What is an HO-2 policy?

An HO-2 policy is a form of homeowners insurance that provides less coverage than a standard homeowners insurance policy. This policy type has been all but phased out of the marketplace.

Pat Howard 1600

Pat Howard

Published June 25, 2020

KEY TAKEAWAYS

  • An HO-2 policy is a type of homeowners insurance that provides coverage against 16 perils

  • A standard homeowners insurance policy has more comprehensive coverage than an HO-2

  • This type of coverage only makes up about 5% of single-family home insurance policies on the market

An HO-2 policy, also known as a broad form policy, is a type of homeowners insurance that contains more coverage than the most basic of policy forms but less coverage than a standard HO-3 policy. An HO-2 provides coverage for your home and personal property against 16 named perils listed in the policy form. It also covers loss of use, your personal liability, and medical payments if a guest is injured on your property

HO-2 coverage is considered an obsolete form of insurance and isn’t sold by many traditional insurance companies any longer. Most companies have defaulted to selling the higher quality homeowners insurance types, like the HO-3 and HO-5 policy. HO-2 policies only make up about 5.37% of single-family home policies countrywide, according to the National Association of Insurance Commissioners (NAIC).

What is HO-2 insurance?

The HO-2 policy is, first and foremost, a document of legal jargon that explains what the insurance company offering the HO-2 policy is responsible for covering, and what they’re not. The form also explains other insurance terms like your premium, deductible, and the coverages that make up the policy.

When an insurer writes you an HO-2 policy, they’re generally basing it off of the same Insurance Services Office (ISO) policy form. The statistical and actuarial company writes other coverage forms as well, like the HO-3, HO-4 (renters insurance) and HO-6 (condo insurance).

Here’s a look at the coverages included in an HO-2 homeowners insurance policy.

CoverageWhat does this coverage do?Loss valuation
Section I - Property Coverages
Coverage A - DwellingCovers the structure of your home and built-in appliancesReplacement cost
Coverage B - Other StructuresCovers detached structures on your propertyReplacement cost
Coverage C - Personal PropertyCovers your personal belongings both inside and outside the homeActual cash value
Coverage D - Loss-of-usePays for additional living expenses while your home is being repaired
Additional CoveragesExplains all the additional coverages in a standard policy—like debris removal, loss assessment and ordinance or law—and the insured limits of each
Section II - Liability Coverages
Coverage E - Personal LiabilityPays for legal and medical bills if you're held liable for injury or personal property damage to someone else
Coverage F - Medical Payment To OthersIf a guest is injured in your home, it pays for their medical bills, regardless of who is at fault
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What does an HO-2 policy cover?

An HO-2 policy covers your home and personal property from the 16 named perils listed in the policy. For comparison, the more comprehensive HO-3 policy provides “all-risks” coverage for your home, meaning it covers virtually everything except losses due to flooding, earthquakes, nuclear war, and wear and tear — and named perils coverage for your personal property.

Here’s a look at the 16 named perils that you’re covered against in an HO-2 policy:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism
  • Theft
  • Falling objects
  • Weight of ice, snow, or sleet
  • Accidental discharge or overflow of water or stream
  • Sudden and accidental tearing apart, cracking, burning, or bulging of a built-in appliance like a water heater or centralized air conditioner or heating system
  • Freezing
  • Sudden and accidental damage from an artificially generated electrical current
  • Volcanic eruption

For a more comprehensive breakdown of what’s covered and what’s not, check out our guide on homeowners insurance perils

What does an HO-2 policy not cover?

In general, an HO-2 policy will not cover the following perils:

  • Ordinance or law
  • Earth movement
  • Water damage from flooding, sewer backups, or water that seeps up from the ground
  • Power failure
  • Neglect
  • War
  • Nuclear hazard
  • Intentional loss
  • Government action
  • Theft to a dwelling under construction
  • Vandalism or malicious mischief (if vacant more than 60 days)
  • Mold, fungus, or wet rot (except if it resulted from an accidental discharge or overflow of water)
  • Wear and tear
  • Mechanical breakdown
  • Smog, rust or other corrosion
  • Smoke from agricultural smudging and industrial operations
  • Discharge, dispersal, seepage of pollutants
  • Settling, shrinking, bulging, or expanding of parts of the structure like your foundation or walls
  • Birds, vermin, rodents, insects
  • Animals owned by insured

HO-2 vs HO-3

As we mentioned earlier, HO-2 homeowners insurance has been all but phased out of the property insurance marketplace, as better forms of coverage — like the HO-3 and HO-5 — are available at virtually the same rate.

So what makes an HO-2 different from an HO-3?

For one, HO-2 homeowners insurance is often referred to as a named perils policy, since your home and personal property are only covered against the 16 specific perils listed in the policy form.

Meanwhile, a standard HO-3 policy will cover your home against all risks, or “open perils”, meaning everything except the specific perils listed in the policy form. With all-risks coverage, the burden of proof is on the insurer to demonstrate that a particular peril isn’t covered when you file a claim. For that reason, HO-3 insurance is preferable to HO-2 coverage.

Insurance Expert

Pat Howard

Insurance Expert

Pat Howard is an Insurance Editor at Policygenius in New York City, specializing in homeowners insurance. He has been featured on Property Casualty 360, MSN, and more. Pat has a B.A. in journalism from Michigan State University.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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