6.2 Homeowners Coverage Forms

All Homeowners forms are package policies that combine property coverage under Section I with liability coverage under Section II. The primary differences among the forms involve the perils covered under Section I and the methods used to settle covered property losses.

Section I provides property coverages similar to those found in Dwelling policies. Section II, which is the same across all Homeowners forms, provides liability coverages comparable to those included in the Personal Liability Supplement:

Coverages

Section I – Property Coverages	Section II – Liability Coverages
Coverage A – Dwelling	Coverage E – Personal Liability
Coverage B – Other Structures	Coverage F – Medical Payments to Others
Coverage C – Personal Property
Coverage D – Loss of Use

The Homeowners series originally included the Basic Form (HO–1). Its property coverage was similar to that provided by a Basic Form Dwelling policy with Extended Coverage and vandalism or malicious mischief (VMM), along with limited theft protection. Most states later discontinued the HO–1 because consumers increasingly preferred broader coverage. Although the HO–1 is generally no longer available, its named perils remain the foundation for the property coverage included in the other Homeowners forms. The standard Homeowners forms currently available are:

Broad Form (HO–2)	Special Form (HO–3)	Contents Broad Form (Tenant's Form) (HO–4)
Comprehensive Form (HO–5)	Unit-Owners Form (HO–6)	Modified Coverage Form (HO–8)

Broad Form (HO–2)

The HO–2 provides named-perils coverage for the dwelling under Coverage A, other structures under Coverage B, and personal property under Coverage C. Coverage applies only when a loss is caused by one of the 16 listed Broad Form perils:

• Fire or lightning
• Windstorm or hail
• Aircraft
• Riot or civil commotion
• Vehicles, except for damage to a fence, driveway, or walkway caused by a vehicle owned or operated by an insured
• Volcanic eruption
• Explosion
• Smoke
• Vandalism or malicious mischief
• Theft
• Falling objects
• Weight of ice, snow, or sleet, excluding damage to awnings, fences, patios, swimming pools, foundations, and similar property
• Accidental discharge or overflow of water or steam from plumbing, heating, air-conditioning, automatic fire-protective sprinkler systems, or household appliances
• Sudden and accidental tearing apart, cracking, burning, or bulging of heating or air-conditioning systems
• Freezing of plumbing, heating, air-conditioning, automatic fire-protective sprinkler systems, or household appliances, provided the insured used reasonable care to maintain heat in the building
• Sudden and accidental damage caused by artificially generated electrical current, excluding damage to tubes, transistors, household-appliance circuitry, and the electrical components of computers or home-entertainment equipment

The Windstorm or Hail peril covers loss to watercraft and their trailers, furnishings, and equipment only when they are located inside a fully enclosed building. If rain, snow, sleet, sand, or dust damages the building's interior or personal property inside the building through an opening, coverage applies only when wind or hail first damages the building and creates the opening.

Example

During a hailstorm, hail breaks a guest-bedroom window, allowing rain to enter and damage the walls and carpeting. Because the hail created the opening through which the rain entered, the resulting interior damage is covered. However, if the window had simply been left open, the rain damage would not be covered because wind or hail did not create the opening.

The Smoke peril covers sudden and accidental smoke damage, including smoke puffback. Puffback may occur when a clogged furnace or oil burner backfires and releases smoke and soot that damage the building or personal property. However, the policy does not cover smoke damage caused by industrial operations or agricultural smudging.

The Theft peril includes several important limitations and exclusions. Coverage does not apply when:

• The theft is committed by an insured.
• The theft occurs in or to a dwelling that is under construction.
• Property is stolen from a portion of the premises rented to someone other than an insured.

Off-premises theft coverage also does not apply to:

• Trailers or campers
• Watercraft and their equipment
• Property located at another residence that is owned by, rented to, or regularly occupied by an insured, unless the property is located in student housing

Example

After a covered fire loss, an insured temporarily moves to another residence while the damaged home is being repaired. If the insured's personal property is stolen from the temporary residence, the loss is covered because the insured is occupying the location only temporarily. However, theft from a secondary residence is not covered under the primary home's policy because a secondary residence generally requires its own Homeowners policy.

Coverage for vandalism or malicious mischief (VMM) and accidental discharge or overflow of water or steam does not apply when the dwelling has been vacant for more than 60 consecutive days immediately before the loss. This vacancy limitation applies to all Homeowners policy forms. However, a dwelling that is under construction is not considered vacant.

The Accidental Discharge or Overflow of Water or Steam peril generally excludes damage caused by mold, fungus, or wet rot. However, coverage may apply when the mold, fungus, or wet rot is concealed within the walls, ceilings, or floors.

Covered losses to the dwelling under Coverage A and other structures under Coverage B are generally settled on a replacement cost basis. Covered losses to personal property under Coverage C are settled based on actual cash value (ACV).

Special Form (HO–3)

Under the Special Form (HO–3), the dwelling under Coverage A and other structures under Coverage B are insured on an open-perils basis. This means the policy covers direct physical loss unless the cause of loss is specifically excluded.

In addition to the exclusions that apply generally under Section I, the HO–3 excludes losses caused by the following:

• Freezing of household appliances or plumbing, heating, air-conditioning, or automatic fire-protective sprinkler systems, unless the insured used reasonable care to maintain heat in the building or shut off the water supply and drained the appliances and systems
• Freezing, thawing, pressure, or weight of water or ice affecting patios, fences, swimming pools, foundations, piers, docks, or retaining walls
• Theft in or to a dwelling under construction, including theft of construction materials and supplies
• Vandalism or malicious mischief, including any resulting loss, when the dwelling has been vacant for more than 60 consecutive days immediately before the loss
• Smoke caused by agricultural smudging or industrial operations
• Mold, fungus, or wet rot: Coverage may be restored when the mold, fungus, or wet rot is hidden from view and results from the accidental discharge or overflow of water or steam from a system or appliance located on the premises. Coverage may also apply when hidden mold, fungus, or wet rot results from an accidental discharge or overflow from an off-premises storm drain or sewer pipe.
• Collapse, except as provided under the Collapse Additional Coverage
• Wear and tear or deterioration
• Mechanical breakdown, latent defect, or inherent vice
• Smog, rust, corrosion, or dry rot
• Pollution, including the discharge, migration, or release of smoke, vapor, fumes, acids, or other chemicals, unless the pollution results from a Broad Form named peril
• Settling, cracking, bulging, or expansion of foundations, walls, floors, pavements, or patios
• Birds, rodents, or insects
• Animals owned or kept by an insured

Unless a specific exclusion applies, the HO–3's open-perils coverage includes loss caused by the accidental discharge or overflow of water or steam from a plumbing, heating, air-conditioning, or automatic fire-protective sprinkler system, or from a household appliance. Coverage also includes the reasonable cost to tear out and replace any portion of the covered building necessary to access and repair the damaged system or appliance.

Under Coverage C, personal property is insured against the same Broad Form named perils provided by the HO–2. However, the Special Form modifies the Vehicles peril by restoring coverage for damage to a fence, driveway, or walkway caused by a vehicle owned or operated by an insured.

As under the Broad Form, covered losses to the dwelling and other structures are settled on a replacement cost basis. Covered losses to personal property are settled based on actual cash value (ACV).

Contents Broad Form (HO–4)

The Contents Broad Form (HO–4) is also known as the Renter's Form or Tenant's Form. Unlike Homeowners forms designed for property owners, the HO–4 does not insure the dwelling or other structures because the insured is a tenant and is generally not responsible for insuring the building. Coverage C protects the tenant's personal property against the Broad Form named perils. Covered personal property losses are settled on an actual cash value (ACV) basis.

An Insurance Story

The tenants renting Sofia and Liam's house maintain HO–4 policies to insure their personal property. When a fire damaged the kitchen, the tenants' covered belongings were insured up to the Coverage C limit shown on each policy's Declarations page.

Comprehensive Form (HO–5)

The Comprehensive Form (HO–5) provides the broadest property coverage available among the standard Homeowners policy forms.

Under the Comprehensive Form (HO–5), the dwelling under Coverage A, other structures under Coverage B, and personal property under Coverage C are insured on an open-perils basis. Covered losses to the dwelling and other structures are settled on a replacement cost basis, while covered losses to personal property are settled on an actual cash value (ACV) basis.

Unit-Owners Form (HO–6)

The Unit-Owners Form (HO–6) is primarily designed for individuals who own condominium or cooperative units. Although the form may also be used for a tenant occupying such a unit, some insurers may restrict eligibility to unit owners.

Like the HO–4, the Unit-Owners Form (HO–6) provides more limited building coverage than forms designed for owners of an entire dwelling. Although the insured may own the condominium or cooperative unit they occupy, they do not own the entire building. Coverage A insures the portions of the unit that the insured owns or is responsible for insuring under the condominium or cooperative association's governing documents. This may include alterations, additions, and improvements made to the unit. Coverage C protects the insured's personal property while it is located anywhere in the world. The HO–6 does not include a separate Coverage B for other structures. However, when the insured owns an eligible structure on the premises, its value may be added to the Coverage A limit.

The dwelling and personal property are insured against the Broad Form named perils. Covered losses to the dwelling are settled on a replacement cost basis, while covered losses to personal property are settled based on actual cash value (ACV).

Modified Form (HO–8)

The Modified Coverage Form (HO–8) is designed for older homes that may not meet the underwriting standards required for other Homeowners forms. It is often appropriate when the cost to replace the home is significantly greater than its market value. For example, an older Victorian home may require an HO–8 policy because rebuilding it with the same materials, craftsmanship, and architectural details could be extremely expensive or impractical. Some original materials may no longer be available, and the high replacement cost could make coverage under another Homeowners form unaffordable.

The Modified Coverage Form (HO–8) provides more affordable protection for older homes by insuring them against the following basic named perils:

• Fire or lightning
• Windstorm or hail
• Riot or civil commotion
• Aircraft
• Vehicles
• Volcanic eruption
• Explosion
• Smoke
• Vandalism or malicious mischief
• Theft

Most of these perils are subject to limitations similar to those under the HO–2. Theft coverage under the HO–8, however, is limited to $1,000 for each covered loss and applies only when the theft occurs at the insured premises. Property stolen away from the premises is not covered.

Like the other Homeowners forms, the HO–8 settles losses to personal property and certain property—such as carpeting and household appliances—on an actual cash value (ACV) basis. Losses to the dwelling and other structures are generally settled according to functional replacement cost. This means the insurer pays the necessary cost to repair or replace the damaged property with materials and construction methods that perform the same function, even when they are less expensive than the original custom, antique, or obsolete materials and methods.

Perils Insured Against

Peril	HO–2	HO–3 Dwelling	HO–3 Personal Property	HO–4	HO–5	HO–6	HO–8
Open Perils		✓*			✓*
Fire or Lightning	✓	#	✓	✓	#	✓	✓
Windstorm or Hail	✓	#	✓	✓	#	✓	✓
Explosion	✓	#	✓	✓	#	✓	✓
Riot or Civil Commotion	✓	#	✓	✓	#	✓	✓
Aircraft	✓	#	✓	✓	#	✓	✓
Vehicles	✓	#	✓	✓	#	✓	✓
Smoke	✓	#	✓	✓	#	✓	✓
VMM	✓	#	✓	✓	#	✓	✓
Theft	✓	#	✓	✓	#	✓	✓
Volcanic Eruption	✓	#	✓	✓	#	✓	✓
Falling Objects	✓	#	✓	✓	#	✓
Weight of Ice, Snow, or Sleet	✓	#	✓	✓	#	✓
Discharge of Water or Steam	✓	#	✓	✓	#	✓
Sudden or Accidental Rupture	✓	#	✓	✓	#	✓
Freezing of Plumbing and Related Systems	✓	#	✓	✓	#	✓
Artificial Electrical Current	✓	#	✓	✓	#	✓

'*' All perils are covered except those specifically excluded. '#' Included within open-perils coverage.