Understanding the 8 Types of Homeowners Insurance Policies (2024 Coverage Explained)

Your home insurance plan covers the home’s structure and your personal belongings. Understanding the eight types of home insurance policies will help you pick the right coverage.

Each policy, from basic HO-1 to specialized HO-8, offers varying levels of protection. For instance, some types of home insurance provide replacement coverage by default but have higher monthly rates. We can help you estimate how much home insurance costs based on where you live.

Use this guide to learn how to read homeowners insurance policy and compare the pros and cons of the different types of homeowners insurance policies. Enter your ZIP code to find affordable home insurance near you. 

Your Home Insurance Policy Explained

What are the three main types of homeowners insurance coverage? No matter what type of policy you buy, homeowners insurance coverage is broken into three basic sections:

• Dwelling Coverage: Protects your home’s structure
• Contents Coverage: Protects your personal belongings, like furniture, clothing, and electronics
• Medical Payments Coverage: Pays medical costs and legal fees if someone is injured on your property

You can choose different levels of coverage, which will impact your home insurance rates, and rates will vary with each company.

For instance, Progressive homeowners insurance is pretty cheap at $145/month for $500,000 in coverage when compared to USAA homeowners insurance. Compare at least three companies to find an affordable price near you.

Homeowners Insurance Monthly Rates by Provider & Coverage Amount

How much homeowners insurance do you need? That depends on the type of home you own. You should at least insure 80% of your home’s value to meet the requirements of your mortgage lender. 

Policies can cover either the replacement cost or actual cash value (ACV) of your property, with ACV policies being cheaper but offering lower compensation.

Replacement cost coverage pays to repair or replace your home and belongings without deducting depreciation, so you get enough to restore your property to its original condition. Actual cash value (ACV) coverage, on the other hand, factors in depreciation, meaning you only get paid what your items are worth today, not what you paid for them. 

While ACV policies are cheaper, they leave you with less money to rebuild or replace your stuff. If you want full protection, replacement cost is the better choice. Some policies automatically offer replacement coverage so compare all eight types of homeowners insurance policies below to find the best coverage for your situation.

Understanding the Eight Types of Homeowners Insurance

What is homeowners insurance? There really isn’t a list of homeowners insurance coverage A, B, C, and D — home insurance policies are numbered 1-8.

What kind of damage does homeowners insurance cover? That varies by policy type. Some named peril policies only cover the damages listed in the policy and nothing else, while others have open coverage save for a few exclusions.

This home policies chart breaks down the different types of coverage for homeowners and renters so you can easily identify the basic types of homeowners policies that are used today:

Types of Homeowners Insurance Policies and What They Cover

Scroll down for a complete list of coverages and exclusions included with the different types of property insurance listed in our HO policies chart.

HO-1 Basic Form Policy

This policy is bare bones and only covers the 10 named perils listed above. It is the only home insurance policy that doesn’t offer personal liability or medical payment protection.

Less than 2% of homeowners buy this policy because it doesn’t meet the insurance requirements of most mortgage lenders or homeowners associations.

HO-2 Broad Form Policy

An HO-2 policy provides a little more coverage than an HO-1. It includes the 10 perils plus:

• Volcanic eruptions
• Freezing damage
• Weight of snow and ice
• Power surges
• Accidental damage to heaters and air conditioners
• Accidental discharge or overflow or water or sewage

HO-2 policies also provide dwelling and contents coverage at replacement value rather than ACV.

HO-3 Special Form Policy

This is the most popular type of homeowners insurance — over 75% of homeowners have this coverage because it’s the most flexible. It automatically provides replacement coverage for your home and actual cash value for personal belongings.

As an open-peril policy, it covers all damages listed above except those explicitly excluded in the policy. The most common exclusions to HO-3 home insurance are:

• Earthquakes
• Floods
• Nuclear waste or hazard
• Mold or fungus
• Foundation damage
• War

The exclusions will be clearly listed on your policy. You may be able to add endorsements to cover certain events and natural disasters depending on your insurance company. Learn how to compare homeowners insurance quotes to get the best price on this policy.

HO-4 Contents Broad Form Policy

HO-4 policies are more commonly known as renters insurance. It protects against the same 16 perils but only covers a tenant’s personal belongings since they don’t own the home or structure. 

Policies typically cover items at their replacement value, but this can vary by company. HO-4 insurance also provides personal liability and loss of use coverage.

HO-5 Comprehensive Form Policy

These policies are designed for high-value homes and items. It covers the same 16 perils, but coverage limits exceed normal policy levels.

All HO-5 policies cover replacement value for structures and personal items by default, which means insurance rates are higher. This is one of the most expensive types of homeowners insurance.

HO-6 Unit-Owners Policy

HO-6 insurance is designed for condominiums. It provides personal liability, loss of use, and medical payment coverage, but also offers unique protections for walls, ceilings, and floors. Any renovations you make to the condo after you buy it are also protected.

Even if your condo association provides insurance, an HO-6 policy can fill in the gaps and allow you to choose between replacement cost coverage or ACV. 

HO-7 Mobile Home Insurance

This is an HO-3 policy for mobile homes, providing additional coverage for trailers, manufactured or modular homes, and sectional homes. It covers any damages except those listed in the policy.

However, HO-7 coverage only applies when the home is stationary. It will not pay for any damages that occur while the home is actually mobile.

HO-8 Modified Coverage Form Policy

This type of home insurance is available for homes more than 40 years old. Most historic homes have this policy because it protects items you can’t replace easily, like vintage crown moldings or hardwood floors.

Policies only protect against the 10 named perils, and buying an HO-8 policy can be expensive and restrictive. If you own a historical property, research the exclusions and any endorsements you can add to your policy to be better protected.  

Common Home Insurance Endorsements

Homeowners insurance forms and endorsements can extend your coverage limits and protect your home against additional risks you may not have thought of, such as inflation and safety ordinances. 

Adding endorsements will increase your monthly home insurance rates. Check out this list of common endorsement options for homeowners:

• Earthquake Coverage: Since most policies exclude moving earth damages, this will protect your property in the event of an earthquake.
• Flood Coverage: Flood damage is a common exclusion, but this add-on protects against hurricanes, high tides, heavy rain, and other natural floods.
• Identity Theft Coverage: Home insurance policies don’t protect against the financial loss of identity theft unless you buy this endorsement.
• Service Line Coverage: Home insurance doesn’t apply to utilities, so get this add-on to protect your cable, internet, electric, sewage, and water lines. 
• Inflation Guard: This endorsement calculates inflation during the term of your policy and increases coverage limits to match the value at the time of your claim. 

 Some add-ons are more expensive than others, and premiums will vary by company. Always compare insurance quotes from three or more companies to get the best homeowners insurance.

Read More: Lemonade Home Insurance Review

Bottom Line on the Different Types of Homeowners Insurance

There are eight different types of home insurance. Each policy type has unique features and coverage levels.

The best type of homeowners insurance for high-value homes is an HO-5 policy. It provides the same open coverage as HO-3 policies but with higher coverage limits for valuable property and personal items. Rates will be higher, so determine how much home insurance costs based on where you live before you buy.

Other policies are designed for condo owners, renters, and historic homes. Enter your ZIP code below to compare the types of homeowners insurance available near you.