HO2 Homeowners Insurance Policy

An HO2 homeowners insurance policy, also known as a broad form, is insurance on the lower end of coverage for your home. Although it provides more coverage than the most basic HO1 policy, it still does not give the policyholder the robust coverage of an HO3 or HO5.

An HO2 policy is a peril policy, although it offers more coverage than the most basic HO1 homeowners insurance. On top of basic peril coverage for events like wind storms and fire, an HO2 policy also covers:

• Personal property
• Medical expenses
• Liabilities

Note: HO2 policies are pretty much obsolete these days and not sold by many insurance carriers. They currently comprise just 5% of single-family homeowners policies nationwide. Most homeowners today opt for more coverage via an HO3 policy.

What is an HO2 Policy Form?

HO2 policies provide less coverage than the standard homeowners policy. They protect the policyholder from natural disasters like fire and rain but not necessarily from all man-made disasters like damage caused by wear and tear and neglect. While HO2 policies don’t offer as much protection as an HO3 policy, they do protect policyholders from some man-made disasters such as pipes bursting, disasters caused by HVAC and home appliances. HO2 policies also cover personal property in the home.

When are HO2 Policies Typically Used?

An HO2 policy is homeowners insurance for people who do not want or are not required to carry full insurance. HO2 policies are typically employed when the homeowner is looking to save money or doesn’t believe they need the protection of a full insurance policy. An HO2 is technically a peril policy but covers more than the basic HO1.

What do HO2 Policies Cover?

HO2 insurance covers your dwelling as well as your personal property. Dwellings include attached structures like garages, porches and decks as well as large appliances attached to your home like a water heater. Personal property includes small appliances and electronics, furniture and clothing. Personal property in attached structures as well as your yard are also covered.

In addition, HO2 policies cover:

• Falling objects
• Weight of snow
• Burst pipes

HO2 policies cover liability and medical payments for anyone who might get injured in your home, attached structures or yard. Liability coverage includes legal fees if someone gets hurt and you’re sued. Medical coverage applies no matter who is at fault and includes hospital bills, rehab costs and even ambulance rides.

What Perils are Covered Under an HO2 Policy?

An HO2 homeowners insurance policy is a basic policy that covers 10 specific perils and more. It offers more coverage than an HO1 policy, but it is still limited coverage. Coverage includes both dwelling and personal property, more specifically:

1. Theft
2. Fire or lightning
3. Explosion
4. Smoke
5. Freezing
6. Vehicles
7. Falling objects
8. Volcanic eruption
9. Windstorm or hail
10. Riot or civil commotion
11. Damage caused by aircraft
12. Vandalism or malicious mischief
13. Weight of ice, snow or sleet
14. Cracking and bulging
15. Artificially generated electrical current

While an HO2 policy includes more peril coverage than an HO1, it does not include as much coverage as an HO3. HO2 policies do not cover wear and tear, smog, rust, corrosion or rot. They also do not cover damage caused by vermin, rodents and insects.

What HO2 Homeowners Insurance Does Not Cover

While it’s important to go over exactly what HO2 homeowners insurance does cover, it’s also important to note exactly what it does not cover. HO2 policies do not cover:

• Neglect: Damages resulting from neglect include failures to make repairs and perform maintenance on your home. If you have an HO2 policy and it’s determined neglect was the cause of the damage, coverage for your claim will be denied.
• Wear and tear: Wear and tear are damages that occur in your home naturally over time. These are not covered in an HO2 policy. Wear and tear includes dirty windows, loose wallpaper and chipped paint.
• Earthquakes: Earthquake damage is not covered in an HO2 policy — or a standard insurance policy either. Earthquake coverage is typically purchased as separate coverage from your standard insurance policy.
• Floods: Just like earthquake coverage, flood insurance must be purchased separately from your standard homeowners policy. Flood insurance is sometimes required in high-risk areas and is offered through the federal government.

Replacement-Cost Coverage and HO2 Policies

One question often posed is: Can you get replacement-cost coverage with your HO2 homeowners policy? The answer is: Yes, you can.

Not to be confused with actual cash value (ACV), replacement-cost value does not take into account any depreciation that might have occurred over time. While the value of your land may increase over time, the price tag on your home itself and the things in it depreciate. While the ACV may go down over time, full replacement-cost coverage means you get your possessions replaced completely, regardless of any depreciating value.

On top of that, what if your home cost $250,000 to build 20 years ago but now costs $500,000 to rebuild that very same house? What are you going to do, build half a house? Replacement-cost coverage guarantees not only that you get the entire house you love back as it was before the disaster — not just a piece of it.

How Much HO2 Coverage do you Need?

Determining exactly how much HO2 insurance coverage you need is a personal decision based on several factors. When determining how much HO2 coverage you need, consider:

• Your home’s replacement value: Replacement value increases over time, so make sure you’re insured for the full replacement value, not just the actual cash value.
• The cost of your personal belongings: Make sure you have an accurate accounting of your personal belongings or you may come up short when looking to replace them if they’re damaged.
• Where you live: If you live in a high-risk area, either for weather damage or theft, make sure you purchase enough coverage for both your dwelling and your personal property.
• Homeowner liability: If you often have guests or if you engage in risky activities that could cause accidental bodily harm to one of your guests, make sure you have enough liability insurance to cover both potential legal and medical costs.

How to Compare and Get an HO2 Insurance Policy

When do you need an HO2 policy? As stated earlier, these policies today are rare. Only about 5% of insurance carriers nationwide even offer them. So how do you know whether an HO2 policy is right for you? You have to know exactly what you need coverage for.

If you’re a first-time homeowner, an HO2 policy probably isn’t for you. If you don’t know exactly what you need coverage for, you’re better off getting full coverage like an HO3 or an HO5 policy. The last thing you want to happen to find out you’re not covered after disaster strikes.

Compare Home Insurance

Still looking for an HO2 homeowners insurance policy? Come compare rates from these companies and find the right policy for you.

HO2 insurance policies can be a good way for homeowners to save money if they know exactly what they’re looking for. Old or seldomly used houses are great candidates for HO2 policies. Structures like a lake or beach house, a cabin in the woods that the homeowner only visits once or twice a year don’t need full coverage because of their limited use.

HO2 coverage isn’t for everyone. HO2 policies are for homeowners who know exactly what they need. For the first-time homeowner, or if you’re not sure exactly what kind of coverage you need, an HO2 policy is probably not best for you. What if something happens that you’re not covered for? HO2 insurance is a named-perils policy, meaning you need to know exactly what you need before buying it.

For more information on homeowners insurance, check out these articles on home insurance from Benzinga.

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