Homeowners Policy Forms & Coverages

The Two-Section Structure

The homeowners (HO) policy differs from the dwelling policy in one fundamental way: it is a package policy that combines property and liability in a single contract. It is divided into two sections.

Section I — Property uses four lettered coverages:

• Coverage A — Dwelling: the residence and attached structures.
• Coverage B — Other Structures: detached structures; automatically 10% of Coverage A as an additional amount of insurance.
• Coverage C — Personal Property: the insured's contents, typically 50% of Coverage A (adjustable), covered worldwide.
• Coverage D — Loss of Use: ALE and fair rental value when the home is uninhabitable; commonly 20-30% of Coverage A.

Section II — Liability uses two coverages:

• Coverage E — Personal Liability: defense and damages for bodily injury or property damage the insured is legally liable for (base limit often $100,000, raisable).
• Coverage F — Medical Payments to Others: small good-faith medical payments to non-residents injured on the premises, regardless of fault (base limit around $1,000-$5,000 per person).

Memorize the letters in order: A-Dwelling, B-Other Structures, C-Personal Property, D-Loss of Use, E-Personal Liability, F-Medical Payments.

Within Coverage C, the homeowners form imposes special internal limits (sub-limits) on theft-prone or high-value categories — for example caps on money, securities, jewelry/watches/furs lost by theft, firearms, silverware, and business property on the premises. These sub-limits are not the policy limit; they are smaller per-category caps that protect the insurer and can be raised by scheduling the items on a personal articles floater. Examiners frequently test that losing a $20,000 diamond ring to theft may recover only the jewelry theft sub-limit (often around $1,500) unless it was separately scheduled.

The Forms: Named vs. Open Perils

The difference between the homeowners forms is which perils apply to the dwelling versus the contents, and whether coverage is named-peril (covers only listed perils — the insured must prove the cause) or open-peril/'all risk' (covers any direct physical loss except stated exclusions — the insurer must prove an exclusion applies).

• HO-2 (Broad Form): Dwelling AND personal property on named perils (the broad list, ~16 perils). Budget owner-occupant form.
• HO-3 (Special Form): Dwelling and other structures on open perils; personal property on named perils. This is the market-standard owner-occupant policy.
• HO-5 (Comprehensive Form): Both dwelling and personal property on open perils — the broadest contents protection. Premium owner-occupant form.
• HO-4 (Contents Broad Form / Renters): Covers a tenant's personal property on named perils plus liability; no Coverage A (the tenant does not own the building).
• HO-6 (Unit-Owners / Condo): For condominium unit owners; personal property on named perils, liability, and a small Coverage A (base often $5,000) for owner-installed improvements/interior the condo association master policy does not cover.
• HO-8 (Modified Form): For older homes where replacement cost exceeds market value; named perils with losses settled on a functional replacement / repair-cost (ACV-style) basis rather than full replacement cost, to avoid over-insuring a hard-to-rebuild structure.

Homeowners Forms at a Glance

Memory aid: HO-3 = 'open dwelling, named contents'; HO-5 = 'open everything'; HO-4 'four-rent' for renters; HO-6 for condos ('six = sticks you own inside'); HO-8 = older/historic homes settled at functional cost.

Note that an HO-1 (Basic Form) once existed with a short named-peril list, but it has been withdrawn in most states and is rarely written today, so the practical owner-occupant choices are HO-2, HO-3, HO-5, and HO-8. The HO-6 condo form is also important because of how it dovetails with the condominium association's master policy. The master policy can be written 'bare walls in' (the unit owner insures everything from the studs inward) or 'all-in/single-entity' (the master covers original fixtures).

The HO-6 owner buys enough Coverage A to fill whatever gap the master policy leaves, plus loss assessment coverage for their share of a deductible or shortfall charged back by the association.

Eligibility, Perils, and Exclusions

Homeowners eligibility generally requires an owner-occupied one-to-four-family dwelling (HO-2/3/5/8), a tenant (HO-4), or a condo unit owner (HO-6). The named-peril forms list the covered causes; the broad list typically includes fire/lightning, windstorm/hail, explosion, riot, aircraft, vehicles, smoke, vandalism, theft, falling objects, weight of ice/snow/sleet, accidental water discharge, freezing, and artificially generated electrical current.

Even the open-peril forms (HO-3, HO-5) carry standard exclusions the exam loves: flood, earthquake/earth movement, war, nuclear hazard, intentional loss, ordinance or law, governmental action, power failure off the premises, neglect, and wear-and-tear/deterioration. Flood and earthquake must be covered separately (NFIP or a difference-in-conditions/earthquake endorsement). Section II liability excludes business activities, motor vehicles (auto liability), intentional acts, and professional services.

Knowing that open-peril does NOT mean 'everything' — these named exclusions still carve out major catastrophe risks — is a frequently tested distinction.