What homeowners need to know about the HO-8 policy

The HO-8 policy is usually reserved for owner-occupied homes with an actual cash value (ACV) that’s less than what it might cost to replace the damaged structure. This means that a claim payout for properties insured on an HO-8 form usually subtract for depreciation, deterioration, and obsolescence.

The actual cash value amount is usually much lower than the replacement cost (RCV), so your insurance company pays less after a loss. That keeps the overall cost of the HO-8 policy down.

In addition to insuring the structure of the home, an HO-8 policy also offers other important coverages for:

• Personal liability

• Other structures 

• Additional living expenses and loss of use 

• Third-party medical expenses

• Personal property

Who needs an HO-8 coverage

Insurers typically use HO-8 forms to insure:

• Older homes, especially ones more than 40 years old.

• Registered landmarks.

• Architecturally significant homes.

• Homes constructed of hard-to-replace materials.

What does an HO-8 policy cover?

The HO-8 form is a named perils policy. Like an HO-1, an HO-8 only covers a loss if it’s caused by one of the 10 events listed in the policy. Depending on the policy form, the perils that are typically covered are:

• Fire or lightning

• Windstorm or hail

• Explosion

• Riot or civil commotion

• Damage from aircrafts

• Damage from vehicles

• Sudden and accidental damage from smoke

• Vandalism or malicious mischief

• Theft

• Volcanic eruptions

States can also require some additional coverage. For instance, Florida state law mandates that all homeowners insurance cover catastrophic ground collapse. In general, the 10 perils listed above represent some of the most common claims a homeowner may face. 

But an HO-8 policy can’t cover every risk. Most don’t cover several  perils that can cause large losses, such as:  

• Water damage. Few home insurance policies cover water damage from flood, but HO-8 also excludes damage caused by a burst pipe or other sudden and accidental events. For that, you may want an HO-3 policy.

• Earthquake. There are no standard home insurance policies that cover earth movement of any kind. Typically, homeowners look for additional coverage specially designed for earthquakes.

• Falling objects. HO-8 does not provide coverage for falling objects, like a tree branch crashing through your roof, unless you can prove the object fell because of one of the 10 covered perils.

Most HO-8 policies also exclude coverage for damage caused by:

• Ordinance or law

• Civil authority

• Nuclear hazard

• War and military action

• Power failure

• Bacteria, fungi, wet rot, or dry rot

• Byproducts of a growing, processing, or production operation involving a controlled substance

• Diminution of value

When considering an HO-8 policy, be sure to tell your agent about your home and the risks you face. They can help you choose the type of home insurance that fits you.

HO-8 vs HO-3: What's the difference? 

HO-8 and HO-3 policies differ in subtle ways, namely in what perils are covered and how losses are settled. 

At a glance: HO-8 vs HO-3

Insurance options for older homes

HO-8 policies are typically used in lieu of HO-3 policies for older homes that aren’t eligible for a standard policy. If your home is historic or very costly to replace, the modified form HO-8 is a great option.

If your home has unique features that are hard to replace, like artisan carvings or plaster moldings, it may be equally hard to insure because most insurance companies won’t pay what it costs to replace these features to their previous condition if you have a loss. With the HO-8, you can cover your home and belongings.