Most lenders will require you to have homeowners insurance in order to qualify for a mortgage. If the home you are looking to buy is older you will most likely be looking at getting an HO8 policy. Here is a rundown of what you need to know and what you can expect from an HO8 policy.
What is an HO8 Policy?
An HO8 policy is most commonly used for older homes where the cost of replacement or significant repair are greater than the market value. Homes older than 40 years, homes with historical value, or homes constructed of hard to replace to materials are all examples of homes that this policy would be the best option for.
An HO8 policy is a named perils policy. Meaning that only perils specifically named in the insurance policy are covered. If anything happens to your home that is not specifically outlined in the 10 perils this policy covers, you will not receive coverage for the damage at all.
What Does an HO8 Policy Cover?
There are 10 basic perils that an HO8 policy covers:
- Fire or Lightening
- Hail or Windstorms
- Riot or Civil Commotion
- Damage from Aircraft
- Damage from Vehicles
- Vandalism or Malicious Mischief
- Volcanic Eruption
Some of these perils have a few limitations in most policies. If the owner of the home and insurance policy causes damage to the home with their vehicle then the damage is not covered. It is also important to note that most HO8 policies only cover theft to about $1,000. Each policy has the ability to vary depending on factors such as location and insurance provider.
What an HO8 Policy Does Not Cover
There are a few very common perils that an HO8 policy does not cover. These are important to keep in mind and consider, so you aren’t caught off guard in the future.
Water Damage. While it is common for insurance policies to not cover flood damage, an HO8 policy also does not cover if water damage occurs from a burst pipe or other sudden accident. However, many policies will add water damage coverage to your policy for an extra fee each month.
Falling Objects. A tree branch falling and crashing into your home would be considered a falling object. Instances such as this will not be covered under an HO8 policy. Sometimes if you can prove that the object fell because of a storm, or peril that the policy does cover, your insurance provider will provide coverage for it.
Earthquake. No standard insurance policies cover earthquake or earth movement of any kind. If you want coverage for that you will have to look for additional insurance.
Difference Between HO3 and HO8
HO3 and HO8 policies are both basic policies. The main difference between them is that an HO3 is an open perils policy whereas an HO8 is a named perils policy. An open perils policy works pretty much in the reverse of a named perils policy. Instead of only covering what is explicitly named, like a named perils policy, it covers everything except what is named.
In a standard HO8 policy an insurance company is allowed to provide you with a home or materials of their choosing, as long as their choice matches the original home close enough. For example if your home is destroyed in a fire, they are required to match the number of bathrooms and bedrooms, but the house does not have to be made out of the same materials as your original house.
Should You Get an HO8 Policy?
You need to evaluate your home and consider its age, building techniques, and building materials. If all or most of these factors are outdated, it is recommended that you get an HO8 policy. In some situations you may not even have an option. If your home is over 40 years old you will likely not qualify for any other policy.
Ask your real estate agent for qualified insurance providers to decide which policy would fit your home best. They will have insight on all the factors that go into choosing an insurance policy, and should be able to guide you to a policy that will work best for you.