Homeowners Policy Forms Overview

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The Insurance Services Office, Inc. (ISO) Homeowners insurance program’s policy forms are designed to meet the personal risk management needs of individuals and families. There are six standard Homeowners Forms: Broad Form (HO–2), Special Form (HO–3), Contents Broad Form (HO–4), Comprehensive Form (HO–5), Unit-owners Form (HO–6), and Modified Coverage Form (HO–8.) Each form includes Section I Property Coverages and Section II-Liability Coverages. Homeowners policies are package policies because they contain more than one type of insurance and offer advantages not found in monoline policies, such as premium savings, broader coverage, and the insured’s need for fewer policies.

Eligibility                                                                                                                                   

  • Individuals and families who own a private home in which they reside-This is typically a single family-family dwelling, but sometimes an eligible two to the four-family dwelling. A mobile home is not eligible for unendorsed coverage. Dwelling and mobile home insurance policies are available for ensuring residences that are not eligible for homeowners policies.
  • Individuals and families who own private condominium units used for residential purposes-Most insurers provide homeowners policies to people who own and live in condominium units. However, some insurers also provide coverage for owners of property who do not necessarily live in the condominium but is used as a residence by one family member or leased/rented by one or two tenants.
  • People who rent or lease the premises in which they reside-The residence might be a house (either a single-family house or other type), a mobile home, a house trailer, or a condominium unit.

All homeowners forms with the exception of the Contents Broad Form (HO–4) and Unit-owners Form (HO–6) require the named insured to be the owner – Occupant of the insured dwelling. The dwelling must be the principal residence of the named insured, and incidental business occupancies, such as offices, studios, and schools, are permitted.

The Contents Broad Form (HO–4) and Unit-owners Form (HO–6) are written to ensure the personal property and personal liability of the named insured who does not own the building in which he/she lives. The HO–4 is designed for tenants of residential units (i.e., dwellings and apartment units) and provides no coverage for buildings and other structures. The HO–6 is designed for the owners and tenants of a condominium or cooperative units. Coverage is provided for the portion of the building the named insured owns (or is responsible for insuring), personal property, and personal liability.
Eligible residential dwellings are those containing one to four residential units and no more than 2 roomers or boarders per family. Dwellings under construction, and that will be the primary residence of the named insured upon completion of construction, are also eligible for coverage.

Homeowner Coverage Forms

HO–2 (Broad Form)
Meets most needs of owner-occupants for dwelling, other structures, and personal property coverage at a lower premium than the HO-3 or HO-5 coverages.
This form provides named perils coverage for the dwelling (Coverage A), other structures (Coverage B), and personal property (Coverage C). The 16 named perils are:
  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Volcanic eruption
  • Vandalism or malicious mischief
  • Theft (limited)
  • Falling objects
  • The weight of ice, snow, or sleet
  • Accidental discharge or overflow of water or steam
  • Sudden and accidental tearing apart, cracking, burning, or bulging of heating or air conditioning systems (HVAC)
  • Freezing
  • Sudden and accidental damage from artificially generated electrical current
Losses under Coverages A and B are valued on a replacement cost basis. Although coverage for personal property (Coverage C) is provided on the same named perils basis as the dwelling and other structures are, losses are valued on an actual cash value (ACV) basis.
This form does not cover loss to a fence, driveway or walk caused by a vehicle owned or operated by the insured.
HO–3 (Special Form)
Meets the needs of owner-occupants of dwellings who want coverage on their dwellings and other structures that are broader than what is usually available through an HO-2 policy.
In the Special Form (HO–3), the dwelling and other structures (Coverages A and B) are insured on an open perils basis, meaning all perils are insured if they aren’t specifically excluded in the policy. Losses to the dwelling and other structures are valued on a replacement value basis just as they are in the HO–2. The Special Form (HO–3) specifically excludes the following causes of loss under Coverage A and B:
  • Collapse, except as provided by Additional Coverages
  • Freezing of household appliances or a plumbing, heating, air conditioning, or automatic fire protective system unless the insured has taken reasonable care to maintain heat in the building or shut off the water supply and drained the appliances and systems of water
  • Freezing, thawing, pressure or weight of water or ice on patios, fences, swimming pools, foundations, piers, docks, retaining wall
  • Theft in or to a dwelling under construction, including construction-related materials and supplies
  • Vandalism and malicious mischief, including ensuing loss, if the dwelling has been vacant for more than 60 consecutive days immediately before the loss
  • Mold, fungus, or wet rot unless resulting from accidental discharge or overflow of water or steam that is hidden from view
  • Wear and tear, marring, deterioration, mechanical breakdown, latent defect, inherent vice, smog, rust, corrosion, dry rot
  • Smoke from agricultural smudging or industrial operations
  • Pollution including discharge, dispersal, seepage, migration, or release of smoke, vapor, fumes, acids, or other chemicals unless such discharge is caused by a Coverage C Peril Insured Against
  • Settling, cracking, bulging, or expansion of foundation, walls, floors, pavements, patios
  • Birds, vermin, rodents or insects
  • Animals owned or kept by an insured
Personal property (Coverage C) is insured on a named perils basis that includes the same 16 named perils in the Broad Form (HO–2). Coverage C losses are valued on an actual cash value basis. It Includes losses to a fence, driveway or walk caused by a vehicle owned or operated by the insured.
The burden of proof for losses to the dwelling and other structures falls to the insurer because coverage is provided on an open perils basis. On the other hand, the burden of proof for losses to personal property falls to the insured to show which of the 16 named perils caused the loss.
HO–4 (Contents Broad Form)
Meets the needs of tenants and other apartment or dwelling occupants who rent or lease and therefore do not require coverage on the dwelling.
The Contents Broad Form is also known as the renter’s or tenant homeowners policy. It doesn’t provide any coverage for the dwelling or other structures because it’s designed to insure those who are tenants. The HO–4 insure’s personal property under Coverage C against loss from the 16 named broad form perils found in the HO–2 and HO–3 forms. Personal property losses are valued on an actual cash value basis, as they are on the HO–2 and HO–3 forms.

HO-5 (Comprehensive Form)   

The Comprehensive Form provides the broadest coverage of any of the homeowner’s forms. Coverage A, B, & C provide insurance on an open peril basis.

Losses to the dwelling and other structures are valued on a replacement cost basis, losses to personal property are value on an actual cash value basis.

HO–6 (Unit-Owners Form)
Meets the needs of owners of condominium units and cooperative apartment shares.
The Unit-owners Form provides named perils coverage to the owner of a condominium or cooperative unit under Coverage A – Dwelling and Coverage C – Personal Property. Coverage B does not appear in this form; however, if the owners of condominiums or cooperative units wish to ensure other structures, the value of other structures may be included in the Coverage A limit of insurance.
The form ensures real property (building and building items) for which the insured is responsible under the bylaws of the condominium association or cooperative corporation. It also insures personal property of the insured while anywhere in the world.
HO–8 (Modified Form)
Meets the needs of owner-occupants of a dwelling who may not meet insurer standards required for other policy forms.
The Modified Coverage Form is used to ensure older homes when the replacement and market values of the dwelling are disproportionate or if a moral hazard would be created if insurance were written at 100% of replacement cost. An example of a dwelling that would be insured under this coverage form is an old 3-story Victorian home in which the insured lives on the first two floors. If the dwelling were destroyed in a loss, the insured would not want to restore or replace it exactly as it was before the loss. Instead of insuring the dwelling for its replacement value of $1,200,000, the insured would insure it for a much lower amount of insurance.
The limit of insurance chosen should represent the functional replacement value of the dwelling, which is the cost to replace damaged property with property that will perform the same function and efficiency even if it isn’t of like kind and quality.
The HO-8 does not cover the following perils:
  • Falling objects
  • The weight of ice, sleet, or snow
  • Accidental discharge of water or steam
  • Accidental tearing apart, cracking, burning, or bulging of heating or air conditioning systems
  • Freezing
  • Sudden and accidental damage from artificially generated electrical current