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

The ISO Homeowners (HO) Program

The Homeowners Policy is a package policy that combines property coverage (Section I) with personal liability coverage (Section II) in a single contract. Most U.S. carriers build their products on the Insurance Services Office (ISO) forms, currently the HO 2011 edition. Exams test the standard ISO structure, so memorize the forms by number and behavior.

Each form is identified by an HO number. The form number tells you who is eligible and how perils are covered. The single most-tested distinction is named peril versus open peril (also called "all-risk").

Named Peril vs. Open Peril

• Named peril coverage pays only for losses caused by a peril specifically listed on the form. The insured carries the burden of proving the loss came from a listed peril.
• Open peril coverage pays for any direct physical loss except those specifically excluded. Here the burden shifts to the insurer to prove an exclusion applies.

This is why open-peril forms (HO-3, HO-5) cost more and protect the policyholder more broadly than named-peril forms (HO-2).

The Forms Compared

The HO-3 is by far the most commonly sold owner-occupant form, so expect several questions on it.

Eligibility Rules

To qualify for a homeowners policy (HO-2, HO-3, HO-5, HO-8), the dwelling must be owner-occupied and generally a one-to-four family residence used primarily for private residential purposes. Incidental office, professional, or studio use is permitted, and limited rental of part of the dwelling can be allowed by endorsement.

The HO-4 insures a tenant's personal property in a rented dwelling, and the HO-6 insures a condominium unit-owner. A non-owner-occupied home, a mobile home, or a farm does not qualify for the standard homeowners forms and is written on a dwelling policy or specialty form instead.

The HO-8 Modified Form

The HO-8 exists for homes whose replacement cost far exceeds market value - often older or architecturally unique houses. Rebuilding such a home with original materials (plaster, ornate millwork) would cost more than the house is worth, creating a moral hazard.

The HO-8 solves this by settling Section I dwelling losses on a functional replacement or repair-cost basis using modern common materials, rather than full replacement cost. It also covers a narrower set of named perils than HO-2.

Section I vs. Section II at a Glance

Every homeowners form is split into two halves, and the exam expects you to know which coverages sit where:

Coverage-Amount Relationships and Form Traps

On owner forms the secondary limits derive from Coverage A: B is 10%, C is 50%, D is 30% (HO-3). The HO-4 (tenant) and HO-6 (condo) invert this — Coverage C is the primary, scheduled limit the insured selects, and Coverage A is small or absent (the HO-6 provides a base $5,000 for unit alterations/improvements, increasable by endorsement).

Frequently tested distinctions:

• HO-3 vs. HO-5: both are open-peril on the dwelling, but only HO-5 extends open-peril to personal property (Coverage C). On HO-3, contents remain named-peril.
• HO-8 settles dwelling losses on a functional/repair-cost basis (not full RC) and drops the costlier theft and contents protections — designed for older homes where RC far exceeds market value.
• HO-2 is fully named-peril (dwelling and contents), so the insured carries the burden of proof that a listed peril caused the loss.

Eligibility recap: owner forms require an owner-occupied 1-4 family dwelling. Farms, vacant dwellings, seasonal rentals, and mobile homes do not qualify and route to a dwelling policy (DP) or specialty form. Incidental business use is allowed; a full daycare or rooming-house operation is not. Knowing that the HO-4/HO-6 reverse the Coverage A/C relationship is a high-yield exam point.

The HO-4 and HO-6 in Depth

The tenant and condo forms invert the usual structure, and each has signature features the exam targets:

• HO-4 (Renters/Contents Broad Form): insures the tenant's personal property (Coverage C, named-peril) plus loss of use and full Section II liability. It provides no Coverage A dwelling because the tenant does not own the building. A small Building Additions and Alterations amount (often 10% of Coverage C) covers tenant-installed improvements.
• HO-6 (Unit-Owners Form): insures the condo owner's personal property and provides a base $5,000 Coverage A for alterations, appliances, fixtures, and improvements within the unit ("walls-in"), increasable by the Unit-Owners Coverage A (HO 06 49) endorsement. The condo association's master policy covers the building shell; the HO-6 fills the gap the master policy leaves.

Worked trap: a condo owner with a bare-walls master policy suffers a kitchen fire that destroys custom cabinets and flooring. The association's policy does not pay for the unit interior, so the owner needs adequate HO-6 Coverage A — the base $5,000 is far too low, illustrating why reading the master policy is essential.

Eligibility recap and traps: seasonal/secondary homes can be written on the owner forms but often require a dwelling under construction or vacancy disclosure; a home with more than incidental business use (full daycare, bed-and-breakfast) is ineligible and routes to a BOP or commercial form. The HO-8 is the answer whenever replacement cost greatly exceeds market value (older/historic homes), settling on a functional/repair-cost basis.