The homeowners insurance you need for each type of home

What are the types of home insurance?

There are eight types of homeowners insurance. Insurance companies use what they call homeowners insurance forms, all of which start with the HO designation. You may also see policies that start with a DP; these are dwelling fire policies usually used for rental homes, seasonal homes, and other specialty needs. HO policies are numbered 1-8, while DP policies are numbered 1-3.

These policies vary in the perils they cover and whether they provide actual cash value (ACV) or replacement cost coverage.

Policy code	Type of home covered	What it's used for	Perils covered	Replacement cost or ACV
HO-1, HO-2	Single-family	Used rarely for homes that don't qualify for HO-3	Named for dwelling and contents	ACV
HO-3	Single-family	Most standard single-family homes	All for dwelling, named for contents	Replacement for dwelling, ACV for contents
HO-4	Rental	Covering the personal property of renters	Named for contents	ACV
HO-5	Single-family	High-value homes	All for dwelling and contents	Replacement for dwelling and contents
HO-6	Condominiums	Condos with an HOA policy covering the structure	Named for interior and contents	ACV
HO-7	Manufactured	Manufactured or mobile homes	Named for dwelling and contents	ACV
HO-8	Single-family	Older homes	Named for dwelling and contents	ACV
DP 1-3	Single-family, some multi-unit	Rentals (landlord insurance)	Named for dwelling (sometimes contents)	ACV

Read more on the different types of homeowners insurance.

What are the perils covered by home insurance?

Perils are the sources of damage a home insurance policy will cover, such as fire or hail. A home insurance policy may be either named perils or all (open) perils. An all or open perils policy covers anything not specifically excluded, while a named perils policy covers only what is listed on the policy. Named perils may include:

Fire/lightning
Hail/windstorm*
Explosion
Riots/civil disobedience
Damage from vehicles crashing into property
Smoke
Vandalism
Theft
Volcanic eruption
Objects falling
Weight of ice, snow or sleet
Interior flooding from plumbing, HVAC, or appliances (including fire sprinklers)
Other damage from steam, heating, cooling or fire protection systems
Electrical damage

*Many coastal areas require a separate hail/windstorm policy.

All homeowners insurance policies exclude floods and earthquakes. They also exclude:

Maintenance issues (negligence)
Wear and tear or age
Water and sewer backups
War and terrorism

The most common home insurance policies

The most common home insurance policies are HO-3 (standard homeowners) and HO-6 (condo). These policies cover the majority of homes.

Standard homeowners insurance (HO-3)

An HO-3 policy includes all perils replacement cost coverage for the dwelling, and actual cash value for personal property. It includes liability insurance starting at $100,000 and additional living expenses coverage in case you can't live at home due to a covered loss.

HO-3 policies can be upgraded with a variety of endorsements to add replacement cost coverage for personal property, additional coverage for high-value items, and coverage for exclusions like water and sewer backup.

Homeowners insurance for a condo (HO-6)

Condo home insurance differs from other policies because it usually doesn't cover the structure. It is common for a condo's homeowners association (HOA) to carry a master policy covering the structure and possibly other elements. But the typical master policy may not protect anything inside your unit, and that may be the biggest single difference between homeowners insurance coverage for a condo versus a single-family dwelling.

Condo policies vary, with some covering only personal property and others covering everything from the walls in, including kitchen cabinets and counters, flooring, bathroom fixtures, light fixtures and anything else that's considered building property. It's important to review your HOA policy to find out what it covers and what it doesn't in order to get the right condo policy.

Specialty home insurance policies

Less common home insurance policies for specific types of homes include those for high-value homes, manufactured homes, and older or historic homes.

Homeowners insurance for manufactured homes (HO-7)

Manufactured home insurance is sold either as an HO-7 policy or as a standard home insurance policy that has a manufactured home endorsement added. Coverage on these policies varies, but may be either open or named perils and may also be either actual cash value or replacement cost.

With a manufactured home, it is important to note the "loss settlement" option. This refers to how you are paid in the event of a claim. For example, if your manufactured home burned to the ground, there are three possible ways your claim could be paid:

The actual cash value, which takes into consideration any depreciation
A stated or agreed value which pays what the policy states as the home's worth
A replacement cost which pays "old for new"

Before buying a manufactured home, research coverage availability and premium costs when you compare homeowners insurance quotes. Because coverage varies, you can expect costs to vary as well.

Homeowners insurance for older homes (HO-8)

Homes built before the 1940s are generally considered older homes. While you might think an older home's insurance premiums would be lower, they are usually higher. There are two reasons for this: costs to rebuild and building codes that have changed since the house was built. old home insurance

Older homes often use outdated materials that are hard to replace, and may also have special features that are costly to repair. They are also often well behind the current building codes, and the insurance company will be required to bring the home up to code during any repairs. That means a lot of extra expenditure.

The HO-8 policy is designed to provide coverage for older homes and uses an actual cash value settlement plan, which means depreciation will be taken into account for any repairs.

Many older homes can qualify for a replacement cost policy if they've been sufficiently updated and inspected, which means better coverage.

Homeowners insurance for historic homes

Historic homes are also older homes, but historic home insurance differs in some cases due to the designation of "historic".

Homes designated as historic are usually governed by the historical organization giving the designation. Such societies typically have strict rules regarding changes and maintenance, and many require that only original materials and finishes be used.

Owners of historic homes should look for something like "guaranteed replacement coverage with restoration," which means the insurer will replace the original material with the same thing, if it's available -- called "like-kind replacement." Such policies are more expensive because materials may be hard to find (read: costly) and they usually need to be installed by craftsmen who know how to use centuries-old construction techniques.

Some historic homes can be covered by an HO-8 policy, but others may require specialty insurance, available from several insurance companies like Chubb and AIG.

Many people who buy historic homes upgrade them with things like new plumbing or electrical wiring. While this does mean lower insurance rates in some cases, it's important to remember that the historic nature of the home will still require specialty insurance.

Here's what you need to know about homeowners insurance for historic homes.

Renters insurance (HO-4)

Renters insurance is a policy that covers only the personal property of a tenant and provides no dwelling or building property coverage. It includes liability and loss of use coverage, but doesn't cover any part of the structure. While it's considered a home insurance policy, it does not apply to people who own the home.

Home insurance for a rental property (DP-3)

If you own a house that you rent to others, you need a different type of home insurance. In most cases, you'll buy a DP-3, which provides coverage for the building and can include coverage for loss of rent if you can't rent out the house for a while due to a covered loss. It has less coverage for personal property, and you'll need to endorse liability coverage.

Landlord insurance provides essential protections to property owners, but you should require your tenants to purchase adequate renters insurance to prevent liability claims from landing on your doorstep.

How to save on any type of home insurance

You can save on any type of home insurance by reducing the risk of a claim with safety features, raising your deductible, shopping around, and asking about discounts, including for bundling.

Reduce the risk: Many insurers offer discounts when you add safety features, such as smoke detectors and burglar alarms. Check with your insurer to find out if reducing the risk of storm damage by adding storm shutters or stronger roofing materials can lower your home insurance rates.
Raise your deductible: Most homeowners insurance companies offer different deductible levels. The higher the deductible, the lower your premium.
Shop around: Insurance rates vary widely by company. It's a good idea to compare quotes annually to see whether you could save by switching.
Ask about discounts: Find out which discounts are available and how to qualify.
Bundle your insurance: Most insurance companies offer a discount when you bundle your auto and home policies.
Improve your credit: In most states, better credit leads to better home insurance rates.

Carefully consider these and other ways to save when buying homeowners insurance. And, regardless of cost, make sure you have the correct policy for your needs.