What is HO-2 insurance?

Generally, property and casualty insurers offer eight different types of coverage, also called “policy forms,” for homeowners, condo owners and renters. Some are specific to the type of home in which you live. An HO-5 policy, for example, is a robust open peril policy that may be beneficial for high-value homes.  HO-4 policies exist just for renters, while HO-6 policies are for condo owners and HO-7 insurance is designed to protect those who own mobile and manufactured homes.

If you own a traditional home, there are several homeowners policy options. An HO-1 policy offers the fewest levels of protection. On the other end of the spectrum is the HO-5 policy, which gives you the most robust protection of the various coverage forms. However, either policy type typically comes with requirements your home has to meet.

HO-2 policies are a step up from HO-1 policies, but they do not offer as much coverage as an HO-3, which is the most common type of homeowners insurance policy.

Like other home insurance policies, HO-2 insurance is comprised of several standard coverage types, including:

• Dwelling coverage, for the home’s structure, such as the roof, walls, foundation and any attached items, like a deck or garage.
• Other structures coverage, for detached structures like sheds, fences, detached garages and in-ground swimming pools
• Personal property coverage, for your belongings, such as clothes, furniture and electronics
• Liability coverage, for financial protection if you are found at fault for injuries or damage to someone’s belongings that occurs on your property
• Additional living expenses coverage, which provides temporary living coverage in case your home is not liveable due to a covered loss

Named perils vs. open perils

The various components of home insurance policies are covered either on a named perils basis or an open perils basis. In general, named perils will cover only the specifically named perils, such as fire or wind, listed in the policy. An open perils policy protects you against any loss unless the peril is explicitly listed as an exclusion, such as damage caused by flooding or earthquakes.

An HO-2 insurance policy covers homeowners on a named perils basis. This means that your policy will only cover damage to your home, detached structures and personal property caused by a peril that is specifically listed in the policy. If your home is damaged by an occurrence that is not specifically listed, it will likely not be covered.

HO-2 vs. HO-3 policies

Before choosing a homeowners insurance policy, you should understand the difference between how an HO-2 policy and an HO-3 policy covers your home’s structure and personal belongings. Below is a table showing how HO-2 policies and HO-3 policies cover losses.

HO-2 coverage

Now that you know that an HO-2 policy only covers specifically named losses, you may be wondering what those losses are.

What do HO-2 policies cover?

An HO-2 policy typically lists 16 named perils. They are:

• Fire and lightning
• Windstorm and hail
• Explosions
• Riot and civil commotion
• Damage caused by aircraft
• Damage caused by vehicles
• Smoke
• Vandalism
• Theft
• Volcanic eruption
• Falling objects
• Damage caused by the weight of ice, snow or sleet
• Accidental discharge of water or steam from a household appliance or a plumbing, heating, air conditioning or sprinkler system
• Sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, air conditioner or sprinkler system
• Freezing of a household appliance or plumbing, heating, air conditioner or sprinkler system
• Sudden and accidental damage from an artificially generated electrical current

What do HO-2 policies exclude?

Like most home policies, HO-2 insurance typically does not cover flood and earthquake coverage. Other exclusions may include:

• Water damage caused by sewer or drain backups
• Nuclear accidents
• War
• Mudslides and landslides
• Sinkholes
• Mold
• Pests like rodents or termites
• Power failure
• Damage as a result of neglected maintenance

Some homeowners insurance providers offer the ability to add optional coverage types to your policy with riders, also called endorsements. You might be able to add a rider to cover mold damage or sewer backup damage, for example. Coverage for flood and earthquake damage could also be added as endorsements, if offered, or you may need to purchase separate policies for these damages.