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

The ISO Homeowners Program

The Homeowners (HO) policy is the single most heavily tested topic on the national portion of any Property & Casualty exam. It is a package policy that bundles property coverage (Section I) and personal liability coverage (Section II) into one contract. Most states use the Insurance Services Office (ISO) Homeowners 2011 program (forms bearing the HO 00 0X 05 11 edition designation), though the 2000 edition still appears on exam questions. Memorize the form numbers and what each one does — examiners love to ask which form fits a given applicant.

Every HO form combines the same Section II liability, so the differences you must learn live entirely in Section I: which perils are covered and whether contents are insured on a named-peril or open-peril basis.

The Six Homeowners Forms

The following table is the backbone of this entire unit. "Named perils" (also called "specified perils") means a loss is covered only if caused by a peril listed in the policy; the insured bears the burden of proof. "Open perils" (formerly "all-risk," now called "special form") means every direct physical loss is covered unless specifically excluded; here the insurer bears the burden of proving an exclusion applies.

Reading the Form Numbers

• HO-2 (Broad Form): Both dwelling and contents on the 16-peril broad named-peril list. Cheaper but the insured must prove the cause.
• HO-3 (Special Form): The workhorse. Dwelling (Coverage A and B) is open perils; contents (Coverage C) remain broad named perils. When an exam stem says "standard homeowners policy," assume HO-3.
• HO-4 (Renters / Tenants): No dwelling coverage at all (the tenant does not own the building). Insures personal property on the broad named-peril basis plus liability and a small amount for tenant improvements.
• HO-5 (Comprehensive): Open perils on BOTH dwelling and contents — the broadest first-party protection available.
• HO-6 (Condo / Unit-Owners): Covers personal property (named broad) plus a minimum of $5,000 Coverage A for the interior "walls-in" improvements the unit owner is responsible for under the condo association master policy.
• HO-8 (Modified): Designed for older/historic homes where replacement cost greatly exceeds market value. Coverage is limited basic named perils and loss settlement is on a functional/repair-cost or ACV basis, never full replacement cost.

Eligibility Rules

Eligibility is a favorite trap. To qualify for a Homeowners form (other than HO-4/HO-6), the dwelling must generally be:

• An owner-occupied one- to four-family dwelling.
• Used principally for residential purposes (incidental occupancies such as a home office or studio may be permitted).
• Occupied by no more than a limited number of roomers or boarders per family unit.

Dwellings that do NOT qualify for the HO program — such as seasonal homes, vacant dwellings, dwellings under construction, farms, or rental properties held purely for income — are written instead on the Dwelling Policy (DP-1, DP-2, DP-3) program. The Dwelling program has no liability or contents-by-default and no theft on the basic DP-1, so do not confuse it with Homeowners.

Matching the Applicant to the Form

The exam almost always frames Homeowners eligibility as a matching problem, so build a quick decision rule. If the applicant owns and occupies a one-to-four-family home and wants standard protection, the answer is HO-3 (open-peril dwelling, broad named-peril contents). If they want the broadest possible protection including open-peril contents, it is HO-5. A tenant who owns no building takes HO-4; a condominium unit owner takes HO-6 with its minimum interior/'walls-in' Coverage A.

An owner of an older home whose replacement cost far exceeds market value is steered to HO-8, which settles on a functional/repair-cost or ACV basis and is meant to remove the incentive to over-insure a historic structure.

The HO-2 Broad Form survives mainly as an economy option: both dwelling and contents on the 16-peril broad named-peril list, with the insured bearing the burden of proving the cause of loss.

Why the Open-Peril vs. Named-Peril Split Drives Every Answer

The forms differ only in Section I, and within Section I only on two axes: which perils apply and whether the burden of proof sits with the insured or the insurer. On a named-peril basis the insured must prove the loss arose from a listed peril; on an open-peril (special form) basis the insurer must prove an exclusion applies. That burden shift is the practical reason HO-3 and HO-5 cost more and why an exam stem describing an unusual or hard-to-classify loss usually rewards the open-peril form.

Memorize the asymmetry of the HO-3 workhorse: the dwelling and other structures are open-peril, but personal property remains broad named-peril. A distractor that claims HO-3 gives open-peril coverage on contents is wrong; that is HO-5. Likewise, an applicant 'declined for Homeowners' (seasonal, vacant, under construction, rental-for-income, or farm) is routed to the Dwelling Program, which carries no built-in liability, contents, or theft, and is a frequent eligibility trap.