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

The ISO Homeowners Program

A Homeowners (HO) policy is a package policy that combines property coverage (Section I) and personal liability coverage (Section II) in one contract. The Insurance Services Office (ISO) publishes the standardized forms most insurers file, commonly the HO 2011 edition series.

Each form carries a number that signals its purpose. The number tells you the occupancy (owner, tenant, condo) and the peril breadth (named-peril vs. open-peril). Memorizing the form-by-form chart is one of the highest-yield exam tasks.

Form-by-form comparison

Note there is no HO-1 or HO-7 in the current program; HO-1 (Basic Form) was withdrawn in most states. A common trap is selecting HO-1 as a valid modern option.

How to read the forms

Open peril (also called all-risk or special) covers any cause of loss unless specifically excluded; the insurer must prove an exclusion applies. Named peril covers only the perils listed; the insured must prove the loss came from a covered peril. Open-peril coverage is broader, so HO-5 is the widest and HO-8 the narrowest.

• HO-3 is the workhorse: open-peril on the structure, named-peril on contents.
• HO-5 upgrades both dwelling and contents to open-peril.
• HO-8 exists for older homes where market value is far below replacement cost; it settles losses on a functional or repair-cost basis rather than full replacement cost, and removes theft of property away from the premises.

Tenant, condo, and modified forms

• HO-4 (Contents Broad Form) insures a renter's personal property and provides Section II liability, but contains no Coverage A dwelling because the tenant does not own the building. It does include limited Coverage A for tenant improvements under the additional coverages.
• HO-6 (Unit-Owners Form) covers a condominium owner's personal property and provides a small Coverage A (default $5,000, often increased) for interior elements ("studs in") the unit owner is responsible for under the master deed.
• HO-8 (Modified Coverage Form) suits older or architecturally unique homes; it pays the lesser of repair cost using functionally equivalent materials, avoiding overinsurance on costly historic features.

Eligibility rules

To qualify for the standard Homeowners Program, a risk generally must be:

• A one- to four-family dwelling used principally for residential (dwelling) purposes;
• Owner-occupied for HO-2, HO-3, HO-5, and HO-8 (the named insured lives there);
• A rented residence for HO-4 or a condominium unit for HO-6.

Incidental occupancies (a home office or a small studio) may be allowed with limits, but substantial business, farming, or vacant exposures push the risk to a Dwelling (DP) policy or a commercial program. A common trap: a four-unit building where the insured occupies one unit is still eligible; a vacant home is not.

Sections, declarations, and structure

Every homeowners form shares the same architecture, which the exam tests directly. Section I is the property half (Coverages A-D); Section II is the liability half (Coverage E - Personal Liability and Coverage F - Medical Payments to Others). The two sections share one Declarations page that names the insured, the residence premises, the policy period, the limits, and the deductible.

The named insured includes the policyholder and, while residents of the household, the spouse and relatives, plus persons under age 21 in their care. This definition controls who receives Section I property protection and who counts as an "insured" for liability.

Choosing a form in practice

Producers select a form by matching occupancy and the client's tolerance for depreciation. A new homeowner with a mortgage almost always takes HO-3 because lenders require dwelling coverage at replacement cost. A high-value home or a buyer wanting the fewest coverage gaps moves up to HO-5.

• A renter who owns furniture but not the building takes HO-4.
• A condo owner whose association master policy covers the building shell takes HO-6.
• An owner of a 90-year-old home whose market value is far below rebuild cost takes HO-8 to avoid paying premium on coverage they could never collect.

Misreading occupancy is the single most common eligibility error: selling an HO-3 to a tenant, or an HO-4 to an owner, voids the intended coverage.

Condominium and tenant nuances

The HO-6 form sits beside the condo association's master policy, which can be written on a bare walls, single entity, or all-in basis. Bare-walls master policies leave the unit owner responsible for everything inboard of the studs, so a unit owner with a bare-walls association should buy up the small default Coverage A well beyond $5,000. The exam frequently pairs HO-6 with loss assessment coverage, since associations levy special assessments after a shared-property loss.

The HO-4 form's tenant Coverage A applies only to improvements and betterments the renter installed (built-in shelving, upgraded flooring) — not the landlord's structure, which the owner insures separately under a dwelling or commercial policy.