4.1 Homeowners Forms HO-2 through HO-8 and Eligibility

4.1 Homeowners Forms HO-2 through HO-8 and Eligibility

The homeowners (HO) program published by the Insurance Services Office (ISO) is the most heavily tested property topic on the national portion of the Property & Casualty (P&C) exam. The current edition in most states is the ISO HO 2011 program (forms carrying the HO 00 0X 05 11 edition date), which replaced the long-running HO 2000 program. Expect the exam to test you on the form letter, the perils approach (named vs. open), and what property is eligible for each form. Memorize the form letters cold; the exam phrases questions by scenario, not by definition.

Every HO form is a package policy: Section I covers property, Section II covers personal liability and medical payments, and the two travel together under one premium and one expiration date.

The Six Homeowners Forms

The distinction the exam returns to again and again is named perils vs. open perils (also called "all-risk" or "special form"). Named-perils forms cover only the perils listed; the insured carries the burden of proof that a listed peril caused the loss. Open-perils forms cover any cause of loss except those excluded; the insurer carries the burden of proof to show an exclusion applies.

HO-3 is the market workhorse — NAIC data shows it covers roughly 79% of owner-occupied exposures. Its signature combination is the one the exam loves: open perils on the dwelling (Cov A & B), named perils on personal property (Cov C). If a question says a homeowner's loss to the building is covered unless excluded but a loss to contents must match a listed peril, the answer is HO-3.

HO-5 upgrades both the building and contents to open perils — the broadest standard form. HO-2 is broad named perils on everything. HO-4 (renters) and HO-6 (condo) carry no full Cov A on the structure: HO-4 has none because the tenant owns no building, and HO-6 provides a small base building limit (commonly $5,000, increasable) for owner-installed improvements and the portions of the unit the master condo policy does not cover.

HO-8 and Eligibility Traps

HO-8 (Modified Coverage Form) exists for older homes where replacement cost would far exceed market value — a Victorian with hand-carved moldings, for example. HO-8 settles dwelling losses on a functional replacement / repair-cost basis using common modern materials, not full replacement of ornate originals, and it pares perils down to a basic, often theft-limited, set. Do not pick HO-8 just because a home is "old"; pick it when replacement cost greatly exceeds market value.

• Owner-occupancy rule: HO-2, HO-3, HO-5 require the named insured to occupy the dwelling as a residence. A purely rented-out dwelling is ineligible — that exposure goes on a Dwelling (DP) policy, not an HO form.
• Incidental occupancies (a home office, a permitted one-family-to-two-family conversion) are generally allowed.
• Boarders/roomers: a limited number may be acceptable; a true rooming house is not.

Eligibility and Owner-Occupancy

The homeowners program requires the insured to be an owner-occupant of a one-to-four family dwelling (or a tenant/condo unit-owner for HO-4 and HO-6). Key eligibility traps: HO-4 (renters/contents broad form) and HO-6 (condo unit-owner) provide no dwelling Coverage A in the conventional sense — HO-6 gives a small built-in Coverage A (often $5,000) for owner-installed improvements. HO-8 exists precisely for older homes whose replacement cost far exceeds market value, settling the dwelling on a modified (functional/repair-cost) basis to remove the moral hazard of over-insuring.

Form-by-Form Peril Structure

The single most-tested line is HO-3: the dwelling is open-peril but contents are broad named-peril — only HO-5 makes both open.

The Eligibility Traps the Exam Loves

Beyond peril structure, eligibility separates the forms. HO-4 insures a tenant's contents and adds Section II liability but provides no dwelling Coverage A; HO-6 insures a condo unit-owner with a small built-in Coverage A for owner-installed improvements and betterments (default often $5,000, raisable).

HO-8 exists for older homes where replacement cost exceeds market value, settling the dwelling on a functional/repair-cost basis and limiting theft to a small amount to remove the moral hazard of over-insuring. The single most-tested line remains HO-3: open-peril dwelling, broad named-peril contents — only HO-5 makes both open.