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

The ISO Homeowners Program

The modern homeowners (HO) policy is a package policy: it combines property coverage (Section I) and personal liability coverage (Section II) in a single contract, eligible for a package discount versus buying a dwelling fire policy plus a separate Comprehensive Personal Liability (CPL) policy. The standard forms are published by the Insurance Services Office (ISO), and most state exams test the HO 2011 program edition. Older agents may recall the HO 2000 edition; the 2011 revision broadened some Coverage C perils and clarified water/mold language but the form numbering stayed the same.

The key insight for the exam: the HO forms differ chiefly in which perils they cover and what property they cover. They do NOT differ in the dollar relationships between Coverages A through D — those percentages are constant across the owner-occupant forms.

The Six Homeowners Forms

Memorize this table cold. Exam writers love to swap a form's peril basis (named vs. open) or hand you an ineligible risk.

HO-3 is the most commonly sold form — open perils on the structure, named perils on contents. HO-5 upgrades contents to open perils. There is no HO-1 (Basic Form) or HO-7 in the current ISO program; HO-1 was withdrawn in most states decades ago and is a classic distractor.

Eligibility Rules

• Owner-occupant forms (HO-2, HO-3, HO-5): the dwelling must be a 1-to-4-family residence, owner-occupied, and not used primarily for business. More than four units, or incidental occupancies beyond limits, pushes the risk to the Dwelling Fire program or a commercial policy.
• HO-4 (renters): for tenants of a house or apartment. No Coverage A (dwelling) because the tenant does not own the structure; the policy provides Coverage C (personal property), Coverage D, Section II liability, and Building Additions and Alterations (typically 10% of Coverage C as additional coverage for tenant-installed improvements).
• HO-6 (condo): Coverage A is a small base (often $5,000, increasable by endorsement) covering the "walls-in" portion the unit-owner is responsible for under the condo master deed. The condo association's master policy covers the building shell.
• HO-8 (modified): designed for older homes where replacement cost greatly exceeds market value (e.g., ornate historic construction). It settles losses on a repair-cost / functional replacement / ACV basis rather than full replacement cost and covers only a reduced set of basic perils. It exists precisely to avoid over-insuring market-cheap but rebuild-expensive homes.

Trap: Mobile/manufactured homes are NOT eligible for a standard HO form — they require the Mobilehome endorsement (MH 04 01) added to an HO-2 or HO-3, or a separate mobilehome program.

Named Perils vs. Open Perils — Burden of Proof

This distinction is the single most-tested HO concept.

• Named perils (HO-2 dwelling & contents; HO-3/HO-6 contents): the policy lists each covered cause of loss. The insured must prove the loss was caused by a listed peril.
• Open perils / "all-risk" / "special" (HO-3 & HO-5 dwelling; HO-5 contents): all direct physical losses are covered except those specifically excluded. The insurer must prove an exclusion applies to deny the claim.

Open-perils coverage is broader and shifts the burden of proof to the carrier — that is why HO-3/HO-5 cost more.

The Six Forms Compared in One Glance

Memorize this peril/property grid; it generates more homeowners questions than any other table:

HO-3 (open dwelling, named contents) and HO-5 (open on both) are the workhorses; the difference between them is the contents trigger, a classic two-answer trap.

Eligibility Rules That Decide the Form

Homeowners requires owner-occupancy of a 1–4 family dwelling (HO-2/3/5/8), with the insured living in the unit. Renters who own no building take HO-4. Condo owners, who own the interior but not the building shell, take HO-6, which insures improvements, betterments, and personal property plus loss assessment, while the condo association's master policy covers the structure. Incidental business or up to a limited number of roomers may be permitted; a true commercial occupancy pushes the risk to a commercial or dwelling form.

HO-8 and the Market-Value Problem

HO-8 exists for older homes whose replacement cost vastly exceeds market value (ornate, obsolete construction). It settles losses on a repair-cost or functional/ACV basis rather than full replacement, preventing the moral hazard of insuring a $200,000-market house for a $700,000 reconstruction. It also pares the peril list and personal-property coverage. When a stem describes a historic home where rebuilding would cost far more than the home is worth, HO-8 is the answer.