Coverage Guide

Home Insurance Coverage Levels

Understanding what your policy covers - and what it doesn't - is as important as the premium you pay. A gap in coverage only matters when you need to file a claim.

Homeowners Insurance Policy Types

HO-1: Basic Form

Rare

Named perils only - typically covers fire, lightning, explosion, theft, vandalism, and a few others. Very limited.

Best for: Almost never recommended - extremely limited coverage

HO-2: Broad Form

Uncommon

Covers a wider list of named perils than HO-1 including falling objects, weight of ice/snow, and water damage from appliances.

Best for: Budget-conscious buyers in low-risk areas

HO-3: Special Form

Most common - ~70% of policies

Open perils on dwelling (covered unless specifically excluded), named perils on personal property. The industry standard.

Best for: Most homeowners - best balance of coverage and cost

HO-5: Comprehensive Form

Premium option

Open perils on both dwelling AND personal property. Higher limits, fewer exclusions, often includes replacement cost on contents automatically.

Best for: Homeowners with high-value possessions or who want the strongest protection

HO-8: Modified Coverage

Older homes

Designed for homes where market value is significantly below rebuild cost. Pays actual cash value or functional replacement rather than full rebuild.

Best for: Historic homes or properties with older non-standard construction

What the Six Coverage Components Mean

Coverage A - Dwelling

The physical structure of your home including attached structures like garages.

Typical limit: Set to the rebuild cost of your home, not market value. Typically the largest component.

Coverage B - Other Structures

Detached garage, fence, shed, guest house not attached to the main dwelling.

Typical limit: Usually 10% of dwelling coverage automatically. Can be increased if needed.

Coverage C - Personal Property

Furniture, electronics, clothing, appliances, and other belongings inside and sometimes outside the home.

Typical limit: Typically 50-70% of dwelling coverage. Valuables like jewelry may need scheduled endorsements.

Coverage D - Loss of Use

Pays for temporary housing, meals, and living expenses if your home is uninhabitable during a covered repair.

Typical limit: Usually 20-30% of dwelling coverage. Very important to have adequate limits.

Coverage E - Personal Liability

Legal defense and damages if someone is injured on your property or you cause property damage to others.

Typical limit: Standard is $100,000 but $300,000 to $500,000 is recommended. Umbrella policy provides additional layers.

Coverage F - Medical Payments

Pays guest medical expenses if injured on your property, regardless of fault. Does not cover your family.

Typical limit: Usually $1,000 to $5,000. Relatively inexpensive to increase.

Common Exclusions That Surprise Homeowners

These items are not covered under a standard homeowners policy and require separate policies or endorsements.

Excluded Item	What to Do
Flood	Requires separate NFIP or private flood policy. The most commonly underbought coverage.
Earthquake	Requires a separate earthquake endorsement or policy. Essential in CA, PNW, and New Madrid fault zone.
Gradual deterioration	Wear and tear, rot, mold from neglect, or pest damage is never covered.
Intentional damage	Any damage you cause intentionally is excluded.
Business property	Home business equipment above $2,500 is typically excluded. Requires a business rider or separate policy.
High-value jewelry and art	Standard policies cap jewelry at $1,000-$2,500. Expensive items need scheduled endorsements.

Replacement Cost vs Actual Cash Value

Actual Cash Value (ACV)

Pays the depreciated value of damaged items. A 10-year-old TV that cost $1,000 new might receive a $200 payout because it has depreciated 80%. Lower premiums but much lower payouts.

Not recommended for most homeowners

Replacement Cost Value (RCV)

Pays to replace damaged items at today's prices for a new equivalent. The 10-year-old TV might receive $400 to buy a comparable new model. Higher premiums but dramatically better protection.

Recommended for most homeowners

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