Acronyms make our lives easier. We don’t just laugh, we LOL and we don’t just get there, we get there ASAP.
But what exactly is HO-1 insurance? Car, home, or health insurance?
Read on, and we’ll uncover the mystery surrounding HO-1 insurance, so you can decide if it’s right for you.
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Let’s cut to the chase: HO-1 insurance, or “basic form home insurance”, protects your physical home and belongings from 10 listed perils. This type of insurance offers limited or less comprehensive protection than other home insurance products.
For instance, traditional homeowners insurance doesn’t just cover the physical structure of your home; it also can pay for loss of use (alternative accommodations) and medical payments (medical expenses if someone is injured on your property). HO-1 insurance, on the other hand, covers just the dwelling.
As of 2019, only 1.62% of families had HO-1 insurance plans. Because this product isn’t the first choice for most homeowners, not all insurance companies offer HO-1 insurance.
The final thing to know about HO-1 policies is it’s a type of actual cash value policy, which means that even if a named peril damages your home, the payout amount depreciates. For example, if your roof is 10 years old, your payout check would be a brand-new roof minus 10 years of depreciation and wear and tear.
HO-1 is the basic form of home insurance, whereas HO-2, HO-3, and HO-5 offer more comprehensive house insurance coverage. They all protect your home from more than just 10 named perils.
Here’s a quick reference guide on each home insurance policy.
HO-2: Broad Form Home Insurance
Rather than offering your home financial protection against 10 named perils, HO-2 covers 16 perils.
| HO-2 Insurance Named Perils | |||
|---|---|---|---|
| Lightning or Fire | Explosions | Damage Caused by Cars | Falling Objects |
| Hail or Windstorm | Riots or Civil Commotion | Theft | Volcanic Eruptions |
| Damage Caused by Aircraft | Smoke Damage | Vandalism | Damage From Weight of Snow, Sleet, or Ice |
| Water Damage From Plumbing, Heating, or A/C Overflow | Water Heater Cracking, Overheating, Burning | Damage From Electrical Current | Frozen Pipe Damage |
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HO-3 home insurance is more commonly purchased than HO-1 or HO-2 insurance because it covers more than just the structure of your house.
This insurance covers open perils, meaning any hazard except anything expressly stated in the policy as not included. For example, your policy may cover everything except frozen pipes.
HO-3 insurance protects your home, personal property, any structures on-site (such as a shed), liability coverage, additional living expenses, and medical payments to anyone injured on your property.
If you’re renting a home or an apartment, HO-4 offers liability and personal property protection.
You can simplify your insurance with HO-5 by removing the burden of proof that your home was damaged by a named peril, thereby fast-tracking insurance claims. HO-5 insurance gives you all the features of HO-3 insurance (open peril protection, coverage on your home, personal property, medical, etc.).
As well, your payouts are either actual cash value (minus any depreciation) or replacement costs (current market value replacement), depending on your policy.
If you live in a condo, HO-6 insurance was made for you as it protects the structure of your condo and your personal property.
HO-1 insurance protects your physical home from damages caused by listed perils. So what are the 10 named perils that your HO-1 plan will cover?
| HO-1 Insurance Named Perils | |||
|---|---|---|---|
| Fire or Smoke | Explosions | ||
| Lightning | Hail and Windstorms | ||
| Theft | Vandalism | ||
| Damage From Vehicles | Damage From Vehicles | ||
| Riots or Civil Commotion | Volcanic Eruptions | ||
The better question isn’t what your HO-1 insurance will cover; it’s what it won’t cover! In all things in life, you get what you pay for, and HO-1 home insurance is no different.
Low premiums mean limited coverage and low coverage limits. HO-1 insurance will not cover any of the following:
If someone is injured on your property, if you don’t have liability coverage and they sue you, you’re on the hook for any court costs.
Suppose your home and personal property—clothing, furniture, belongings—are damaged or destroyed by a named peril. HO-1 insurance won’t pay to repair or replace your personal property.
When someone gets hurt at your home, medical payments will pay for their medical bills. However, HO-1 insurance doesn’t include medical payments.
Suppose something happened to your house and you needed to temporarily relocate to a hotel or other accommodations while it’s being repaired. In that case, additional living expenses will pick up the tab. If this feature sounds attractive, consider a more comprehensive home insurance like HO-5.
Read more about what homeowners insurance doesn’t cover here.
Most homeowners prefer a home insurance policy with more features than just protecting the physical structure of their house. So, who benefits from HO-1 insurance?
Because HO-1 protects against named perils only—without additional features like liability coverage—many states don’t allow insurers to offer this product. Furthermore, to get a mortgage on a house, most lending requirements mandate you obtain a more substantial home insurance, like HO-3 or HO-5.
You should only consider taking out an HO-1 policy if you’re insuring an older home that doesn’t have much in the way of personal belongings inside. For instance, if your secondary property is an older house that you don’t live in, HO-1 coverage might be sufficient.
As a homeowner and especially if you have a family, HO-1 insurance shouldn’t be your top choice for home insurance. Yes, it comes with affordable premiums, but at what future cost? If a peril damages your home (named or not), you shouldn’t have to worry about footing the bill for repairs. The point of home insurance is to shelter you from financial stress if anything happens.
Your home insurance policy cannot protect you if you pick a policy that offers little protection. So, unless you have a secondary property that you want to protect from vandals, you may want to look into a home insurance plan that is more comprehensive, like HO-3 or HO-5 plans. Find more tips for shopping for a home insurance policy here.
And finally, before picking out home insurance, be sure to shop around for the best home insurance coverage at the right price. It always pays to explore all your options before you sign on the dotted line. So, if you’re ready to start insurance shopping, get access to free quotes here.
Hollay Ghadery Hollay Ghadery is a writer and editor who is passionate about financial literacy as a means to personal fulfillment. Hollay has over 18 years of experience creating content about a range of topics related to personal finance, including insurance, investing, banking, and credit cards. When Hollay isn't writing, she's spending time with her four children, two dogs, and three goats.
