Insurers use the term HO-1 to identify a bare-bones policy (discontinued in many states, according to the International Risk Management Institute). It provides hazard insurance covering a list of “named perils,” as well as liability insurance. Liability occurs when an owner is held responsible for an accident on his property, such as a visitor tripping over a loose step and breaking her ankle.
HO-2 covers the owner’s house, other buildings on the property, personal property–furniture, clothes, books and so on–as well as liability insurance. The list of “named perils” is broader than under HO-1. Some policies also pay expenses if the owner has to move into a hotel or apartment while his house is being repaired. The policy covers personal property up to a percentage of the value of the policy, typically 50 to 70 percent.
HO-3 is the policy most commonly used today, the institute states. It offers the same features as HO-2, but protects homes against any damage not specifically excluded; floods, earthquakes and water seepage are standard exemptions. Personal property is only covered for damage from the 16 named perils in the policy.