5.1 Homeowners Policy Forms (HO-2 through HO-8) & Section I Coverages A–D

Homeowners Policy Forms (HO-2 through HO-8) & Section I Coverages A–D

Exam Focus: The New York Series 17-70 examination frequently tests the specific operational distinctions between ISO Homeowners forms (especially HO-3 versus HO-5 and HO-8), the calculation of standard coverage limits (Coverage B at 10%, Coverage C at 50%, Coverage D at 30%), and exact statutory sub-limits on personal property such as $200 for money and $1,500 for the theft of jewelry.

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ISO Homeowners Policy Architecture

The Insurance Services Office (ISO) standardizes homeowners insurance into a modular package policy combining property and personal liability coverages into a single contract. Every standard homeowners policy is divided into two primary sections:

• Section I – Property Coverages: Coverage A (Dwelling), Coverage B (Other Structures), Coverage C (Personal Property), Coverage D (Loss of Use), and Additional Coverages.
• Section II – Liability Coverages: Coverage E (Personal Liability) and Coverage F (Medical Payments to Others).

To be eligible for an ISO Homeowners policy, the building must be a private residential dwelling used primarily as a home, housing no more than four family units (one- to four-family dwellings), and the named insured must reside in the dwelling as an owner-occupant (with structural exceptions for tenant and condominium forms). Dwellings with incidental business occupancies (such as an office, private school, or beauty studio with no more than two employees) remain eligible if permitted under underwriting rules.

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Comparison of ISO Homeowners Policy Forms (HO-2 through HO-8)

Adjusters must immediately recognize the eligibility criteria, peril structures, and loss settlement mechanisms across the six standard ISO forms:

1. HO-2 (Broad Form)

A named-peril policy covering the dwelling, other structures, and personal property against 16 broad named perils. It provides replacement cost coverage on buildings (Coverages A and B) if the 80% coinsurance requirement is met, but personal property (Coverage C) is settled strictly on an Actual Cash Value (ACV) basis.

2. HO-3 (Special Form)

The most widely written homeowners contract in New York and nationally. It provides open perils (all-risk / risk of direct physical loss) coverage for the dwelling and other structures (Coverages A and B), meaning any direct physical loss is covered unless expressly excluded. In contrast, personal property (Coverage C) is covered on a broad named-peril basis identical to the HO-2.

3. HO-4 (Contents Broad Form / Tenant's Form)

Engineered specifically for residential tenants and apartment renters who do not own the physical real estate. It provides broad named-peril coverage on personal property (Coverage C) and loss of use (Coverage D). It contains no Coverage A or Coverage B protection.

4. HO-5 (Comprehensive Form)

The broadest and most protective contract in the ISO portfolio. It provides open perils coverage on both the real property (Coverages A and B) AND personal property (Coverage C). Under the HO-5, contents losses such as mysterious disappearance or accidental loss are covered unless an express exclusion applies.

5. HO-6 (Unit-Owners Form / Condominium Form)

Designed for owners of condominium units and cooperative apartments. It covers the unit-owner's personal property (Coverage C) and loss of use (Coverage D). It includes a baseline of $1,000 or $5,000 under Coverage A to protect real property items for which the unit-owner has responsibility under the condo association agreement, such as interior partitions, fixtures, cabinetry, appliances, and alterations inside the unit's perimeter walls.

6. HO-8 (Modified Coverage Form)

Designed for older, historic, or architecturally ornate homes where the full replacement cost substantially exceeds the current market value (e.g., an urban Victorian brownstone with an $800,000 reconstruction cost but a $250,000 market value). To eliminate moral hazard, the HO-8 restricts coverage to basic named perils, settles building losses on a functional replacement cost or ACV basis, restricts theft recovery to $1,000 on-premises, and caps off-premises contents at 10% of Coverage C or $1,000.

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Section I Property Coverages: Coverages A through D

Coverage A – Dwelling

Covers the residential dwelling building shown on the Declarations page, structures attached directly to the dwelling (such as an attached garage, breezeway, attached deck, or porch), and construction materials and supplies located on or adjacent to the residence premises used to construct, alter, or repair the dwelling or attached structures. Coverage A strictly excludes the land on which the dwelling sits, including land beneath foundations.

Coverage B – Other Structures

Covers appurtenant private structures on the residence premises that are separated from the dwelling by a clear space, or connected only by a fence, utility line, or decorative walkway. Common examples include detached garages, storage sheds, gazebos, fences, driveways, retaining walls, and in-ground swimming pools.

• Standard Limit: The default limit is 10% of Coverage A. In homeowners policies, this is an additional amount of insurance.
• Exclusions: Structures rented or held for rental to any person other than a tenant of the dwelling (unless rented solely as a private garage), and structures from which any business is conducted.

Coverage C – Personal Property

Provides worldwide coverage for personal property owned or used by an insured anywhere in the world. Personal property of guests or residence employees can be covered at the insured's request while on the residence premises.

• Standard Limit: The default limit is 50% of Coverage A (on HO-2, HO-3, HO-5, and HO-8). On HO-4 and HO-6, Coverage C is the primary coverage limit selected by the policyholder.
• Off-Premises Limitation: Personal property usually situated at an insured's secondary residence (such as a seasonal lake cottage) is limited to 10% of Coverage C or $1,000, whichever is greater.

Critical Special Sub-limits of Coverage C

The policy establishes internal dollar ceilings on specific categories of personal property to limit insurer exposure to cash-equivalent and theft-prone items. These limits apply per occurrence and do not increase the total Coverage C limit:

• $200: Money, bank notes, bullion, gold, silver, platinum, coins, medals, and stored-value cards.
• $1,500: Securities, accounts, deeds, evidences of debt, letters of credit, notes, passports, tickets, and stamps.
• $1,500: Watercraft of all types, including their trailers, furnishings, equipment, and outboard motors.
• $1,500: Other trailers not used with watercraft (e.g., utility trailers).
• $1,500 for loss by theft: Jewelry, watches, furs, and precious/semi-precious stones. (Note: Fire or windstorm damage to jewelry is covered up to the full Coverage C limit; the $1,500 cap applies only to theft).
• $2,500 for loss by theft: Firearms and related equipment.
• $2,500 for loss by theft: Silverware, silver-plated ware, goldware, gold-plated ware, platinumware, and pewterware.
• $2,500: Property on the residence premises used primarily for business purposes.
• $1,500: Property away from the residence premises used primarily for business purposes.
• $1,500: Portable electronic equipment in or upon a motor vehicle that receives or transmits audio/visual signals.

Coverage D – Loss of Use

Protects the insured when a covered loss makes the residence premises uninhabitable. It encompasses two primary protections:

1. Additional Living Expense (ALE): Pays the necessary increase in living expenses incurred by the named insured to maintain the household's normal standard of living (e.g., temporary hotel bills, commercial laundry, restaurant meal surcharges over normal food costs).
2. Fair Rental Value: Reimburses the lost rental income for that part of the premises rented to others, less any operating expenses that do not continue while uninhabitable.

• Civil Authority: If a civil authority prohibits the insured from using the residence as a direct result of damage to neighboring premises caused by a covered peril, Loss of Use covers expenses for up to two weeks.
• Standard Limit: The standard limit is 30% of Coverage A under the HO-3 (30% of C under HO-4; 50% of C under HO-6; 10% of A under HO-8).

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Section I Additional Coverages

Homeowners forms provide built-in additional coverages to address common loss-related expenses:

• Debris Removal: Included within the applicable limit. If covered damage plus debris removal exceeds the policy limit, an additional 5% of the applicable limit is available. Up to $1,000 ($500 per tree) is provided to remove fallen trees felled by wind, hail, or weight of ice/snow if they damage a covered structure or block a driveway.
• Reasonable Repairs: Reimburses the reasonable costs incurred by the insured for temporary measures taken solely to protect covered property from further damage following a covered loss (e.g., boarding broken windows or tarping a compromised roof).
• Trees, Shrubs, and Other Plants: Covers loss to outdoor trees, shrubs, plants, or lawns caused by fire, lightning, explosion, riot, aircraft, vehicles not owned by a resident, vandalism, or theft. The maximum limit is $500 per tree/shrub/plant, up to an aggregate maximum of 5% of Coverage A. Windstorm, hail, and weight of ice/snow are strictly excluded for outdoor plants.
• Fire Department Service Charge: Pays up to $500 when a fire department is called to save or protect covered property from a covered peril, provided the department is not required by law to respond without charge. No deductible applies.
• Credit Card, Fund Transfer Card, Forgery, and Counterfeit Money: Pays up to $500 for legal obligations or loss resulting from theft or unauthorized use of credit cards, electronic fund transfer cards, or check forgery. No deductible applies.
• Property Removed: Covers personal property against direct physical loss from any cause while being removed from a premises endangered by a covered peril, and for up to 30 days while removed.

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Practical Adjuster Scenario

An insured with an HO-3 policy ($400,000 Coverage A limit) suffers a burglary and fire. The adjuster identifies the following items:

• Detached garage damaged: $30,000 loss. Under Coverage B (10% of $400,000 = $40,000 limit), the entire $30,000 is covered as an additional amount of insurance.
• Personal property stolen: $800 in currency, a $5,000 diamond ring, a $3,500 hunting rifle, and $2,000 in clothing.
• Adjuster calculation: Currency is capped at the $200 sub-limit; the diamond ring is capped at the $1,500 theft sub-limit; the hunting rifle is capped at the $2,500 theft sub-limit; clothing has no special sub-limit and is paid at $2,000 (subject to ACV and policy deductible). Total recoverable contents is $200 + $1,500 + $2,500 + $2,000 = $6,200.