Homeowners Forms (HO-2/3/4/5/6/8) & Coverages A-F

The Homeowners Package

A homeowners (HO) policy combines property and liability coverage in a single package for owner-occupants, tenants, and condo owners. Section I insures property; Section II insures liability. The form number tells you how broadly perils are covered and who is eligible.

Homeowners forms require owner-occupancy (except the tenant and condo forms), and most insure the dwelling at replacement cost when the insured carries at least 80% of replacement value. The package design is why an HO policy is more convenient — and usually more expensive — than a property-only dwelling policy.

Comparing the HO Forms

Each form pairs an eligible insured with a peril structure. HO-3 is by far the most common and the most tested.

Key contrasts: HO-5 extends open-peril to personal property (HO-3 does not). HO-4 and HO-6 carry no Coverage A on the main structure. HO-8 settles on ACV or functional replacement, not full replacement cost.

Why HO-8 exists

The HO-8 (modified form) is built for older homes whose replacement cost far exceeds market value — ornate historic construction, or a house worth less than it would cost to rebuild exactly. Insuring such a home at full replacement cost would over-insure it and invite moral hazard. HO-8 therefore:

• Pays losses on an actual cash value or functional replacement basis;
• Covers a narrower, fire-form set of perils;
• Lets owners of hard-to-value or older homes obtain coverage they could not get under HO-3.

Eligibility and perils by form

Eligibility is a recurring exam point because each form targets a specific insured. HO-2, HO-3, and HO-5 require an owner-occupied one-to-four-family dwelling. HO-4 requires a tenant who rents. HO-6 requires a condominium or co-op unit-owner; its Coverage A covers only the unit's interior build-out, fixtures, and improvements the unit-owner is responsible for, since the association's master policy covers the building shell.

HO-8 requires a home where market value is below replacement cost — typically older. The perils insured against also climb with the form: HO-8 uses a limited fire-form list, HO-2/HO-3/HO-4/HO-6 use broad named perils on contents, and HO-3 and HO-5 add open-peril on structures, with HO-5 extending open-peril to contents as well.

Section I (A-D) and Section II (E-F) Coverages

Memorize the six standard coverage letters; the exam uses them constantly.

Section I — Property

• Coverage A — Dwelling: the home and attached structures.
• Coverage B — Other Structures: detached garage, shed, fence; usually 10% of Coverage A.
• Coverage C — Personal Property: contents; commonly 50% of Coverage A, and covered worldwide with a 10% off-premises extension.
• Coverage D — Loss of Use: additional living expense and fair rental value when the home is uninhabitable.

Section II — Liability

• Coverage E — Personal Liability: bodily injury and property damage the insured is legally liable for (a single limit, e.g., $100,000).
• Coverage F — Medical Payments to Others: small, no-fault medical bills for non-residents injured on the premises (e.g., $1,000–$5,000), paid regardless of fault.

Special Limits on Valuables

Coverage C insures personal property broadly, but it places special internal sub-limits on categories that are easy to steal or hard to value. These dollar caps apply even though the overall Coverage C limit is much higher, and the exam tests the concept (not always exact dollars):

• Money, coins, and precious metals — a low cap (often around $200).
• Securities, deeds, manuscripts — a modest cap (often around $1,500).
• Jewelry, watches, and furs — capped for theft (often around $1,500).
• Firearms — capped for theft (often around $2,500).
• Silverware and goldware — capped for theft (often around $2,500).

To insure a valuable item above its sub-limit, the insured schedules it by listing it specifically (often on a personal articles floater / scheduled personal property endorsement), which provides higher, often open-peril, agreed-value coverage with no deductible. Understanding that the base policy under-covers high-value items — and that scheduling fixes it — is a recurring exam theme.

Coverage limits as percentages of Coverage A

Many homeowners coverage limits are set automatically as a percentage of Coverage A, so the exam expects you to know the defaults even though they can be raised by endorsement:

A practical test point: because Coverage C is a fixed percentage of A, an insured with valuable contents may exhaust the contents limit even when the structure is amply insured. The remedy is to increase the Coverage C percentage and schedule high-value items. Tying every related limit back to the Coverage A figure — and knowing which can be raised — is the kind of applied reasoning the homeowners portion of the exam rewards.