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

The ISO Homeowners Program

The homeowners (HO) policy is the most heavily tested property topic on every state Property & Casualty exam. Most states test the ISO Homeowners 2011 (HO 00 series) editions, though the structure has been stable for decades and older 2000 editions read nearly identically for exam purposes. A homeowners policy is a package policy: it bundles Section I (property) and Section II (liability) in one contract, which is why it is not a monoline form. Memorize the form numbers, what each insures, and on what valuation and peril basis — that triad is the exam's favorite trap.

The six personal forms in use are HO-2, HO-3, HO-4, HO-5, HO-6, and HO-8. (HO-1, the old basic form, is obsolete and not sold; do not pick it.) Three forms insure a house the owner occupies (HO-2, HO-3, HO-5), two insure occupants who do not own the building's structure (HO-4 tenants, HO-6 condo unit-owners), and one insures older or unusual homes that cannot meet replacement-cost underwriting (HO-8).

The Six Forms at a Glance

The single most-tested distinction: HO-3 = open perils on the structure, named perils on contents; HO-5 = open perils on BOTH. Examiners love to ask which form gives all-risk coverage on personal property — the answer is HO-5, not HO-3.

Eligibility Rules

A risk must satisfy ISO eligibility to be written on a homeowners form rather than a dwelling (DP) or commercial policy:

• Owner-occupancy: HO-2/HO-3/HO-5 require the named insured to occupy the dwelling as the principal residence (some incidental occupancies allowed).
• No more than a four-family dwelling, and the insured occupies at least one unit, with no more than two roomers/boarders per unit. A five-or-more-unit building is commercial — a classic trap answer.
• HO-4 is for tenants of any dwelling (apartment, rented house) — covers personal property and liability, not the building.
• HO-6 is for condominium/co-op unit-owners; the unit's structure is the association's master policy responsibility, so Coverage A is small (default $5,000) and covers improvements, alterations, and the 'walls-in' interior.
• HO-8 is for dwellings where market value is far below replacement cost (older, ornate, or historic homes), so it settles on repair cost / ACV to discourage over-insuring to inflate a loss.

If a dwelling is non-owner-occupied (a rental house), the insured cannot use a homeowners form — write a Dwelling Policy (DP-1/2/3) instead. That owner-occupancy line is tested constantly.

Worked Example: Picking the Right Form

A client rents an apartment and owns $40,000 of furniture and electronics but no building. HO-4 is correct: it provides named-peril coverage on personal property (Coverage C) plus loss of use (Coverage D) and Section II liability, with no Coverage A because the tenant does not own the structure.

Contrast: a client owns a 1955 brick Victorian with a market value of $180,000 but a replacement cost of $420,000 (ornate plaster, custom millwork). Writing HO-3 at full RC would force the owner to insure to $420,000 — economically irrational and an over-insurance/morale-hazard concern. The proper form is HO-8, which pays repair cost using common, modern materials and settles on ACV, capping recovery near actual market/repair value rather than the inflated reproduction cost.

Condo (HO-6) and the Master Policy Split

The HO-6 deserves special attention because it interacts with the association's master policy. Master policies come in two flavors that the exam tests:

• Bare walls ('walls-out'): the association insures the building structure but not interior fixtures, cabinets, flooring, or improvements. The unit-owner's HO-6 Coverage A must be raised to cover everything 'walls-in.'
• All-in ('single-entity'): the master policy covers original interior fixtures as built, leaving the unit-owner responsible mainly for upgrades and personal property.

Because the unit-owner cannot control the master policy's deductible, the HO-6 includes Loss Assessment coverage so the owner can recover a share of an association assessment after a covered building loss. The default Coverage A of $5,000 is frequently inadequate for renovated units, so producers raise it - a common scenario question.

Tenant (HO-4) Scope and Insurable Interest

The HO-4 underscores insurable interest: a tenant has no ownership interest in the building, so writing Coverage A would violate the principle of indemnity. Instead, the tenant insures (1) personal property (Coverage C) on a named-peril basis, (2) loss of use (Coverage D) for additional living expense if the rented unit becomes uninhabitable, (3) any tenant's improvements and betterments they installed (a sublimit, often 10% of Coverage C), and (4) Section II liability and medical payments.

A recurring trap: a landlord's policy (a Dwelling Policy on the building) does not cover the tenant's belongings - the tenant needs the HO-4. Likewise, when the named insured owns and occupies a one-to-four-family dwelling, the HO-2/3/5 forms apply; the moment occupancy or ownership fails, the producer must pivot to a Dwelling or commercial form. Tying eligibility back to ownership + occupancy + unit count answers nearly every form-selection item.