An HO-4 policy, also called renters insurance, protects a renter’s personal property and addresses their personal liability. In other words, it can help pay for:

• Replacing your property when it’s stolen or damaged by a covered incident.
• Legal expenses when someone is injured in your rented space or you damage their property.
• Medical payments when you’re responsible for a visitor’s injury.

Depending on where you buy this policy, it may come with other protections, too. For example, some HO-4 policies also include loss of use coverage. This can help pay for temporary living expenses when a covered incident makes your place uninhabitable.

No matter the type of property that’s rented – home, condo, townhome, or apartment – HO-4 is the type of home insurance policy designed for renters. 

What does an HO-4 policy cover?

HO-4 insurance is a named perils policy, which means the coverage steps in when the incidents listed in the policy damage your stuff.

HO-4 policies usually cover damage caused by these 16 named perils:

1. Fire or lightning
2. Windstorm or hail
3. Explosion
4. Riot or civil commotion
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism
9. Theft
10. Volcanic eruption
11. Falling object
12. Weight of ice, snow, or sleet
13. Accidental water overflow or steam
14. Sudden and accidental tearing apart, cracking, burning, or bulging of certain household systems
15. Freezing
16. Sudden and accidental damage from artificially generated electrical current

So say, for example, someone breaks into your apartment and steals your laptop, camera, and some jewelry. You would draw on your renters insurance to pay for their replacements, up to your policy limits.

Because HO-4 policies are designed primarily to cover personal property, most can cover all types of belonging: clothes, furniture, electronics, etc.

However, if you have rare and extremely valuable belongings (such as antiques, original artwork, or other high-value items), it may make sense to schedule those items. That means your high-value items get their own full-value coverage. That way, if someone steals your platinum diamond ring and a bunch of other things from your home, you won’t burn through your coverage limits with replacing just the valuable items.

The other big benefit of an HO-4 renters insurance policy is its personal liability and medical payments coverage. If you’ve ever had several guests over at your place, chances are you’ve seen the potential for accidents. Perhaps your friend is really enthusiastic dancer and slips and falls in your kitchen while getting down to Lizzo. Maybe you accidentally knock your guest’s phone off your counter and it shatters. Accidents happen all the time, and when they happen in your place, you can be held responsible for the financial aftermath.

Fortunately, personal liability insurance can help pay for incidents like your friend’s medical costs or broken phone.

For minor bodily injuries visitors suffer in your apartment, medical payments coverage may be enough. It can provide a small amount of coverage for immediate medical attention, like an ambulance ride.

What an HO-4 policy doesn’t cover

Unlike many other home insurance policies, HO-4 doesn’t cover your dwelling or other buildings on the premises. That’s because as a renter, you don’t own the structures, and therefore it’s up to your landlord to insure these buildings.

An HO-4 policy also won’t cover damage caused by incidents that aren’t explicitly listed in your policy.

HO-4 policies: Actual cash value vs. replacement cost

Just like you can choose to insure your personal property at its replacement or actual cash value with homeowners insurance, most renters policies let you choose, too. 

Here is the main difference:

• Replacement cost property coverage does not deduct your damaged or stolen item’s depreciation when it pays out a claim. That means your claim payout may be enough to help you replace your lost item with a similar new item.
• Actual cash value coverage does deduct depreciation from your claim payout.

This distinction between the two can make a world of difference when you need to replace damaged or stolen electronics, which depreciate fairly quickly.

Say you bought a nice laptop two years ago for $1,200. Your insurance company will likely use a calculation like this to determine your payout:

R × (E - C) / E = ACV

R = replacement cost of the item
E = expected life (lifespan) of the item
C = current life of the item
ACV = actual cash value

If most laptops have an expected life of 5 years, your actual cash value payout comes to:

$1,200 x (5-2) / 5 = $720

In other words, you’d be paying a fair chunk out of pocket to replace your lost laptop with a new, similar laptop.