils coverage on the dwelling but named perils coverage on personal property?
A tenant renting an apartment needs coverage for their personal belongings and liability. Which policy form is appropriate?
An owner of a Victorian home built in 1890 finds that replacement cost exceeds market value. Which form is most appropriate?
4.3 Section I: Property Coverages
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