What are the different types of homeowners insurance?

Key points

• There are eight types of homeowners insurance policies to choose from, depending on your coverage needs.
• The most common type of homeowners insurance is an HO-3 policy, which covers owner-occupied, standalone houses and townhouses.
• The type of home insurance policy you choose will affect how much you pay for homeowners insurance. 

8 types of homeowners insurance and what they cover

Here is a breakdown of the eight different types of homeowners insurance policies:

• HO-1 policy.
• HO-2 policy.
• HO-3 policy.
• HO-4 policy.
• HO-5 policy.
• HO-6 policy.
• HO-7 policy.
• HO-8 policy.

What is an HO-1 homeowners insurance policy?

Considered a basic type of homeowners insurance, HO-1 policies provide limited coverage for 10 named problems, or “perils.” These include:

• Damage caused by aircraft (not your own).
• Damage caused by vehicles (not your own).
• Explosions.
• Fire or lightning. 
• Riot or civil commotion. 
• Theft.
• Vandalism or malicious mischief. 
• Volcanic eruption.
• Windstorm or hail.

This is the least comprehensive type of home insurance, as most other homeowners insurance policies cover 16 identified perils. HO-1 typically provides only coverage for your house’s main structure, so personal property, liability and other important types of coverage are excluded. 

An HO-1 policy pays out for the actual cash value of your house, factoring in depreciation. That means it may not be enough coverage to fully pay to rebuild your home at current costs for labor and materials.

Home insurance coverage for disasters: Is tornado damage covered?

What is an HO-2 homeowners insurance policy? 

An HO-2 policy is a type of homeowners insurance that picks up where HO-1 policies leave off, covering 16 identified perils. This includes the 10 named perils in and HO-1 policy as well as the following:

• Accidental overflow or discharge of water or steam.
• Bulging or cracking caused by a sudden and accidental event.
• Falling objects.
• Freezing of plumbing or air conditioning.
• Sudden, accidental damage caused by artificially generated electrical current.
• Weight of snow and ice.

An HO-2 policy also extends coverage outside of the structure of your house, after a covered loss. Here are the six coverages included in an HO-2 policy.

• Dwelling: Pays to rebuild your house and its attached structures, like a deck. 
• Other structures: Pays to rebuild other structures on your property, like a shed or gazebo. 
• Personal property: Pays to replace or repair your personal belongings, like your clothing and furniture.
• Loss of use: Pays for additional living expenses (ALE) above your normal household spending, like a hotel stay and restaurant meals, if you need temporary housing while your house is being repaired. 
• Personal liability: Pays for property damage repair bills or medical expenses to someone else if they’re injured and you’re at fault, like if your dog attacks a guest or someone at the park. Liability insurance also pays for your legal fees, representation and settlements if you’re taken to court over the matter. 
• Medical expenses to others: Pays for someone else’s minor medical expenses, such as up to $5,000, if they’re injured in your house, regardless of who was at fault. 

HO-2 homeowners insurance actual cash value policies, so depreciation is factored into your claim payout when you file a property damage claim for your house and/or belongings.  

What is an HO-3 homeowners insurance policy?

HO-3 policies are the most common type of homeowners insurance. They contain the same six coverages as an HO-2 policy but use an “open peril” model for the structure of your house. This means that all perils, or types of loss, are covered unless denoted as exclusions. 

For your personal property coverage, HO-3 home insurance policies cover the same 16 covered perils, or types of damage, as an HO-2 policy.

Some exclusions include: 

• Earthquake damage.
• Flood damage.
• Negligence.
• Pest infestations.
• Water, drain or sewer backups.
• War and nuclear hazards.
• Wear and tear.

You may be able to add endorsements, or additional coverage, to your HO-3 home insurance policy to include coverage for the excluded types of damage. 

With an HO-3 policy, your house is insured at its replacement cost value, which means you’ll be paid out at the market price for repairs at the time of the claim. 

However, like HO-2 policies, your personal belongings are insured at their actual cash value, so depreciation is factored into the claim payout. You may be able to upgrade to replacement cost coverage for your belongings for an additional fee. 

What is an HO-4 homeowners insurance policy? 

HO-4 policies, also known as renters insurance, provide coverage for those renting houses, apartments or condos. This type of policy does not cover the actual structure of the building, which is typically covered by landlord insurance. 

Renters insurance includes the following types of coverage: 

• Personal property coverage.
• Loss of use coverage.
• Liability coverage.
• Medical payments to others coverage. 

Your belongings are protected by the same 16 perils listed in HO-2 and HO-3 policies and are insured at their actual cash value. Like HO-3 policies, you may be able to upgrade your personal property coverage so that your belongings are insured at their replacement cost value and you’re paid out at today’s prices to replace them. 

Renters insurance doesn’t cover the dwelling structure, attached structure or other structures on the property since as a renter you do not own the property and have no financial interest in protecting it. 

What is an HO-5 homeowners insurance policy?

Also known as comprehensive coverage, an HO-5 policy is the most robust type of home insurance policy. It pays to rebuild your house and replace your personal belongings if they’re damaged by anything other than a listed exclusion, such as flood and earthquake damage. 

Comprehensive  homeowners policies automatically provide replacement cost coverage for both your house and personal property, rather than cash value, so you’ll be paid out at today’s prices for repairs. It also includes the same four other types of coverage that HO-2 and HO-3 policies provide — other structures, loss of use, liability and medical payments to others.

What is an HO-6 homeowners insurance policy?

HO-6 policies are a type of home insurance policy meant for those who own a condo or co-op. If you live in a condo, your condo association will have what is called a master insurance policy, which all condo unit owners in the building pay into. 

There are different types of master policies, and they typically pay to repair the structure of the condo building and shared spaces. Some master policies include more coverage than others. How much dwelling coverage you need in your HO-6 policy will be directly affected by how comprehensive your master policy is, as they are meant to complement each other.  

Your HO-6 policy will likely pay to repair post-purchase renovations, interior walls, floors and ceilings and your personal property. HO-6 policies also provide standard coverage for loss of use, liability and medical payments to others.

What is an HO-7 homeowners insurance policy?

An HO-7 policy is designed for homeowners with mobile or manufactured houses. HO-7 home insurance policies function similarly to HO-3s.

Some insurance companies may only offer named peril coverage for both your mobile house and belongings. But depending on the home insurance company, you may be able to get an open peril policy for the structure of the mobile house and coverage for 16 named perils for your belongings. The open peril policy will provide coverage for any type of damage to the structure of your mobile house, unless listed as an exclusion. 

Other structures, loss of use, liability and medical payments to others coverage are included in HO-7 policies. 

These  homeowners policies offer coverage for manufactured and mobile homes, sectional homes, modular homes and trailers. The properties must be stationary to qualify for coverage.

What is an HO-8 homeowners insurance policy?

HO-8 home insurance policies are designed for older homes with historic elements and cover the same 10 named perils as an HO-1 policy. When you own a historic house, you may not qualify for an HO-3 home insurance policy — the most popular type of home insurance. This is because historic and older houses are usually made with outdated or vintage materials that can’t easily be replaced, which can make the cost to rebuild the house to its prior state extremely expensive. 

HO-8 policies can help pay out if your house is damaged by the following: 

• Fire and lightning.
• Windstorms and hail.
• Explosions.
• Riots and civil commotions.
• Aircraft.
• Vehicles.
• Smoke.
• Vandalism and malicious mischief.
• Theft.
• Volcanic eruptions. 

HO-8 homeowners insurance policies also include loss of use, liability and medical payments to others coverage.

Types of home insurance coverages

Homeowners  insurance policies typically include six types of coverage: 

Dwelling. This type of coverage helps cover the cost to repair or rebuild your home if it is damaged or destroyed due to a covered problem, like a fire. To determine how much coverage you may need, consider local labor and building costs and the square footage of your home.

Other structures. If your property has a barn, shed, fence or other structure, this coverage will help cover the cost of repair if they are damaged due to a covered issue. Your other structures limit is typically set at 10% of your dwelling coverage limit. So if your dwelling coverage limit is $500,000 then your other structures limit is $50,000. 

Personal property. Personal property coverage helps pay for replacing or repairing damaged, destroyed or stolen belongings such as electronics, furniture, clothing, appliances and other possessions up to your policy limit, which is typically set at a percentage of your dwelling coverage limit, such as 50%. 

Most home insurance policies insure your personal property at its actual cash value, which means depreciation is factored into your claim reimbursement. You may be able to upgrade to replacement cost coverage so that you’re paid out at the market price at the time of the claim. 

Loss of use. Also called additional living expenses (ALE) coverage, this covers your expenses if your property becomes uninhabitable due to a covered loss. It will pay for things like short-term housing, meals and other approved expenses over and above normal living costs while your house is repaired or rebuilt. 

Liability. If you, your family, or your pet cause property damage or bodily injury to another, liability coverage helps pay for others’ medical expenses or repair bills and for your legal defense costs and any settlements and judgments against you. You can typically get $100,000 to $300,000 in liability coverage, but you may be able to increase these limits depending on the insurance company. If you have more than $300,000 worth of assets to protect from a potential lawsuit, you might consider buying umbrella insurance. 

Medical payments to others. If someone outside your household receives a minor injury on your property, this no-fault coverage can cover their medical bills up to your policy limit. You can typically get $1,000 to $5,000 in this type of coverage.

How much home insurance do you need? What home insurance does and doesn’t cover

Named peril vs. open peril policies

Depending on the type of home insurance policy you choose, the structure of your house, detached structures and personal belongings will either be insured on a named peril or open peril basis. 

• Named peril. This means your house, other structures or personal property are only insured against specifically named problems, or perils, in your policy. For example, HO-3 home insurance policies will pay to replace your belongings if they are damaged by a named peril in your policy, like fire, windstorm or hail. 
• Open peril. Also called all peril or all risk, this means your house, other structures or personal property are insured against all types of damage unless the problem is specifically listed as an exclusion in your home insurance policy. Common exclusions include flood and earthquake damage, pest infestations and wear and tear. 

What’s the difference between an HO-3 and HO-5 policy?

HO-3 and HO-5 home insurance policies are two types of home insurance that are alike in many ways. However, HO-5 offers more financial protection for your personal property. 

• HO-5 home insurance policy. If your belongings are stolen or damaged by anything other than an exclusion in your policy, like flood damage, you’ll be paid out at the replacement cost value for your belongings.
• HO-3 home insurance policy. Your belongings are only protected against 16 named issues listed in your policy. And you’re paid out at their actual cash value, meaning depreciation is factored into the claim payout. 

Here’s a breakdown of the differences between HO-3 and HO-5 home insurance policies.

Most major home insurance companies offer HO-3 policies, but not all offer HO-5 home insurance. 

How to get homeowners insurance

These steps can help you find the best homeowners insurance based on your needs and budget.  

Know how much coverage you need. You need enough dwelling coverage to fully rebuild your house back to its prior state after a covered disaster. There are several replacement cost calculators available online to give you a rough estimate, your insurance company can give you an estimate or you can hire a licensed appraiser. You also should purchase enough liability coverage to protect your assets in a lawsuit.

Shop around. Always shop around before choosing an insurance company, as insurance costs and coverage types can vary substantially from policy to policy. Aim for at least three quotes before making a decision.

Find out which companies offer the cheapest homeowners insurance. 

Decide on additional coverage. There are several ways to customize your coverage to meet your specific insurance needs. For instance, if you live in an area at risk of flooding, you may need or want to purchase a flood insurance policy. There are also ways to enhance your policy, such as adding extended or guaranteed replacement cost coverage.

Inventory your personal property. It’s difficult to know how much personal property coverage you need without considering the value of your possessions. Create a home inventory to get a realistic figure and avoid the risk of under-insuring your belongings. 

“Think about whether you want to insure them for actual cash value or for replacement cost,” said Worters. “The price of replacement cost coverage is about 10% more but is generally a worthwhile investment in the long run.”

If you own particularly valuable jewelry, art or other collectibles, you may need to ask about scheduling or endorsements to protect these to their full value in the event they’re stolen.

Ask about discounts. Many insurers offer multiple discounts to policyholders, including ones for making home upgrades, such as a new roof or electrical system, as well as safety features like deadbolts, security systems and smoke detectors. 

You may also be able to secure a bundling discount if you take out multiple policies, such as car insurance or RV insurance, with the same insurance company. See the best home and auto insurance bundles. 

Consider customer reviews. Not all insurance agencies are created equally, with some garnering much higher customer satisfaction scores than others. In addition to researching contenders online, ask friends and family about their experiences.

Types of homeowners insurance FAQs

What is the most common homeowners insurance policy?

An HO-3 is the most common type of homeowners insurance policy. It provides six standard types of coverage: dwelling, other structures, personal property, loss of use, liability coverage and medical payments to others. 

HO-3 coverage provides open peril coverage for the structure of your house, meaning all perils, or problems, are covered unless specifically identified as exclusions. 

Is homeowners insurance required?

There are no state laws that require you to purchase homeowners insurance for your property, but mortgage lenders often mandate coverage. Even if you don’t have a mortgage, you should consider purchasing (or keeping) homeowners insurance.

What are the six categories typically covered by homeowners insurance?

Within a standard homeowners insurance policy, you can expect to find six different types of coverage. These include: 

• Dwelling coverage for your home’s structure.
• Other structures coverage for detached structures on your property, such as a shed or barn.
• Personal property coverage for your personal possession, such as furniture.
• Loss of use or additional living expenses (ALE), which covers additional expenses if your home is deemed uninhabitable.
• Liability coverage which can pay for medical bills if you, a member of your family or a pet injures someone or damages their property. It also pays for your legal defense if you are sued, and any settlements or judgments against you, up to your policy limit. 
• Medical payments to others which covers small expenses if an individual outside your home received a minor injury on your property, regardless of who is at fault. 

How do I choose the type of homeowners insurance I need?

What type of home insurance policy you need depends largely on the type of house you own. If you own a condo, you’ll need an HO-6 policy, but if you own a single-family house, you’ll probably choose a standard HO-3 policy. 

When you’re shopping for home insurance types, you’ll need to provide details about your house. From there, the insurance agent will let you know the types of homeowners insurance available to you. If you’re comparing home insurance quotes online, the quote tool can also typically help determine what type of home insurance you need.

Can I decide to make my homeowners insurance named peril or open peril?

Whether you get named peril or open peril typically depends on the type of homeowners insurance you buy. Depending on the insurance company, however, you may be able to upgrade or purchase a more comprehensive home insurance type — like an HO-5 policy — to get open peril coverage.  

How many types of home insurance are there?

There are eight types of homeowners insurance.

• HO-1: This is the most basic type of homeowners insurance. It typically only provides coverage for the structure of your house if it’s damaged by 10 named issues listed in the policy.
• HO-2: This type of home insurance includes the six main types of coverage in a home insurance policy: dwelling, other structures, personal property, loss of use, liability and medical payments to others. If your house or belongings are damaged by one of the 16 named problems in the policy, you can file a claim. 
• HO-3: This is the most common type of home insurance. It includes the six main coverages. HO-3 home insurance typically is open peril coverage for the structures on your property but named peril coverage for your belongings. 
• HO-4: Also called renters insurance, HO-4 policies include personal property coverage, loss of use, liability and medical payments to others coverage. They don’t include coverage for the structure of the house or apartment building because the owner, not the renter, is financially responsible for the structure. 
• HO-5: This is the most comprehensive type of homeowners insurance. It includes the six main coverage types on an open peril basis. That means if your house or the stuff inside are damaged by anything other than a listed exclusion, such as a flood, you can file a claim. 
• HO-6: Also called condo insurance, HO-6 policies are designed for those who own a condo or co-op. Your condo or homeowners association will typically provide a master policy to cover the structure of the building. Your HO-6 policy will likely pay to repair post-purchase renovations, interior walls, floors and ceilings and your personal property. HO-6 policies also provide standard coverage for loss of use, liability and medical payments to others.
• HO-7: If you live in a stationary, mobile or manufactured house, you’ll likely need an HO-7 home insurance policy. It includes the same main six coverage types as an HO-3 policy, but you may only be covered on a named peril basis.
• HO-8: This type of home insurance is designed for older or historic homes, and you’re usually only covered if your house or belongings are damaged by 10 listed issues in your policy. If your house is historic, you likely won’t qualify for an HO-3 home insurance policy because historic houses are typically more expensive to repair.