2.2 Homeowners Policy Forms & Endorsements

Homeowners Policy Forms

The Homeowners (HO) policy is a "package" or "multiline" policy. Unlike a basic dwelling policy, it packages property coverage (Section I) and personal liability coverage (Section II) into a single document. It is designed for owner-occupied residential properties of 1 to 4 units.

Policy Structure

Every standard Homeowners policy is divided into two main sections:

Section I: Property Coverages

• Coverage A (Dwelling): Covers the residence premises and attached structures.
• Coverage B (Other Structures): Covers unattached structures. Automatically set at 10% of Coverage A.
• Coverage C (Personal Property): Covers the insured's belongings worldwide. Automatically set at 50% of Coverage A (except in HO-4 and HO-6, where it is the primary coverage limit selected by the insured).
• Coverage D (Loss of Use): Combines Additional Living Expense and Fair Rental Value. Usually set at 30% of Coverage A for an HO-3.

Section II: Liability Coverages

• Coverage E (Personal Liability): Protects the insured against legal claims for bodily injury or property damage caused by their negligence, anywhere in the world. The standard base limit is typically $100,000 per occurrence.
• Coverage F (Medical Payments to Others): Pays necessary medical expenses incurred by others within 3 years of an accident that causes bodily injury on the insured premises or is caused by the insured's activities. This is a "no-fault" coverage (negligence is not required). The standard base limit is $1,000 per person.

The Six Homeowners Forms

Claims adjusters must be able to identify which policy form applies, as this dictates whether a peril is covered and how the loss is settled.

HO-2 (Broad Form)

The HO-2 provides Named Peril coverage for both the dwelling (Coverages A & B) and personal property (Coverage C). It covers the broad perils (fire, lightning, wind, hail, aircraft, riot, vehicles, volcanic eruption, explosion, smoke, V&MM, theft, falling objects, weight of ice/snow/sleet, accidental discharge of water, freezing, etc.). Dwelling losses are settled at Replacement Cost (80% rule applies); contents are ACV.

HO-3 (Special Form)

The HO-3 is the most widely sold homeowners policy. It is a hybrid:

• Coverages A & B (Dwelling/Other Structures): Provided on an Open Peril basis. Settled at Replacement Cost.
• Coverage C (Personal Property): Provided on a Named Peril basis (the same broad perils as HO-2). Settled at Actual Cash Value.

HO-4 (Contents Broad Form - Renter's)

Designed specifically for tenants. Because the insured does not own the building, there is no Coverage A or Coverage B.

• Coverage C (Personal Property): The primary focus. It provides Named Peril coverage for the tenant's belongings, settled at ACV.
• Coverage D (Loss of Use): Set at 30% of the Coverage C limit.

HO-5 (Comprehensive Form)

The "Cadillac" of homeowners policies, offering the broadest coverage.

• Coverages A, B, and C: All are covered on an Open Peril basis.
• Losses to the dwelling are Replacement Cost; personal property remains ACV by default, though a Replacement Cost endorsement is usually added.

HO-6 (Unit-Owners Form - Condominium)

Designed for condominium and cooperative unit owners. The condo association typically insures the exterior building structure.

• Coverage A: Provides limited dwelling coverage (usually a low baseline like $5,000, which can be increased) to cover the "walls-in" (alterations, appliances, fixtures, and improvements within the unit).
• Coverage C: The primary focus, covering personal property on a Named Peril basis.

HO-8 (Modified Coverage Form)

Used for older homes where the replacement cost far exceeds the market value (e.g., an elaborate Victorian mansion). If the home were destroyed, replacing the custom plasterwork and woodwork with modern equivalents would be disproportionately expensive.

• Provides Basic Named Peril coverage.
• Settles dwelling losses on a Functional Replacement Cost basis (repairing with commonly available modern materials) or Actual Cash Value, rather than true Replacement Cost.

Special Limits of Liability (Coverage C)

The HO policy restricts the amount paid for certain categories of personal property, particularly items prone to theft or difficult to value. Common standard limits include:

• $200 for money, bank notes, bullion, gold, silver, coins.
• $1,500 for securities, accounts, deeds, tickets, stamps.
• $1,500 for watercraft, including their trailers, furnishings, equipment, and engines.
• $1,500 for theft of jewelry, watches, furs, precious/semiprecious stones.
• $2,500 for theft of firearms and related equipment.
• $2,500 for theft of silverware, goldware, pewterware.

If the insured needs more coverage for these items, they must be scheduled via a Personal Articles Floater.

Adjuster Scenario: A burglar breaks into an insured's home (HO-3 policy) and steals $3,000 worth of jewelry and a $4,000 television. The television is fully covered (subject to the deductible) because it is subject to the overall Coverage C limit. However, the jewelry is subject to the $1,500 special limit for theft. The maximum the adjuster can pay for the jewelry is $1,500.