Lauren Lewthwaite Last Updated On: September 14, 2023

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Looking for HO-2 Home Insurance? Here’s What You Should Know First

HO-2 Insurance

Navigating home insurance can be overwhelming enough as it is without throwing insurance jargon into the mix. But home insurance coverage has different levels to support different insurance needs, including HO-2 insurance and more. 

Keep reading and we’ll de-mystify the types of home insurance available to you, so you can shop for insurance with confidence. 

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What Is HO-2 Insurance?

HO-2 insurance is a form of home insurance. Most people don’t actually realize that there are multiple forms of home insurance policies, but this means that you have more options than you think when it comes to protecting your biggest asset. 

Keep reading to find out what an HO-2 policy covers, what it costs, and what your other options might be.

Types of Home Insurance Policies

Before we get into what an HO-2 policy covers, it helps to compare other home insurance policies. 

Here’s a quick breakdown of the different policy types:

  • HO-1 Insurance: The most basic form of home insurance that covers ten named perils and nothing more. The only perils you’re covered for include:
    • Fire/smoke
    • Explosions
    • Lightning
    • Hail/wind
    • Theft
    • Vandalism
    • Damage from vehicles
    • Damage from aircraft
    • Riots
    • Volcanic eruption
  • HO-2 Insurance: This is more of a broad form insurance policy and it covers 16 named perils. It covers the above ten plus these six:
    • Weight of snow, sleet, ice
    • Water overflow damage
    • Water heater cracking, tearing, burning
    • Damage from electrical current
    • Pipes freezing
    • Falling objects
  • HO-3 Insurance: This insurance policy covers your home on an open peril basis, meaning that you’re covered from all perils except those specifically excluded in your policy.
  • HO-4 Insurance: This is renters insurance.
  • HO-5 Insurance: A comprehensive open-peril policy for high value homes (eg. dwelling coverage over $1 million).
  • HO-6 Insurance: This is condo insurance.
  • HO-7 Insurance: This is insurance for mobile or manufactured homes.

When shopping for home insurance, keep in mind there’s no cookie cutter policy that works for everyone. HO-2 insurance is one option for you, and we’ll explore how it works next. 

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How Does HO-2 Insurance Work?

HO-2 insurance is a popular choice for many homeowners. It walks the line between the lower coverage for HO-1 and the pricier costs of HO-3 insurance. We know that HO-2 insurance covers 16 named perils (see above); this means that only damage from these listed perils are covered. Anything else wouldn’t be covered and you would be stuck paying out of pocket to repair/replace it. This applies to the structure of your home, your property, and your belongings. 

What Does HO-2 Insurance Cover?

HO-2 insurance includes the standard buckets of coverage in homeowners insurance. These include:

  • Liability: This covers you if someone is injured while on your property or if you cause damage to their belongings on your property. It includes their medical costs and damages if they sue you.
  • Dwelling: This covers the structure of your home (walls, roof, foundation) and any other structures on your property, like a shed or deck.
  • Property: This covers your personal belongings, like clothing, electronics, furniture, jewelry, and more.
  • Additional Living Expenses: If your home is made unlivable by a named peril, this covers your living costs to find temporary lodging, food, and transportation while your home is being repaired.

For your dwelling and property, your policy will specify if you’re covered on a named or open peril basis. It’ll also specify whether your belongings are covered under actual cost value or replacement cost value—more on that next.

Replacement Cost Value vs. Actual Cost Value

Your home insurance policy will designate whether your belongings are covered under replacement cost value or actual cost value. The difference matters:

  • Replacement Cost Value: The cost to replace an item with a new one at current market value.
  • Actual Cash Value: Reimburses you the cash value of the item, including depreciation.

With HO-2 insurance, your policy could have either option. Of course, the replacement cost value is more comprehensive and helpful for a homeowner, but it can come with higher premiums. 

HO-2 Policy Exclusions

HO-2 insurance only covers 16 named perils, but it’s helpful to know specifically what your policy doesn’t include, because the answer might surprise you. 

HO-2 insurance doesn’t include flood or earthquake damage. These are commonly thought to be included  in home insurance, so it’s important to note that they’re not covered by default. If you want coverage from these perils, you usually need to purchase a rider for these on top of your home insurance policy. 

Here are some other exclusions from HO-2 coverage:

  • Nuclear damage
  • War
  • Mudslides/landslides
  • Sinkholes
  • Mold
  • Pests/rodents
  • Neglect
  • Power failure (more details here)

General upkeep on your home is important because even a named peril could be denied in a claim if the insurer finds that neglect was the root cause. For example: your home is covered for the weight of snow, but if the roof caves in from snow, you may not be covered if your roof was old and needed replacing. 

How Much Does HO-2 Coverage Cost?

Your home insurance policy cost will depend on a number of factors. These include:

  • Where you live
  • The age of your home 
  • Construction materials for your home
  • Cost to rebuild
  • Condition of your roof 
  • Your claims history 
  • The size of your home
  • Risky items like a swimming pool, trampoline, wood stove

And more. In fact, even how close you live to a fire hall or fire hydrant can affect your premiums. The amount of coverage you choose and your deductible will also impact your cost. 

All that being said, there are average HO-2 policy costs that can help give you an idea of what you’ll pay. The average cost of HO-2 home insurance is $1,131 on average. You can compare this with the average cost of HO-3 insurance, which is $1,899 on average. 

Your individual cost can vary though, so it’s important to gather quotes and compare coverage before making up your home.  

How to Find Affordable HO-2 Home Insurance

If HO-2 insurance is what you can afford, that’s great. But you can also find savings on home insurance, regardless of policy type, which can help you put some money back in your pocket for a rainy day (or even bump up your coverage).

Here’s how to save on home insurance:

  • Look for Discounts: Most insurers offer discounts on your home insurance, which can start to add up. When getting quotes, be sure to check for any discounts you might be eligible for, such as:
    • Multi-Policy Bundle
    • Associations/Group Discounts
    • Safety Devices
    • New Home
    • Renovated Home
    • Claims Free
    • And more
  • Increase Your Deductible: By increasing your deductible (the amount you have to pay before a claim goes through), you can save on your monthly/annual premiums.
  • Compare Quotes: Always be sure to do your research and compare quotes before choosing a policy, so that you’re confident you’re getting the best deal. And when it comes time to renew your policy, it never hurts to shop around before renewing, so that you’re still getting the best deal (more info here).
  • Maintain Your Home: General upkeep will not only help ensure your claims aren’t denied for neglect, but will also help prevent damage from happening in the first place. While you’re at it, consider adding in security features like alarms, smoke detectors, a backwater valve, and more to lower your insurance. You might also want to reconsider high-risk items like a pool or trampoline, especially since they cause an instant spike in your premiums.

No matter which type of home insurance you choose, whether it’s HO-2, HO-3 or higher, you can find savings on your premiums to help put a little more money back in your pocket.

Which Type of Homeowners Insurance Should I Get?

You have options for your home insurance coverage, which can be good news and bad news. It’s great to have options for your needs and budget, but choosing which policy you truly need can be overwhelming. 

It might be helpful to know that HO-3 insurance is the most common form of home insurance. After all, an open-peril policy is much more comprehensive and protective versus a named-peril policy. 

But HO-2 insurance is still a great option for coverage, especially if it’s what fits in your budget. As long as you understand the risks of only being covered for named perils, HO-2 insurance can be right for you. 

Tip: Deciding what type of home insurance you need can be confusing, let alone figuring out what other types of insurance you might need. If you’re new to the U.S., grab our free insurance handbook for new immigrants here to better understand your options. 

We’ve got you covered. 

HO-2 Home Insurance: The Bottom Line

HO-2 insurance can be an affordable option, but it’s not the right option for everyone. If you’re looking for more coverage, HO-3 insurance will give you more peace of mind with open perils. But if you’re okay with a little more risk in your life and want to save money, HO-3 home insurance could be adequate for you.

No matter which route you go, having home insurance is key. And equally important is understanding what you are and aren’t covered for, so you can be more prepared. 

Great home insurance is just a few clicks away. 

Lauren Lewthwaite Lauren Lewthwaite has been freelance writing for almost five years writing content that ranges from health to insurance and everything in between. Lauren is also a trained translator in French and English and is a dog-mom to an adorable Australian Shepherd.

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