If you're a homeowner, you want your property to be protected. You may know you have several options when it comes to homeowners insurance, and one of the most basic forms available is known as an HO1 policy. However, this type of home insurance isn't right for everyone.
Luckily, a local independent insurance agent can get you set up with the type of homeowners insurance that makes the most sense for you. They'll help you determine if HO1 insurance coverage is the policy that best meets your needs. But first, here's more about HO1 home insurance and when you might want it.
What Is an HO1 Policy?
HO-1 homeowners insurance, also written as HO1 insurance, is the most basic homeowners insurance policy available. HO1 home insurance covers your owner-occupied, stand-alone home against 10 disasters, also known as listed perils, that can harm your property.
This type of home insurance only provides dwelling coverage and other structures coverage. It doesn't provide liability coverage, contents coverage, or additional living expenses coverage.
You can’t buy an HO1 policy for a property you rent. An HO1 is also not meant for other types of property, such as condos or townhomes, that has different rules and coverage needs. Your local independent insurance agent can help you determine if an HO1 policy will work for your needs.
What Does HO1 Insurance Cover?
An HO1 policy is also often referred to as HO1 named peril insurance. This means it will only provide reimbursement for disasters that are specifically listed on your policy if they damage or destroy your home's structure or that of additional structures you've insured.
Named peril home insurance can cover claims related to the following perils:
- Fire and lightning
- Windstorms and hail
- Explosions
- Smoke
- Vandalism and malicious mischief
- Theft (usually up to $1,000)
- Volcanic eruptions
- Vehicle damage (unless caused by the homeowner)
- Aircraft damage
- Riots and civil commotion
What is covered under an HO1 policy is highly limited to these listed perils. If you try to file a claim for another type of disaster not listed above, your home insurance company will likely deny it.
The Types of Coverage Included in HO-1 Insurance
An HO-1 home insurance policy only provides the following types of coverage for your home:
- Dwelling coverage: This protects your home's structure, including the walls, roof, foundation, etc, against the perils listed in your policy.
- Additional structures coverage: This protects other structures on your property, such as storage sheds and fences, against the perils listed in your policy.
Your independent insurance agent can further explain how your HO1 coverage protects your home's structure and additional structures you've insured.
HO1 Can Be Actual Cash Value or Replacement Cost
Many people ask, "Is HO1 actual cash value coverage?" It's helpful to know if your home policy provides actual cash value (ACV) or replacement cost coverage before you ever try to file a claim.
- Actual cash value: These home policies pay to repair or replace the home minus the cost of depreciation, or wear and tear.
- Replacement cost: These home policies pay to fix or rebuild your home without factoring in the cost of depreciation.
An HO1 plan is usually a replacement cost policy. However, an independent insurance agent can help you double-check if your HO1 is a replacement cost or actual cash value policy.
What's Not Covered by HO-1 Insurance?
There are several common perils that an HO1 policy will not cover. These include:
- Water damage
- Falling objects
- Earthquake damage
- Flood damage
- Personal liability
- Damage, theft, or destruction of your personal property (i.e., contents)
- Additional living expenses (i.e., loss of use)
In general, the basic HO1 home insurance will not safeguard your personal possessions like furniture, clothing, electronics, and jewelry. You’ll need to get a separate insurance plan for your belongings.
Because HO-1 policies offer highly limited protection, many insurance companies have discontinued this type of coverage. Additionally, many mortgage lenders require applicants to get more comprehensive HO-3 policies before they're approved for a home loan.
The Difference Between HO1 and HO3 Insurance
HO-3 home insurance policies are the most common type of homeowners coverage. They include much broader protection than HO-1 policies. Check the table below for the key differences in these policies.
HO1 vs. HO3 Policies
| HO-1 Insurance: | HO-3 Insurance: |
|---|---|
| Dwelling and other structures coverage only | Dwelling, contents, liability, other structures, and additional living expenses coverage |
| Does not protect personal belongings | Includes protection for personal belongings |
| Named perils coverage | Open-perils coverage for the dwelling, named perils coverage for contents |
| Usually replacement cost coverage | Usually replacement cost coverage for the dwelling and other structures, but ACV for personal property |
| Does not cover loss of use | Includes loss of use coverage |
| Does not cover liability | Includes liability coverage for third-party property damage and bodily injury |
An Independent Insurance Agent Can Help You Find HO-1 and Other Types of Home Insurance
When you're ready to get the right coverage for your home, no one's better equipped to help than an independent insurance agent. These agents have access to multiple insurance companies, so they're free to shop and compare policies and rates for you.
Ultimately, they'll provide you with quotes for only the best HO-1 and other types of home insurance. And down the road, your agent can help you file home insurance claims and update your policy as necessary.
Sources
https://www.bankrate.com/insurance/homeowners-insurance/ho1/
https://www.bankrate.com/insurance/homeowners-insurance/ho3/
