What is an HO-2 Insurance Policy?

Should you insure your home with an HO-2 policy?

HO-2 insurance: policy definitions and details

HO-2 is the technical term for a particular homeowners policy tier. An HO-2 home insurance policy covers only your home and personal property against threats specifically named on the policy's declarations page. An HO-2 policy is often called a named peril policy — the covered threats are specifically listed. Below are the 16 named perils covered by an HO-2 policy.

  • Lightning or fire
  • Hail or windstorm
  • Damage caused by aircraft
  • Explosions
  • Riots or civil disturbances
  • Smoke damage
  • Damage caused by vehicles
  • Theft
  • Vandalism
  • Falling objects
  • Volcanic eruption
  • Damage from the weight of snow, ice, or sleet
  • Water damage from plumbing, heating, or air conditioning overflow
  • Water heater cracking, tearing, and burning
  • Damage from electrical current
  • Frozen pipes

HO-2 policies are uncommon. Most insurance companies will only write an HO-2 if they deem the risk presented by you and your property to be too great for a higher-level policy. An HO-2 policy can leave you and your belongings vulnerable to many unnamed perils. Let’s explore the ins and outs of HO-2 policies.

  1. What does an HO-2 policy cover?
  2. What does an HO-2 policy not cover?
  3. Other homeowners policies to consider

 

What does an HO-2 policy cover?

An HO-2 policy is fairly basic. The physical structure of your home, any other structures — fences or a detached garage — and your personal belongings are only insured against threats specifically named on the policy.

Insurance levelProperty coverage againstContents covered against
HO-2 Broad FormNamed PerilNamed Peril


A named peril is any factor covered by your insurance provider. Each of these is specified in the policy documents.

An HO-2 policy offers reimbursement at actual cost value or replacement cost value. Actual cash value considers depreciation in your claim payout, which means you will get less than you originally paid after a property damage claim.

A replacement cost reimbursement system reimburses you the amount needed to get a new item at its current market value. This is a more comprehensive form of coverage.


Liability coverage

With a typical homeowners insurance policy, liability applies worldwide — except when you’re driving a vehicle. If you are found liable for damage to another person’s property or their bodily injuries, this coverage would provide assistance.

Personal property

This includes your wardrobe, your furniture, your TV, your paintings, and any other personal property. Sub-limits for personal property exist on most insurance policies. Below are standard limitations.

Sub-limitPropertyLimitations
$200Money, Gold, Coins 
$1,500Jewelry, watches, fursTheft-only
$1,500Watercraft, trailersTheft-only
$2,500Firearms 
$2,500Silverware 
$2,500Business propertyOn-premises
$500Business propertyOff-premises
VariesElectronics 

 

Additional living expenses

If your home is deemed unliveable due to a covered loss, this coverage will cover the costs for you to live elsewhere. You are usually limited by duration or a monetary amount. This is sometimes referred to as "loss of use."

Medical payments to others

If a guest is injured on your property, this coverage pays for their medical expenses up to the coverage limits. This may cover the cost of:

  • Medical bills and payments
  • Surgical costs
  • X-ray costs
  • Dental procedures
  • Ambulance and hospital fees
  • Nursing care
  • Prosthetic devices
  • Funeral services


What does an HO-2 policy not cover?

The downside of an HO-2 policy that it leaves uninsured your home or personal belongings on an open peril basis. A named peril policy means only specifically named threats are covered. An open peril policy is a much more comprehensive kind of protection.

Most homeowners in the US insure at least their physical dwelling on an open peril basis.


Additional exclusions

There are some extra HO-2 policy exclusions worth mentioning. Many of these circumstances are excluded from any homeowners insurance policy.

  • Flood
  • Hurricane
  • Mold*
  • Vandalism to vacant dwellings
  • Wear and tear
  • Property damage caused by pets
  • Earthquakes**
  • Enforcement of building codes and similar laws
  • Intentional acts
  • Neglect
  • Government acts

*Some policies allow you to add limited coverage for mold damage.

**You can add earthquake insurance separately. 

 

HO-2 — Homeowners insurance coverage: what to consider

Because it only provides coverage on a named-peril basis, an HO-2 is not very common. Most insurance agents encourage their clients to insure their homes for an HO-3 (Special Form Policy) or an HO-5 (Comprehensive Form Policy).

Occasionally, your insurance provider might require you to insure your home on an HO-2 basis if the risk presented is too high. This can happen in older homes. Outside of this, an HO-2 is not recommended. Your home is an investment and should be insured as such. Consider an HO-3 or an HO-5 policy instead.

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