October 21, 2021

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Comparing Various Types of Homeowners Insurance Forms

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Some of you may have heard the age-old adage, knowledge is power. This phrase is especially relevant when it comes to your homeowners policy because knowing what is and is not covered under your policy can save you a lot of strife in the event of a loss. In order to know and understand your policy, you first have to read it. As Bill Wilson emphasizes in his book, When Words Collide: Resolving Insurance Coverage and Claims Disputes, you need to Read The Full Policy!

When reading and reviewing your homeowners insurance policy, you may see your policy described as a type of form like HO-2 or HO-3. There are eight different types of homeowners insurance forms and each one is intended for different property types and coverage needs. For example, a person renting an apartment will not need the same coverage as a person who owns a single-family dwelling. Below we will dive into some of the differences between the most common types of homeowners forms.

HO-2 Broad Form

The HO-2 Broad Form is a broad named peril form for real property and for personal property. Broad named peril only provides coverage for damage that is named in the policy form. In other words, if it is not written in your policy, it is not covered. Additionally, you cannot endorse your policy to change it from broad named peril to cover beyond what is named in your policy.

For valuation of your real property, the HO-2 form provides for the replacement cost value (“RCV”) of the property. This is usually defined as the cost to replace the damaged property with materials of like kind and quality, without any deduction of depreciation. For personal property valuation, the HO-2 form provides for the actual cash value (“ACV”) of the property. This means you will receive what it would cost to replace that property today less the physical depreciation of what was damaged. However, you can endorse your policy using the HO-0490 endorsement form to change your personal property valuation to get the RCV of the property, which is typically the better choice.

HO-3 Special Form

The most common type of homeowners insurance policy is the HO-3 form. This form provides for special cause of loss for real property. Special cause of loss provides the broadest coverage. It means the damage and cause of loss is covered unless it is specifically excluded in the policy. In other words, by default the loss is covered under your policy unless it says otherwise. If it is not named in the policy and it is not excluded, you have coverage. For personal property, the HO-3 form is a broad named peril form, which only provides coverage for what is named in the policy, and you cannot endorse it to get coverage beyond what is in your policy.

Like the HO-2 form’s valuation of your real property and personal property, the HO-3 form provides the RCV of the real property and ACV of the personal property. Similar to the HO-2 form, you can endorse your policy using the HO-0490 endorsement form to change your personal property valuation to get the RCV of your personal property.

HO-4 Contents Broad Form

As Christopher Boggs teaches in one of his classes at the Academy of Insurance, the HO-4 Contents Broad Form is a “unique animal.” The HO-4 form is used for apartment dwellers and renters of any location or property. You would not expect this renters form to have any dwelling coverage, but the policy does provide some real property coverage. Typically, your real property cause of loss coverage is the same as the cause of loss coverage for your personal property. The HO-4 form is a broad named peril form for your personal property. However, unlike the HO-2 and HO-3 forms, you can endorse it using the HO-0524 endorsement and change the cause of loss for personal property from a broad named peril form to a special cause of loss form.

The valuation of your real property is based on how your personal property is valuated. The personal property is valuated using the ACV. Similar to the HO-2 and HO-3 forms, you can use the HO-0490 form to change your personal property valuation from ACV to RCV. Additionally, if you get the HO-0490 endorsement form, this also change your real property valuation from ACV to RCV as well.

HO-5 Comprehensive Form

The HO-5 Comprehensive Form is a special cause of loss form for real property and for personal property. It does not require any endorsements. As discussed above, special cause of loss is the broadest coverage form and means if it is not named in the policy and it is not specifically excluded, then the loss is covered.

Like the HO-2 and HO-3 forms, the valuation of your real property is RCV and your personal property is ACV. Similar to the HO-2 and HO-3 forms, you can endorse your policy using the HO-0490 endorsement form to change your personal property valuation to get the RCV of your personal property. However, unlike the HO-4 form, the HO-0490 form does not expand your real property valuation from ACV to RCV.

HO-6 Unit-Owners Broad Form

The HO-6 Unit-Owners Broad Form policy is purchased by condominiums and cooperative unit owners. In its standard form, it is a broad named peril form for real property. However, unlike the other forms discussed, it can be endorsed with the HO-1732 endorsement form which changes it from a broad named peril form to a special cause of loss form. Again, this means if it is not specifically excluded then it is covered under your policy. It is also a broad named peril form for your personal property. However, you can use the HO-1731 endorsement to get special cause of loss for your personal property as well.

Similar to the HO-2, HO-3, and HO-5 forms, the valuation of your real property is RCV and your personal property is ACV. Additionally, you can endorse your policy using the HO-0490 endorsement form to change your personal property valuation to get the RCV of your personal property only.

HO-8 Modified Coverage Form

The HO-8 Modified Coverage Form is mostly used for older homes and is used for very limited purposes. The HO-8 Modified Coverage Form is a basic named peril form for real property and for personal property. This is the minimum amount of coverage you can get and there are no endorsements you can use to change it. It includes an incredibly short list of what is covered and that is all that is covered.

The valuation of real property under the HO-8 Modified Coverage Form uses a “functional” RCV. This means your carrier will take what was there and replace it with something functionally equivalent. An example Christopher Boggs uses to help explain what this means is if the wood shingles on a house was damaged, then the insured can get the functional equivalent of those shingles by getting asphalt shingles. For personal property valuation, the HO-8 form provides for ACV of the property, which can be endorsed from ACV to RCV using the HO-0490 endorsement.

For more information (or knowledge and power if you will), check out the Academy of Insurance, When Words Collide: Resolving Insurance Coverage and Claims Disputes, by Bill Wilson, and of course, Pay Up! by our every own Chip Merlin.

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