If you are a first time homeowner you have probably found that you have
learned more than you ever wanted to know about inspections, property values, real estate fees, property taxes
and those mysterious "points". Unfortunately, purchasing homeowner's insurance is full of those code words and
concepts that are likely to be new to you.
Categories of homeowner's insurance are designated by "HO" numbers, which simply stands for homeowners. The
basic "HO" numbers are explained below.
HO-1: In earlier times, HO-1 was the only type of homeowner's insurance available. At this point in time,
HO-1 is basic coverage for eleven specific types of damage that can happen to your home. These include: vehicle
damage, smoke damage, fire or lightening damage, explosion, riot, aircraft, windstorm or hail, damage by glass,
theft, and volcanic eruption. This is fairly limited in nature, and depending upon where your house is located
much of it is pretty irrelevant while it leaves big gaps for common occurrences in some areas such as
HO-2: While slightly more expensive, HO-2 covers the basic eleven listed with HO-1 but also includes
seventeen additional specific dangers. One of the big things that this type of insurance covers that HO-1 does
not is damage from water or freezing, which is very important to those who live in areas where pipes may
HO-3: While HO-1 and HO-2 cover very specific dangers, HO-3 is more of a blanket policy that instead has
specific exclusions. For example, a fairly standard H-3 policy will not cover floods. If you live in an area
that is prone to flooding you would actually have to purchase separate flood insurance. Your policy will
clearly state what is not covered under the HO-3 policy, but as it covers much more than HO-1 and HO-2 it tends
to be a bit more expensive than these options.
HO-4 and HO-6: These two types of homeowner's policies are similar in the fact that both only cover property
damage itself. Neither one includes coverage of any buildings on the personal property, including your home.
They are meant for people who rent their homes instead of those that own their homes. In the case of a rental,
the homeowner would have coverage for the building, and the renter has coverage for their personal
HO-5: Of all of the policies available, HO-% is the most comprehensive policy you can buy. It is also the
most expensive, on average running about 15% more than an HO-3 policy will cost. The benefits are in the lack
of exclusions. HO-5 will often cover things like heirlooms, jewelry, art, and other collectibles that are
valuable and hard to insure elsewhere. When you bundle all these extra add-ons into one policy you save
significantly more than you would by buying a basic homeowners policy and then buying separate polices for all
of your valuables.