4.1 Homeowners Forms HO-2 through HO-8 and Eligibility
Key Takeaways
- HO-3 is open peril on the dwelling, named peril on contents; HO-5 is open peril on both.
- HO-2 is named peril on both; HO-8 uses the basic peril list and functional/repair settlement.
- HO-4 covers renters (no Coverage A); HO-6 covers condo unit-owners (default $5,000 Coverage A).
- Owner-occupied HO forms require a 1-4 family dwelling occupied by the named insured.
- Open peril shifts the burden to the insurer to prove an exclusion; named peril requires the insured to prove a listed peril.
The ISO Homeowners Program
The Homeowners (HO) program is a package policy filed by the Insurance Services Office (ISO). It bundles Section I (property coverages on the dwelling and personal property) with Section II (personal liability and medical payments) into one contract. Most state exams test the 2011 and 2022 ISO editions; the form numbers (HO 00 02, HO 00 03, HO 00 05, HO 00 04, HO 00 06, HO 00 08) and the coverages they trigger are the heavily tested material. Memorize which form is broad vs. open peril, and which forms are for non-owner occupants.
The single biggest distinction on the exam is named-peril coverage versus open-peril (also called "special" or "all-risk") coverage. Named-peril forms cover only the perils listed in the policy; the insured must prove a listed peril caused the loss. Open-peril forms cover all direct physical loss except perils specifically excluded; the burden shifts to the insurer to prove an exclusion applies. This burden-of-proof shift is the reason open-peril forms cost more.
The Six Homeowners Forms
| Form | Common Name | Dwelling (Cov A) | Personal Property (Cov C) | Eligible Occupant |
|---|---|---|---|---|
| HO-2 | Broad Form | Named peril (broad list) | Named peril (broad list) | Owner-occupant |
| HO-3 | Special Form | Open peril | Named peril (broad list) | Owner-occupant |
| HO-5 | Comprehensive | Open peril | Open peril | Owner-occupant |
| HO-4 | Contents Broad (Renters) | No dwelling coverage | Named peril (broad list) | Tenant/renter |
| HO-6 | Unit-Owners (Condo) | Cov A limited (default $5,000) | Named peril (broad list) | Condo unit-owner |
| HO-8 | Modified Form | Named peril (basic list) | Named peril (basic list) | Owner of older/unusual home |
The HO-3 is by far the most common owner-occupied form in the market: open peril on the structure, named peril on contents. The HO-5 upgrades contents to open peril. The HO-2 is fully named peril on both. The HO-8 uses the narrowest (basic) peril list and settles losses on a functional/repair-cost basis rather than replacement cost, making it suitable for historic or hard-to-replace homes whose replacement cost far exceeds market value.
Eligibility Rules
- The HO-2, HO-3, HO-5, and HO-8 require the named insured to be an owner-occupant of a one-to-four family dwelling (up to four units, with no more than two roomers/boarders per family).
- The HO-4 insures a tenant who does not own the building; it provides only contents and liability, never Coverage A on the structure.
- The HO-6 insures a condominium or co-op unit-owner; the association's master policy covers the building, so the unit-owner needs interior, contents, and loss-assessment coverage.
- Seasonal and secondary dwellings are generally eligible; mobile homes require the MH endorsement (HO 00 03 plus mobile-home endorsement), not a standalone HO form.
- A dwelling used as a rooming house, fraternity, or for incidental business beyond permitted limits is ineligible for a standard HO and is written on a Dwelling (DP) policy or commercial form instead.
Eligibility is judged at policy inception and renewal. A property that becomes vacant beyond 30 or 60 days triggers the vacancy condition, which suspends or reduces several perils (vandalism, glass breakage, water damage) - a tested point because insureds wrongly assume an empty insured home keeps full coverage.
Why the Right Form Matters
Producers must match the form to the exposure or risk an errors-and-omissions claim. A landlord who buys an owner-occupied HO-3 for a rental house has no coverage because the named insured does not reside there; that exposure belongs on a Dwelling (DP) policy. A condo owner sold an HO-3 has paid for full building coverage already provided by the association master policy while leaving interior improvements and loss assessment underinsured.
The HO-3 is the default recommendation for a typical owner-occupant because it balances broad structural protection (open peril) against premium. The HO-5 is the upgrade for higher-value homes and discerning insureds who want open-peril contents and the lighter burden of proof at claim time. The HO-8 exists specifically for homes where replacement cost would be uneconomic. Knowing these positioning rules answers many scenario questions on the exam.
Exam trap: Renters and condo owners are frequently confused. HO-4 = renter (no structure). HO-6 = condo owner (limited structure for interior improvements, default $5,000). Do not assign Coverage A on the full building to either.
An insured wants open-peril coverage on both the dwelling structure AND personal property. Which Homeowners form should the producer recommend?
Which Homeowners form is designed for an older home whose replacement cost greatly exceeds its market value, settling losses on a functional/repair basis with the basic peril list?
The Open-Peril vs. Named-Peril Split Across HO Forms
The exam hinges on which part of each Homeowners form is open vs. named peril. HO-2 (Broad) insures both dwelling and contents on named perils. HO-3 (Special) — the most common — insures the dwelling/other structures on open peril but contents on named perils. HO-5 (Comprehensive) insures both dwelling and contents on open peril. HO-8 (Modified) is for older homes whose market value is far below replacement cost; it insures on a named-peril, ACV/functional-replacement basis to avoid over-insuring.
HO-4 (renters) and HO-6 (condo) insure contents (and, for HO-6, the unit's interior) on named perils.