HO-8 homeowners insurance is designed for older homes that may not qualify for a standard policy. These homes are typically more than 40 years old and were built with hard-to-replace materials and outdated construction standards. They may even be registered landmarks or have architectural significance. As one of the 13 original US states, New Jersey has a generous share of older homes, including some dating to the 17th century!
Typically, the cost to rebuild these homes far exceeds their market value. Because of such factors, these homes are usually challenging to insure with a standard homeowners policy.
HO-8 insurance is rare. In fact, less than one-half of one percent of homeowners policies in the US are HO-8.
What does an HO-8 insurance policy cover?
An HO-8 insurance policy is similar to a standard homeowners insurance policy in many ways. For example, an HO-8 policy includes these common coverages.
Coverage A: Dwelling
This coverage pays to repair or replace your home if it's damaged or destroyed. Coverage A has a limit, or a maximum amount the insurance company will pay in case of a claim. You choose the limit when you buy the policy; it's typically based on the estimated cost to rebuild the home.
Coverage B: Other structures
This pays to repair or replace structures on your property other than the main dwelling. Such structures may include a pool, detached garage, or fence. The limit for coverage B is usually a percentage of the coverage A limit.
Coverage C: Personal property
This pays to repair or replace damaged items such as your clothing, furniture, appliances, electronics, and other property if damaged or stolen.
The limit for coverage C is typically 50% of your coverage A limit. However, certain items may have a smaller sub-limit. For example, the insurance company may provide only $1,500 of coverage for jewelry, $2,500 for firearms, and $5,000 for electronics. However, if you need higher limits for specific items (a jewelry collection, for instance), you can usually buy additional coverage.
Coverage D: Loss of use
Coverage D helps pay for living expenses if you can’t live in your home due to damage from a covered event. For example, if your insurance company pays to repair your home after a fire, it will also pay your living expenses if the home cannot be occupied during repairs. These expenses might include hotel or home rental costs, restaurant meals, or laundry services.
Note: Some insurance companies refer to Coverage D as additional living expense coverage.
Coverage E: Personal liability
Provides reimbursem*nt if you’re responsible for someone’s injury or property damage. It covers incidents both on and off your property.
Coverage F: Medical payments
Provides limited reimbursem*nt for routine medical bills if people are hurt on your property.
Where an HO-8 policy differs from a standard policy is in the breadth of its protection and how it values your property for claims.
Understanding named perils and actual cash value
A standard homeowners insurance policy provides coverage on an "open peril" basis. This means it'll cover virtually any incident. The few exceptions are listed in the policy contract.
An HO-8 policy, on the other hand, provides coverage only for a list of 10 named perils. These typically include:
- Fire or lightning.
- Windstorm or hail.
- Explosion.
- Riot or civil commotion.
- Damage by aircraft.
- Damage by vehicle.
- Smoke damage.
- Vandalism.
- Theft.
- Volcanic eruption.
Additionally, an HO-8 policy pays claims based on actual cash value. This means that the policy pays to repair or replace an item based on its depreciated value, not its replacement value. The bottom line? Claims payouts are typically much lower with an HO-8 policy than with a standard homeowners policy.
What does an HO-8 insurance policy not cover?
Some of the perils not covered by an HO-8 policy include:
- Falling objects (which may include trees).
- Damage by the weight of ice, sleet, and snow.
- Freezing of home systems.
- Sudden or accidental power surges.
- Water or steam discharge from home systems and appliances.
An HO-8 policy will also typically not cover damage caused by earthquakes or watershed flooding, damage by pests, intentional damage or neglect, or normal wear and tear. Supplemental coverage for earthquakes and flooding may be available through your insurer.
How much does HO-8 insurance cost?
Because of the greater insurance risk associated with older homes, an HO-8 insurance policy typically costs far more than a standard homeowners policy.
The average annual cost of an HO-8 insurance policy is $2,035 for up to $399,999 of coverage. By contrast, the average annual cost of a standard policy for the same coverage is $1,278 per year.
How to get an HO-8 policy
If your insurance company or agent tells you that your home does not qualify for a standard policy because of its age or features, you may need to get an HO-8 policy.
Many insurers offer HO-8 policies in New Jersey. You can check with well-known brands like State Farm and Allstate. An independent insurance agent, who typically represents multiple carriers, can also be an excellent resource when shopping for HO-8 homeowners insurance.
Keep in mind that most homes qualify for standard homeowners insurance. In fact, more than three-quarters of homeowners can purchase a standard (HO-3) policy. So unless your home is particularly rare, you probably don’t need HO-8 insurance.
Frequently asked questions (FAQs)
What is the difference between an HO-3 and an HO-8 insurance policy?
An HO-3 policy, which is the standard homeowners insurance policy type, provides coverage in more situations (perils) than an HO-8 policy. It also typically bases claims payouts on the replacement cost of the property. An HO-8 policy bases claims payouts on actual cash value.
What is the HO-8 homeowners policy also referred to as?
HO-8 is often referred to as the “modified coverage form.”
What does the term “HO-8” mean, anyway?
Insurance is full of jargon, and homeowners insurance is no exception. The term “HO-8” is part of a labeling system used for standardized homeowners insurance policy contracts. HO-1, HO-2, HO-3, and HO-5 policy contracts are for single-family homes. HO-4 is for renters, HO-6 is for condominium owners, and HO-7 is for mobile or manufactured homes.
