Homeowner's insurance insures your house, contents and outbuildings for covered losses. Covered losses vary from one policy to another. General standards approved by state legislatures and set by state insurance commissions control the coverage within the boundaries of the state. Three basic insurance policies cover most homes in the U.S.: HO-1, HO-2 and HO-3. More numbers and policies exist, but these are the common ones.
HO-1 provides the least coverage for your home, with fewer perils covered than the other policy forms. The key to HO-1 is that it names the perils covered, with all others excluded. Few insurers sell this policy, reports the New York Insurance Department, because insurers choose to sell policies that are more comprehensive. HO-1 covers fire, lightning and smoke damage, wind storm and hail, burglary and theft, explosion, glass breakage, vehicle or aircraft damage, riot and civil commotion, vandalism and malicious mischief, bodily injury, damage to property of others, civil judgments, medical payments, personal property at home and away and additional living expenses.
The HO-2 form covers all of the perils covered in HO-1 and adds several others. Weight of ice and snow or falling objects, water from plumbing systems, freezing pipes, rupture of water heaters and heating systems and electrical damage to appliances are covered perils in the HO-2 policy. You may not have noticed this coverage did not exist in HO-1 coverage when reviewing that policy, but you would miss it in case of a claim.
The HO-3 homeowner's insurance policy covers everything the insurer does not exclude. This gives you the most insurance, but the cost may be more than the basic coverage of HO-1 or the additional coverage provided by HO-2. HO-3 excludes flood, earthquake, war and nuclear accidents. Home contents have the same exclusions. Some HO-3 policies have other exclusions specified and approved by the state insurance department. Review the policy carefully for exclusions approved in your state.
Some states, such as Texas, have hybrid policies approved by the state insurance commission. In Texas, these include HO-A, HO-B and HO-C. According to the Texas A&M University Real Estate Center, the HO-B policy offers more protection than the HO-3 and includes hail damage, foundation damage and water damage as well as some mold coverage if caused from leaking water. HO-4 is renter's insurance, and HO-5 is a comprehensive homeowner's policy. Contact your state insurance department to determine how your state's homeowner's insurance coverage compares with the standard policies.