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What Is an HO-2 Insurance Policy? Broad Coverage Explained

An HO-2 insurance policy is a named-peril policy that protects your home against 16 perils. Also called "broad form coverage," an HO-2 policy offers a wider range of coverage, including personal property and personal liability, than an HO-1 policy. However, an HO-2 policy does not provide the level of protection a standard HO-3 policy does.

An HO-2 policy offers a wider range of coverage, including personal property and personal liability, than an HO-1 policy.

Fewer insurance companies now offer HO-2 policies for purchase. Today's homeowners commonly opt for an HO-3 policy with its more comprehensive coverage.

Table of Contents:

What Is an HO-2 Policy? 

An HO-2 policy (commonly called a broad form policy) is a type of home insurance that exceeds the basic coverage of an HO-1 policy but offers less protection than the more commonly purchased HO-3 policy. 

HO-2 policies are named-peril policies, offering dwelling coverage at replacement cost value or actual cash value against all 16 named perils. Loss of use and personal liability is included, and medical payments coverage is also available to be purchased separately. 

An HO-2 policy is one of eight types of homeowners policies — each has its own coverage levels and target customer:

Policy 

Description

HO-1

Named-peril policy with the most limited coverage (protects against 10 out of 16 perils, no liability, no personal property).

HO-2

Named-peril policy with more coverage than an HO-1 policy (all 16 named perils plus liability and personal property)

HO-3

Open-peril policy with more coverage than an HO-2 policy. 

HO-4

Insurance policy for renters

HO-5

Most comprehensive form of insurance coverage. Includes open-peril policy for personal property. 

HO-6

Insurance policy for condo owners.

HO-7

Insurance policy for mobile homeowners.

HO-8

Insurance policy for older properties.

HO-2 Policies: What's Covered and Not Covered 

An HO-2 policy offers coverage against 16 types of perils:

  • Fire or lightning

  • Theft

  • Windstorm or hail

  • Volcanic eruptions

  • Explosion

  • Falling objects

  • Riot or civil commotion damage

  • Weight of ice, sleet, snow

  • Damage by aircraft

  • Freezing of home systems

  • Damage by vehicle

  • Sudden/accidental power surges

  • Smoke

  • Freezing of home systems

  • Vandalism or malicious mischief

  • Sudden/accidental power surges

  • Sudden/accidental tearing, cracking, burning, or bulging of home systems

  • Water/steam discharge from home systems and appliances

In addition to coverage for your dwelling and other physical structures (e.g., fences, sheds), an HO-2 policy also provides the following protections:

  • Personal liability: Pays for legal costs that arise when somebody sues you for property damages or injuries incurred while on your property.

  • Loss-of-use: Also called additional living expenses coverage, this coverage kicks in to pay for living expenses, including hotel bills, when your home is inaccessible (e.g., your home is undergoing repairs after a windstorm).

  • Personal property: Pays to repair or replace your possessions if they are damaged or stolen.

What's Not Covered in an HO-2 Policy?

Since an HO-2 policy is a named-peril policy you're covered only for specifically named perils on your policy. Open-peril policies, like the HO-3 policy, offer coverage for all events except those marked for exclusion. The coverage is typically more comprehensive than a named-peril policy.

Since an HO-2 policy is a named-peril policy you’re covered only for specifically named perils on your policy.

Some events and natural disasters that insurance companies would NOT cover under a standard HO-2 policy include:

  • Damages to vacant properties

  • Earthquakes

  • Flood

  • Mold

  • Neglect

  • Pet damage

  • Wear and tear

  • Upgrades of building codes

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HO-2 Policy vs. HO-3 Policy

HO-2 policies and HO-3 policies may have the same types of coverage but each functions differently. The first is a named-peril policy and the latter is an open-peril policy. This chart outlines the differences and similarities between the two insurance policies:

HO-2

HO-3

Named peril-policy provides coverage for ONLY perils listed on the policy.

Open-peril policy provides coverage for all perils EXCEPT for those specifically excluded on the policy.

Example: Robert's HO-2 policy protects against 16 perils. His insurance provider would pay for damages caused by lightning (a named peril) but NOT mold (not named).

Example: Sarah's HO-3 policy protects against all perils EXCEPT those which are excluded. Her insurance provider would pay only $1,500 for a stolen diamond ring but NOT the remaining $18,500 because she didn't buy a rider for valuables.

Named peril policy on personal belongings (both)

Additional living expenses coverage (both)

Personal liability coverage (both)

Medical expenses coverage (both; optional)

Is an HO-2 Policy Enough for My Home?

If you're financing your home through a mortgage lender, an HO-2 policy would likely satisfy the requirements for proof of insurance since you have coverage for 16 perils but some mortgage lenders may require an HO-3 policy.

An HO-2 policy would likely satisfy the requirements for a mortgage loan.

If you own your home free and clear, then the question boils down to your comfort level in taking a potentially expensive risk and where you live. If you live in a generally low-risk area, then the savings of reduced coverage may be worth it. 

HO-2 Policy FAQs

How many perils does the HO-2 form insure against?

An HO-2 policy protects against 16 perils, which include fire or lightning; windstorm or hail; explosion; riots; damage from aircraft; damage from vehicles; smoke; vandalism; theft; falling objects; weight of ice, snow or sleet; overflow of water or steam; sudden warping of home systems; freezing of warp systems; sudden and accidental damage from power surges and volcanic eruptions.

What is the difference between an HO-2 and an HO-3 policy?

Both insurance policies share many of the same coverages but an HO-2 policy is a named-peril policy (only listed perils are protected), while an HO-3 policy is an open-peril policy (all perils except listed events are protected). Homeowners typically buy more coverage with HO-3 insurance but will likely pay higher prices for the added protection. Both HO-2 and HO-3 policies cover personal property.

What is a broad form 2?

Broad form 2, or broad form coverage, is another term referring to an HO-2 insurance policy.

How much does an HO-2 policy cost?

HO-2 policies cost, on average, $1,131 annually, in 2018 according to the National Association of Insurance Commissioners (NAIC).

Which type of homeowners insurance should I get? 

HO-3 policies are the most popular policy sold because they protect against 16 perils plus personal belongings and personal liability. This type of open-peril policy also offers more coverage than an HO-2 policy. Getting an HO-3 policy is generally a good idea and will save you money if you do experience a loss. For even more coverage, you can also take out an insurance rider or separate policy for specific perils, like flood or earthquake insurance, or even upgrade to the much more comprehensive HO-5 policy.

Get the Right Homeowners Insurance Coverage for Your Budget

An HO-2 policy covers more perils than an HO-1 policy but it still lacks some coverage. The most common type of homeowners insurance is an HO-3 policy. If you want even greater coverage, an HO-5 policy is the most comprehensive type of policy you can buy. 

No matter what type of policy you need, SmartFinancial can help you find the best prices from the top insurance companies. Comparing policies from 200+ insurance partners, they're bound to find you the right coverage. Just enter your zip code below and answer a few questions for a free quote.

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