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

The ISO Homeowners Program

The Insurance Services Office (ISO) Homeowners (HO) Program packages property and liability coverage into a single contract. Exam writers test the 2011 ISO edition heavily, though many companies now file the 2022 edition; the form NUMBERS and their coverage breadth are identical across editions, so memorize the form family. Every HO policy contains two parts: Section I (property) and Section II (liability). This unit covers Section I.

The six commonly tested forms are HO-2, HO-3, HO-4, HO-5, HO-6, and HO-8. There is no HO-1 in the current ISO program (it was the old Basic Form, withdrawn). HO-7 is not an ISO form. Watch for distractor answers that reference "HO-1" or "HO-7" as ISO products.

What Each Form Insures

The key differences are (1) WHO is eligible (owner-occupant, renter, condo unit-owner), (2) how the dwelling/Coverage A perils are written (named-peril vs. open-peril), and (3) how personal property/Coverage C is written.

HO-3 is the most common form sold. HO-5 is the broadest, giving open-peril protection on BOTH the structure and the contents. HO-8 is the narrowest — designed for older/historic homes where replacement cost greatly exceeds market value.

Eligibility Rules and Traps

• Owner-occupancy: HO-2, HO-3, HO-5, and HO-8 require the named insured to own AND occupy the dwelling as a primary residence. A dwelling rented to others is ineligible (use a Dwelling DP policy instead).
• Up to four units / two roomers: A 1-to-4 family dwelling may qualify if the insured occupies one unit. The insured may also rent to no more than two roomers or boarders per unit.
• HO-4 (renters): Covers the tenant's personal property and liability; there is NO Coverage A because the tenant does not own the building. Building additions/alterations get a small Coverage A allowance (10% of Coverage C as an additional coverage).
• HO-6 (condo): Provides at least $5,000 of Coverage A for "walls-in" improvements and betterments; the association's master policy covers the building shell.
• HO-8 trap: Loss settlement is on a functional/actual-cash-value (modified) basis, NOT replacement cost — that is the entire point of HO-8 for a home worth far less than the cost to rebuild it with original materials.

Section II and the Two-Part Architecture

Every owner HO form combines Section I (property, Coverages A-D, covered above) with Section II (liability): Coverage E - Personal Liability (base limit $100,000 per occurrence) and Coverage F - Medical Payments to Others (base $1,000 per person). The form chosen sets the property trigger, but Section II liability limits are identical across forms and selected separately on the declarations.

Insured Locations and Defined Persons

Two definitions drive eligibility scenarios. The "insured" includes the named insured, resident spouse, resident relatives, and other persons under 21 in the care of an insured. The "residence premises" is the one-to-four-family dwelling the named insured occupies as shown on the Dec page. A secondary or seasonal home is insured by a separate policy or a dwelling endorsement, not automatically.

Trap: A home rented to others (no owner-occupancy) is ineligible for an owner HO form - it belongs on a Dwelling (DP) policy. Owner-occupancy is the dividing line between the HO and DP programs.

Form Selection by Scenario

The exam hands you a household and asks for the right form. Match occupancy and need to the form:

The dividing line between the HO program and the Dwelling (DP) program is owner-occupancy: an investor renting a house to tenants uses a DP policy, not an HO form.

Trap: "HO-1" and "HO-7" are not current ISO forms - HO-1 (Basic) was withdrawn and HO-7 never existed. If an answer choice names either, it is a distractor. HO-8 is the only owner form that settles dwelling losses on a modified/functional basis rather than replacement cost.

The 1-to-4 Family and Roomer Rules

Owner HO forms allow a dwelling of one to four units provided the named insured occupies one unit, and the insured may rent to no more than two roomers or boarders per unit without losing eligibility. Exceed those thresholds, or remove owner-occupancy entirely, and the risk moves to a Dwelling (DP) policy or a commercial form.

Trap: A duplex where the owner lives in one half and rents the other is HO-eligible; a single-family home the owner has moved out of and rents to a tenant is not - it belongs on a DP policy. Owner-occupancy, not the building type, is the gate.