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More on Home Insurance
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.
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).
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
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.
|Coverage||What does this coverage do?||Loss valuation|
|Section I - Property Coverages|
|Coverage A - Dwelling||Covers the structure of your home and built-in appliances||Replacement cost|
|Coverage B - Other Structures||Covers detached structures on your property||Replacement cost|
|Coverage C - Personal Property||Covers your personal belongings both inside and outside the home||Actual cash value|
|Coverage D - Loss-of-use||Pays for additional living expenses while your home is being repaired|
|Additional Coverages||Explains 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 Liability||Pays for legal and medical bills if you're held liable for injury or personal property damage to someone else|
|Coverage F - Medical Payment To Others||If a guest is injured in your home, it pays for their medical bills, regardless of who is at fault|
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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
Riot or civil commotion
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
Sudden and accidental damage from an artificially generated electrical current
➞ For a more comprehensive breakdown of what’s covered and what’s not, check out our guide on homeowners insurance perils
In general, an HO-2 policy will not cover the following perils:
Ordinance or law
Water damage from flooding, sewer backups, or water that seeps up from the ground
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
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
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.
Pat Howard is a homeowners insurance editor at Policygenius in New York City. He has written extensively about home insurance cost, coverage, and companies since 2018, and his insights have been featured on Investopedia, Lifehacker, MSN, Zola, HerMoney, and Property Casualty 360.
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