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An HO2 home insurance policy, also known as broad form, is insurance on the lower end of your home coverage. Although it offers more coverage than the most basic HO1 policy, it still does not give the policyholder the robust coverage of an HO3 or HO5.
An HO2 policy is a risk policy, although it offers more coverage than the most basic HO1 home insurance. In addition to the basic cover against the risks of events such as windstorms and fires, an HO2 policy also covers:
- personal property
- Medical fees
Note: HO2 policies are pretty much obsolete these days and not sold by many insurance companies. They currently make up only 5% of policies for single-family homeowners nationwide. Most homeowners today opt for greater coverage through an HO3 policy.
- HO2 policies are basic forms of home insurance that cover risk plus a few additional items. They are best suited to owners who know exactly what types of insurance coverage they need.
- HO2 policies are for savvy homeowners who don’t want or need the added protection of more coverage.
- HO2 policies are no longer sold by most insurance companies.
What is an HO2 Policy Form?
HO2 policies offer less coverage than the standard homeowner’s policy. They protect the policyholder against natural disasters such as fire and rain, but not necessarily against all man-made disasters such as damage caused by wear and tear and neglect. Although HO2 policies do not offer as much protection as an HO3 policy, they do protect policyholders against certain man-made disasters such as burst pipes, HVAC, and appliance disasters. HO2 policies also cover personal property in the home.
When are HO2 policies typically used?
An HO2 policy is home insurance for people who do not want or are not required to purchase comprehensive insurance. HO2 policies are typically used when the owner is looking to save money or doesn’t feel they need the protection of a comprehensive insurance policy. An HO2 is technically a risk policy but covers more than the basic HO1.
What do HO2 policies cover?
HO2 insurance covers your home as well as your personal property. Dwellings include attached structures like garages, porches, and decks as well as major appliances attached to your home like a water heater. Personal property includes small appliances and electronics, furniture, and clothing. Personal property in adjoining structures as well as your yard is also covered.
In addition, HO2 policies cover:
- falling objects
- snow weight
- burst pipes
HO2 policies cover liability and medical payments for anyone who may be injured in your home, attached structures, or yard. Liability coverage includes legal fees if someone gets hurt and you are sued. Medical coverage applies regardless of who is at fault and includes hospital bills, rehabilitation costs, and even ambulance rides.
What risks are covered by an HO2 policy?
An HO2 home insurance policy is a basic policy that covers 10+ specific perils. It offers more coverage than an HO1 policy, but its coverage is still limited. Coverage includes both housing and personal property, specifically:
- fire or lightning
- falling objects
- volcanic eruption
- Windstorm or hail
- Riot gold civil unrest
- Aircraft damage
- Vandalism or malicious mischief
- Weight of ice, snow, or sleet
- cracking and swelling
- artificially generated electric current
While an HO2 policy includes more risk coverage than an HO1, it does not include as much coverage as an HO3. HO2 policies do not cover normal wear and tear, smog, rust, corrosion, or rot. They also do not cover damage caused by vermin, rodents, and insects.
What HO2 home insurance does not cover
While it’s important to look at exactly what HO2 home insurance covers, it’s also important to note exactly what it doesn’t cover. HO2 policies do not cover:
- Negligence: Damage resulting from negligence includes failure to make repairs and maintain your home. If you have an HO2 policy and it is determined that negligence was the cause of the damage, coverage for your claim will be denied.
- Normal wear and tear: Wear and tear is damage that naturally occurs in your home over time. These are not covered by an HO2 policy. Wear and tear include dirty windows, loose wallpaper, and peeling paint.
- Earthquakes: Damage caused by earthquakes is not covered by an HO2 policy, nor by a standard insurance policy. Earthquake coverage is usually purchased as a separate coverage from your standard insurance policy.
- Floods: Like earthquake coverage, flood insurance must be purchased separately from your standard home policy. Flood insurance is sometimes required in high-risk areas and is offered by the federal government.
Replacement cost coverage and HO2 policies
A frequently asked question is: can you get replacement cost coverage with your HO2 home insurance policy? The answer is: yes, you can.
Not to be confused with actual cash value (ACV), replacement value does not take into account any depreciation that may have occurred over time. Although the value of your land may increase over time, the price of your home itself and its components will depreciate. Although the ACV may decline over time, full replacement cost coverage means you get a full replacement for your belongings, regardless of the depreciation value.
On top of that, what if your house cost $250,000 to build 20 years ago but now costs $500,000 to rebuild that same house? What are you gonna do, build a half house? Replacement cost coverage not only ensures that you get the whole home you love back as it was before the disaster, not just part of it.
What HO2 coverage do you need?
Determining exactly how much HO2 insurance coverage you need is a personal decision based on several factors. When determining the HO2 coverage you need, consider:
- Your home’s replacement value: Replacement value increases over time, so make sure you’re insured for the full replacement value, not just the actual cash value.
- The cost of your personal effects: Make sure you have an accurate accounting of your personal effects or you may miss replacing them if they are damaged.
- Where you live: If you live in a high-risk area, whether for weather damage or theft, make sure you have enough coverage for both your home and your personal belongings.
- Owner’s Liability: If you often have guests over or engage in risky activities that could cause accidental injury to one of your guests, make sure you have sufficient liability insurance to cover both potential legal and medical costs.
How to Compare and Get an HO2 Insurance Policy
When do you need an HO2 policy? As noted earlier, such policies are rare today. Only about 5% of insurance companies nationwide even offer them. So how do you know if an HO2 policy is right for you? You need to know exactly what you need coverage for.
If you’re a first-time homeowner, an HO2 policy probably isn’t for you. If you’re not sure exactly what you need coverage for, you’re better off getting comprehensive coverage like an HO3 or HO5 policy. The last thing you want to happen is to find out you’re not covered after a disaster.
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HO2 policies are not for everyone
HO2 insurance policies can be a great way for owners to save money if they know exactly what they are looking for. Older or rarely used homes are excellent candidates for HO2 policies. Structures like a lake or a beach house, a cabin in the woods that the owner only visits once or twice a year do not need full coverage due to their limited use.
HO2 coverage is not for everyone. HO2 fonts are for owners who know exactly what they need. For the first-time owner, or if you’re not sure what type of coverage you need, and HO2 policy probably isn’t the best for you. What if something happens that you’re not covered for? HO2 insurance is a named risk policy, which means you need to know exactly what you need before you buy it.