Q

What is an HO-8 policy?

A

An HO-8 policy is a type of homeowners insurance that is designed for older, historic homes that don’t meet the coverage requirements of a standard home insurance policy.

Kara McGinley

By

Kara McGinley

Kara McGinley

Property and Casualty Insurance Expert

Kara McGinley is an insurance editor at Policygenius, specializing in home, auto, and renters insurance. She's been writing about insurance since 2019, and her work and insights have been referenced in Kiplinger and WRAL.com.

Published April 28, 2021|2 min read

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An HO-8 policy, also called a modified coverage form, is a type of homeowners insurance that is primarily designed for owner-occupied older homes or historic residences that otherwise wouldn’t qualify for coverage under a standard home insurance policy.

Insurance companies generally consider older homes to be higher risk since many are constructed with ornate features, outdated electrical work (like aluminum wiring) and building materials that are no longer common or up to code.

HO-8 policies are ideal if you’re intent on not making drastic renovations or upgrades to your home. You don’t need to pass a four-point inspection or make upgrades to your electrical wiring or plumbing to qualify for an HO-8 policy.

Key Takeaways

  • An HO-8 policy, also called a modified coverage form, is designed to cover older homes with outdated construction and custom features that may not qualify for standard coverage

  • You don’t need to pass an inspection or make upgrades to your home to qualify for an HO-8 policy

  • However, HO-8 insurance doesn’t cover as many hazards as a standard policy, and you’re only paid out for the actual cash value of your home or belongings, meaning depreciation is factored into your payout after a covered loss

Who needs an HO-8 policy?

HO-8 policies are designed to cover homes with outdated features or rare building materials. If your home falls into one of the below categories, you may need an HO-8 policy instead of standard homeowners insurance (also known as an HO-3 policy).

  • An older home, typically over 40 or 50 years-old

  • Historically landmarked home

  • A home designed with hard to find materials, like rare or outdated wiring, plumbing, or roofing

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What does an HO-8 policy cover?

An HO-8 policy contains the same types of coverage as a standard homeowners insurance policy, but it only covers your home and personal belongings at their actual cash value in the event of a loss.

That means if your home is damaged by a fire, depreciation would be factored into your claim reimbursement. If you had a standard homeowners policy in that scenario, you’d be paid out at the home’s replacement cost.

HO-8 policies also don’t cover as many causes of damage or loss as a typical home insurance policy. Under an HO-8 policy, your home and belongings are only protected against the following ten perils.

  • Fire or lightning

  • Windstorm or hail

  • Explosion

  • Riot or civil commotion

  • Damage by aircraft

  • Damage by vehicle (not your own)

  • Smoke damage

  • Vandalism

  • Theft

  • Volcanic eruption

HO-8 coverage types

Below are the coverages that makeup an HO-8 policy:

  • Dwelling coverage - Covers damage to the structure of your home, including your roof, built-in systems and appliances, and any attached structures

  • Other structures coverage - Covers detached structures on your property, like a shed or garage

  • Personal property coverage - Covers the cost of damaged or stolen personal property

  • Loss of use coverage - Covers the cost of additional living expenses like temporary housing and restaurant meals while your home is being repaired or rebuilt after a covered loss

  • Personal liability coverage - Covers legal and medical fees if you’re found liable for bodily injury or property damage

  • Medical payments to others - Helps pay for a guest’s minor medical expenses if they are hurt in your home, regardless of who was at fault

Each coverage has a limit of liability, which is the maximum amount an insurance company will pay out for a covered loss. Certain types of personal property, like jewelry, will have their own sublimits.

What does an HO-8 policy not cover?

An HO-8 policy will only cover the ten named perils mentioned above. That means unlike most home insurance policies, coverage for damage from weight of snow or ice or falling objects is not included in an HO-8 form.

There will also be a section of an HO-8 policy that outlines specific exclusions, or risks that will never be covered, such as:

  • Damage by earthquake and earth movement

  • Types of water damage, including flooding

  • Intentional loss

  • War

  • Neglect or maintenance issues

  • Wear and tear over time

  • Power failure

  • Pest infestations or mold

However, you may be able to add protection in the form of an endorsement to your HO-8 policy to get coverage for some excluded risks. For example, you may be able to add water backup coverage to your HO-8 policy to protect your home against sewer or sump pump backups.

You can also buy a standalone flood policy or a standalone earthquake insurance policy if you live in an area of the country that is at high-risk for either of those natural disasters.

FAQs

What is the difference between an HO-3 and HO-8 policy?

An HO-8 policy is a type of homeowners insurance primarily meant to cover older or historic homes that may not qualify for a standard HO-3 policy. The two policies contain the same types of coverage for the structure of your home, personal property, and liability, but they differ in what perils they cover and how you’re paid out for claims.

HO-8 are named peril policies, meaning you’re only protected from the ten perils explicitly named in the policy. HO-3 policies are open peril, so you’re covered from most types of loss unless it’s explicitly listed as an exclusion. HO-8 policies tend to pay out actual cash value for covered claims and HO-3 policies pay out replacement cost.

What is functional replacement cost?

Functional replacement cost (FRC) may be an option when insuring your home with an HO-8 policy. FRC policies don’t factor in depreciation like actual cash value policies, instead you’d receive a claim payout to repair your home, but with less expensive building materials. That means in the event of a loss, if you have an FRC policy your home won’t be rebuilt with the same antique or rare materials, but with cheaper, more modern replacements, like faux wood floors or drywall.

Why are older homes more expensive to insure?

Older homes are typically more expensive to insure because insurance companies consider them to be "high risk". Older homes may be built with outdated, rare building materials that would be expensive or difficult to replace in the event of a loss. There's also a chance the roof, plumbing, or wiring isn't up to code either. Since the replacement cost value of an older home is so high, you're likely going to have higher insurance rates than you would with a more modern home.

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