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

The Insurance Services Office (ISO) publishes the standardized Homeowners (HO) program forms most commonly written today under the 2011 edition (HO 00 02, HO 00 03, HO 00 04, HO 00 05, HO 00 06, HO 00 08). The exam tests two facts about each form: who it is designed for and the peril basis it applies to the dwelling and to personal property. Memorize the table below cold.

The Six Current Homeowners Forms

Exam Tip: HO-1 (Basic Form) is essentially obsolete and is not offered in most states. If it appears as an answer choice it is almost always a distractor.

Open Perils vs. Named Perils - the Burden of Proof

This single distinction drives many exam questions because it determines who must prove what at claim time.

• Named perils (HO-2, the Coverage C contents of HO-3, plus HO-4, HO-6, and HO-8): the insured must prove the loss was caused by a peril on the policy's list. If the cause is not listed, there is no coverage.
• Open perils (also called 'special' or 'all-risk' - the dwelling of HO-3 and all of HO-5): coverage applies to any cause of loss except those specifically excluded. The insurer carries the burden of proving an exclusion applies in order to deny.

Because the insurer must affirmatively prove an exclusion, open-perils coverage is broader and more favorable to the insured. That is why HO-3 and HO-5 cost more and dominate the owner-occupant market.

The contents named-peril list used by HO-2 and HO-3 is the broad form list of 16 perils (covered in the next section). HO-5's open-perils contents coverage is the reason adjusters rarely dispute a Coverage C claim on an HO-5 - the insured does not have to fit the loss into a listed category.

Eligibility - Owner-Occupancy and the 1-4 Family Rule

The HO program is built for owner-occupied private residences. Standard eligibility requires:

1. The dwelling is a 1-to-4 family structure (HO-2/HO-3/HO-5/HO-8).
2. The named insured (or a relative) occupies the residence - the home is not held purely for rental or investment.
3. No more than a limited number of roomers/boarders and limited incidental business use.

Risks that fail these tests are written on the Dwelling Policy (DP) program instead:

• Rental / non-owner-occupied dwellings (landlord risks) -> DP form.
• Vacant or under-construction homes -> DP or special endorsement.
• Farms and ranches -> Farmowners program.
• Mobile/manufactured homes -> HO with the mobile-home endorsement (MH 04 01) or a specialty form.

Tenants who do not own the building use HO-4; condo unit-owners who own only the interior 'box' use HO-6. Both provide Coverage C (personal property) and Section II liability, but Coverage A is either absent (HO-4) or limited 'walls-in' building items (HO-6, default $5,000).

When to Recommend HO-8

HO-8 exists for the valuation gap problem. An older or historic home may have a replacement cost of $600,000 (ornate plaster, hand-carved millwork) but a market value of only $180,000.

Insuring it to full replacement cost would be unaffordable and would over-insure the property relative to its market and lot value. HO-8 solves this by settling building losses on a functional replacement cost basis - rebuilding with common modern materials, such as drywall instead of plaster - or on a repair-cost basis, capped at actual cash value where appropriate.

HO-8 is named-perils on both dwelling and contents and uses a reduced peril list (often excluding theft beyond a small sublimit and dropping the costlier broad perils). It is purpose-built for the secondary/older-home market and should never be sold simply to lower premium on a standard modern home - doing so leaves the insured under-protected.

The Homeowners Form Family

The ISO Homeowners program packages property (Section I) and liability (Section II) in one contract. Examiners must match each form to its peril basis and intended occupant:

The HO-3 is the market workhorse, and the HO-5 is the broadest because it extends open-peril coverage to contents. The HO-8 exists for homes whose replacement cost far exceeds market value (historic or architecturally unique), settling on a functional/ACV basis to avoid over-insurance.

Eligibility Rules

A homeowners policy generally requires owner-occupancy (HO-2/3/5/8), tenancy (HO-4), or condo ownership (HO-6), with a maximum of one to two families and limited incidental business. Dwellings with more units or rented to others belong on the dwelling (DP) program. Farm exposures require a farmowners policy.

Worked Eligibility Example

A client rents an apartment and owns $40,000 of furniture and electronics but no building. The correct form is HO-4, which provides no Coverage A (the landlord insures the building) but full Coverage C personal property plus Section II liability. If instead the client owns a condo and is responsible for interior "betterments," the HO-6 applies, with a small default Coverage A (often $5,000, increasable) for improvements the condo master policy does not cover. Matching the occupant to the correct HO form is one of the most frequently tested fact patterns on the exam.