Types of Homeowners Insurance

When it comes to homeowners insurance, there are actually a few different types of coverage types to choose from. Also known as ‘forms’ or ‘policies’, the policy you purchase will depend on your living circumstances, and what type of coverage you choose.

What are the types of homeowners insurance?

HO1

An HO1 policy is the most basic homeowners insurance policy, and offers coverage on your home for 10 specific perils , including:

1. Fire and lightning
2. Windstorm and hail
3. Explosion
4. Riots and civil commotion
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism and malicious mischief
9. Theft
10. Volcanic eruptions

If something happens that’s not listed on your policy, you probably won’t be covered for it. For example, if your home is damaged due to an overflow of water, you won’t be covered, since it isn’t listed above.

Despite a pretty comprehensive list of perils, an HO1 policy won’t cover you for some important risks, including earthquakes, floods  and falling objects.

HO2

An HO2 policy is another basic homeowners insurance policy. It covers the 10 perils listed on an HO1 policy, and some additional perils, including falling objects, and weight of snow, sleet, or ice. In total, it covers 16 perils.

The HO2 provides more protection than the HO1, but not as much as an HO3, and similar to an HO1, a HO2 policy also excludes coverage for floods and earthquakes.

HO3

An HO3 policy is the most popular homeowners insurance policy, since it protects you, your family, and your property (including your things!) against several bad situations.

Your HO3 policy includes 6 different coverage areas:

1. Your house
Referred to as ‘dwelling coverage,’ this protects you from damages to your home and everything attached to it, such as your garage, chimney, in-ground pool, etc.

2. Other structures on your property
This covers things like your driveway, fences, sheds, and other structures on your property.

3. Your personal property
Generally speaking, personal property refers to the stuff you own. Fun fact: Your homeowners insurance has your back whether your stuff is at home, or anywhere else. So if your computer gets stolen from your car, or your shed burns down with a bunch of power tools inside, you’re covered. Take note, there may be sub-limits on certain valuable things like jewelry and artwork, so make sure to get Extra Coverage on your high-ticket items when buying your policy.

4. Additional living expenses
If one of those pesky perils happens and your place becomes uninhabitable, you’d be covered under ‘loss of use,’and your insurance company may help pay for a temporary place to stay and basic living expenses such as food, laundry, parking, etc. A deductible never applies for this coverage.

5. Personal liability
Liability refers to things you’re responsible for. In the insurance arena, this means if for some reason someone gets injured on your property and it’s your fault, or you/anyone named on your policy causes damage to someone else’s property or stuff, your insurance company should have you covered. Just to be 100% clear: we’re only talking about unintentional situations.

A small note on this one: homeowners insurance only covers personal injury to others, not yourself or others covered under your policy.

6. Medical fees
While personal liability kicks in when you get sued, medical payments kick in without being sued – they are a quick way to settle small injuries. No, home insurance doesn’t cover your own medical bills (that’s what health insurance is for!), but it does help out with covering injuries sustained by guests who may have gotten injured at your place, or people you may have accidentally hurt outside of your home as well.

HO5

An HO5 policy provides broader protection and higher coverage limits than your typical homeowners policy. An HO5 policy is like the Rolls Royce of insurance policies. It takes your basic homeowners insurance coverage and gives it a ton of extra perks.

HO3 and HO5 policies are pretty much similar in their overall structure, but HO5 policies are a bit more comprehensive when it comes to covering your stuff. One of the main differences is an HO3 has an open perils coverage for personal property, which means your stuff is covered, unless it’s specifically excluded.

One of the biggest differences is the way your stuff is covered – with an HO3 policy you’re defaulted to actual cash value, and in an HO5 your stuff is covered for replacement cost. At Lemonade, we believe you should always have your stuff covered with replacement cost, so while you’ll have an HO3 policy, we’ll include this HO5 feature in your policy.

HO6

An HO6 policy is homeowners insurance for a condo and it’s also known as ‘walls-in’ coverage. Since condos come with Homeowners Associations (HOAs), every condo association will have an insurance policy in place for the shared space. HOA’s are responsible for insuring your shared outdoor space and the structure itself, but your condo insurance will cover the inside walls of your condo, your personal property, personal liability, and loss of use, similar to a standard HO3 homeowner insurance policy.

HO8

The least commonly used insurance policy, the HO8 is designed to insure much older homes that would be almost impossible to replace if they were destroyed. An HO8 works on a ‘named peril’ basis, and covers the 11 perils listed in the most basic HO1 policy. Because an HO8 is meant for older homes, it insures your home at market value, aka actual cash value. This means if something happens to your home, your insurance company would value it at the price it would cost in today’s market.

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