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Standard Home Owner Policies — What’s Covered


Homeowner policies—often termed HO by the insurance industry—come in a number of standard packages that are pretty much the same no matter where you live in the United States. The most common homeowner policies consist of two parts: the first is property coverage, which includes coverage of your dwelling, other structures on the property, and personal property. “Other structures” include the garage, as well as guest house, tool shed, or similar type buildings. Not included are buildings used for business or rented or leased to others. Personal property includes all household furnishings and your own personal belongings, including clothes. Among personal property usually excluded from coverage are your car or other motorized vehicle, pet dog or cat or other animal, computers or other equipment that are part of a small business run from your home.

The second part of your policy provides personal liability coverage, which pays damages if someone brings a claim or suit against you for bodily injury or damage to his or her property.

Property coverage: Three types of HO policies are commonly offered. The first two, usually termed HO-1 and HO-2, insure the dwelling, other structures, and personal property against a list of named “perils,” or causes of loss, such as fire, lightning, etc. HO-1, a basic policy, commonly covers some 11 perils. HO-2 is broader, covering some five or six additional perils. A third policy, usually termed HO-3, includes an “all risk” clause that covers nearly all perils or causes of loss, with specified exceptions. The exceptions almost always include flood, earthquake, war, and nuclear hazard.

HO-3 is probably the most widely sold homeowner policy. Although the all-risk clause adds to the cost of the premium, without the clause, coverage is limited to damage caused by one of the named perils.

Liability: The liability portion of the homeowner policy protects against a claim or lawsuit brought by someone who is injured on your property or by something you do. The claim can also be for damage to that person’s property, if it is caused by something you do or for which you are responsible. The liability portion of your homeowner’s policy pays for damages when you are liable for the injur y, pays the medical expenses if the person is injured, and provides legal expenses to defend you even in cases where the suit is not thought to be justified.

Other Types of HO Policies

Variations of these common homeowner policies are available for other types of dwellings. They include:

Renter’s or tenant’s policy: The standard renter’s policy insures your personal property against the expanded list of perils named in the HO-2 policy, and also includes liability coverage;  it does not, of course, cover the actual building or other structures, which are the responsibility of the owner.

Mobile home policy: This provides basically the same type of cover- age as the common HO policies described above. Premiums are usually higher because of the greater susceptibility of mobile homes to wind damage.

Condominium owner’s policy: The condominium association buys insurance covering the building and other structures. The owner of the condominium unit, therefore, usually buys a policy similar to the renter’s policy in that it principally provides personal property and liability coverage.  You should check with the condominium association, however, to determine the extent of its cover- age. Typically, the association’s insurance covers only the exterior walls, and damage to such items as bathroom fixtures, kitchen cabinets, and carpet would need to be covered by your policy.

Actual Cash Value coverage: (often termed HO-8) is similar to HO-1 in providing both property and liability coverage  for some 11 named perils, but it differs from most HO policies sold today in that it covers repairs or reimburses based on Actual Cash Value—not replacement or rebuilding costs. This type of cover- age is often sold to cover older homes that have some architectural or other features that make their replacement cost significantly higher than their market value. It also is commonly sold to those who cannot afford or qualify for the more comprehensive HO policies described above.