An HO-8 policy, also called a modified coverage form, is a type of homeowners insurance that is primarily designed for older homes or historic residences that otherwise wouldn’t qualify for coverage under a standard home insurance policy.
Insurance companies generally consider older homes to be higher risk since many are constructed with ornate features, outdated electrical work (like aluminum wiring) and building materials that are no longer common or up to code.
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What is an HO-8 policy?
An HO-8 policy is a type of homeowners insurance that is designed to cover older homes with outdated construction or custom features that may not qualify for standard coverage.
HO-8 policies are ideal if you’re intent on not making drastic renovations or upgrades to your home. You don’t need to pass a four-point inspection or make upgrades to your electrical wiring or plumbing to qualify for an HO-8 policy — you’d typically need to do this to qualify for standard coverage.
That said, HO-8 insurance doesn’t cover as many hazards as a standard policy, and you’re only paid out for the actual cash value of your home and belongings, meaning depreciation is factored into your payout after a covered loss.
What does HO-8 insurance cover?
An HO-8 policy contains the same types of coverage as a standard homeowners insurance policy, but it only covers your home and personal belongings at their actual cash value in the event of a loss.
That means if your home is damaged by a fire, depreciation would be factored into your claim reimbursem*nt. If you had a standard homeowners policy in that scenario, you’d be paid out at the home’s replacement cost value.
Below are the coverages that makeup an HO-8 policy:
Dwelling coverage. Covers damage to the structure of your home, including your roof, built-in systems and appliances, and any attached structures.
Other structures coverage. Covers detached structures on your property, like a shed or garage.
Personal property coverage. Covers the cost of damaged or stolen personal property.
Loss of use coverage. Covers the cost of additional living expenses like temporary housing and restaurant meals while your home is being repaired or rebuilt after a covered loss.
Personal liability coverage. Covers legal and medical fees if you’re found liable for bodily injury or property damage.
Medical payments coverage. Covers a guest’s minor medical expenses if they are hurt in your home, regardless of who was at fault.
Each coverage has a limit of liability, which is the maximum amount an insurance company will pay out for a covered loss. Certain types of personal property, like jewelry, will have their own sublimits.
You may be able to upgrade your HO-8 policy to functional replacement cost
Functional replacement cost (FRC) may be an option when insuring your home with an HO-8 policy. FRC policies don’t factor in depreciation like actual cash value policies, instead you’d receive a claim payout to repair your home, but with less expensive building materials. That means in the event of a loss, your home would be rebuilt with cheaper, more modern construction materials, like faux wood floors or drywall, rather than the same materials used when it was originally constructed.
What perils are covered by HO-8 insurance?
HO-8 policies also don’t cover as many causes of damage or loss as a typical home insurance policy. Under an HO-8 policy, your home and belongings are only protected against the following 10 named perils.
Fire or lightning
Windstorm or hail
Explosion
Riot or civil commotion
Damage by aircraft
Damage by vehicle (not your own)
Smoke damage
Vandalism
Theft
Volcanic eruption
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Who needs an HO-8 policy?
HO-8 policies are designed to cover homes with outdated features or rare building materials. If your home falls into one of the below categories, you may need an HO-8 policy instead of standard homeowners insurance (also known as an HO-3 policy).
An older home, typically over 40 or 50 years-old
Historically landmarked home
A home designed with hard to find materials, like rare or outdated wiring, plumbing, or roofing
What does an HO-8 policy not cover?
An HO-8 policy will only cover the 10 named perils mentioned above. That means unlike most home insurance policies, coverage for damage from weight of snow or ice or falling objects is not included in an HO-8 form.
There will also be a section of an HO-8 policy that outlines specific exclusions, or risks that are not covered, such as:
Damage by earthquake and earth movement
Types of water damage, including flooding
Intentional loss
War
Neglect or maintenance issues
Wear and tear over time
Power failure
Pest infestations or mold
You may be able to add coverage to your policy
You can typically add additional coverage, or endorsem*nts, to your HO-8 policy for protection against some of the excluded risks mentioned above. For example, you may be able to add water backup coverage to your HO-8 policy to protect your home against sewer or sump pump backups. You can also buy a standalone flood or earthquake insurance if you live in an area at high-risk of flooding or earthquakes.
How much does an HO-8 insurance policy cost?
The average cost of HO-8 insurance is $2,035 per year for $300,000 to $399,999 in dwelling coverage, according to the National Association of Insurance Commissioners. In comparison, an HO-3 policy — the most common type of homeowners insurance — costs $1,278 per year for the same amount of coverage, according to the NAIC. [1]
Older homes are typically more expensive to insure because they’re often built with outdated, rare building materials that are more expensive now. There's also a chance the roof, plumbing, or wiring isn't up to code, either. Since the replacement cost value of an older home is so high, you're likely going to have higher insurance rates than you would with a more modern home.
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What is the difference between an HO-3 and HO-8 policy?
Both HO-3 and HO-8 policies contain the same types of coverage for the structure of your home, personal property, and liability, but differ in terms of what you’re covered against and how you’re paid out for claims. HO-8 policies also don’t require a four-point inspection, whereas HO-3 policies sometimes can.
HO-3
Most common type of homeowners insurance coverage
Pays out actual cash value for personal property coverage claims
Pays out replacement cost for dwelling coverage claims
Open peril policy, which means you’re covered from most types of loss unless explicitly excluded
HO-8
Designed for older or historic homes that don’t qualify for standard coverage
Pays out actual cash value for both dwelling and personal property coverage claims
Named peril policies, which means you’re only protected against the 10 named perils listed in the policy
