When it comes to insurance acronyms and vocabulary, insurance agents have the tendency to forget that unless you look at these contracts every day some of these things may not make much sense to someone looking to purchase coverage on their home. Much like any industry, there are abbreviations to types of policies that represent a specific set of coverage that will be included.
Today we want to tackle the types of homeowners insurance. Too often we see a new home buyer come to us with a requirement from a lender for a specific “HO-3, HO-5, HO-6” policy without knowing exactly what they are being asked to get and why. So let’s take a few minutes to clear this up and provide some understanding of each of these types of policies.
The summaries below are just an overview of each class. To get more specific coverage questions answered. We advise reaching out to an experienced independent agent who would be able to help walk through the specifics and answer any additional questions you have.
What is an HO-3 Policy?
An HO-3 policy is your standard home policy that will mainly cover your dwelling, other structures on your land, and personal property/belongings, and provide liability coverage should someone get hurt on your property. There are many more coverages within HO-3 policies that are either included or available to add on as endorsements, but the ones listed above are the primary protections.
HO-3 policies are for your typical single-family homes, most townhouses, and free-standing properties. HO-3 policies will be your primary and/or secondary residence (as long as it’s not a rental property) with those demographics.
HO-3 policies are the most commonly written home policies in the industry.
What is an HO-5 Policy?
HO-5 Policies are in simple terms an HO-3 policy on steroids. HO-5 policies provide more comprehensive coverage when it comes to protecting your home and belongings.
Typical improvements with HO-5 Policies included improved Replacement Cost on your dwelling, larger base coverages for Jewelry or electronics, and simply cover more types of loss causes than an HO-3 policy.
HO-5’s are fantastic policies. You will pay a little more than you would for an HO-3 but if securing the best coverage for your home is your main concern, this is the policy you would want to go with.
What is an HO-6 Policy?
HO-6 policies are for condo owners, and sometimes townhomes when they are considered “townhouse condos”.
HO-6 policies will still have the primary coverages for liability and your personal property/belongings. The one thing you will see on an HO-6 that is drastically less than an HO-3 or 5 would be the dwelling coverage. The reasoning behind this is that with condos there is usually a Master policy held by the condo owners association that protects the structure itself.
With that being said it is still advised to opt for some building/dwelling coverage as this will help protect any betterments and improvements you complete to your unit specifically.
There are also a number of additional coverages available on an HO-6 that are highly advised to carry such as Loss Assessments, Water Back-Up, etc. and it would be a good idea to talk with your agent about any additional risks.
What is an HO-4 Policy?
An HO-4 is a policy designed for renters that have no ownership interest in where they reside. Since there is a lack of ownership interest, there is no need for any coverages on the structure itself and an HO-4 will not provide coverages for this.
However, HO-4 will provide coverage for your personal property/belongings and provide liability coverage. There are other endorsements you can add for additional protections as well.
Check back frequently as we aim to simplify more insurance industry terms for you to help make your policy documents easier to understand as a whole. The more you understand your policy the better it will work in protecting you, your family, and everything you work so hard for.
If you would like to have a more in-depth conversation about home insurance and optimizing your coverage. Please contact The Staples Agency. We have a team of dedicated home insurance specialists that would be delighted to provide detailed advice on your policies, and also look to save you money!