HO-1 – Basic Form Homeowners Insurance: A Comprehensive Guide

Introduction

Homeowners insurance is a crucial aspect of homeownership, offering protection against various risks and potential losses. Among the different types of homeowners insurance policies, the HO-1 policy, also known as the Basic Form, provides a limited and fundamental level of coverage. Though not as common today due to its restricted scope, it is still important to understand its features, coverage details, exclusions, and suitability for homeowners. This guide explores everything you need to know about HO-1 insurance, helping you determine whether it aligns with your home protection needs.

Understanding HO-1 – Basic Form Homeowners Insurance

HO-1 is the most fundamental type of homeowners insurance policy. It offers limited coverage compared to other policies, such as HO-2 (Broad Form) and HO-3 (Special Form). The HO-1 policy covers only specific perils that are explicitly listed in the policy, making it a named-perils policy. If a peril is not listed, it is not covered.

Perils Covered Under HO-1

HO-1 policies typically cover losses caused by the following named perils:

1. Fire or lightning
2. Windstorm or hail
3. Explosion
4. Riot or civil commotion
5. Aircraft damage
6. Vehicle damage
7. Smoke
8. Vandalism or malicious mischief
9. Theft
10. Volcanic eruption

Since HO-1 coverage is limited to these specific perils, it does not offer comprehensive protection against all possible risks homeowners may face.

Exclusions in HO-1 Policies One of the major drawbacks of HO-1 insurance is its numerous exclusions. Some common exclusions include:

1. Water Damage – Flooding, sewer backup, and water leaks are not covered.
2. Earthquakes – Damage caused by earthquakes, landslides, or sinkholes is excluded.
3. Falling Objects – Unlike broader policies, HO-1 does not cover damage from falling trees or objects.
4. Personal Liability Protection – Many HO-1 policies do not include personal liability coverage, leaving homeowners financially exposed to lawsuits.
5. Medical Payments to Others – Medical expenses for injuries that occur on the insured property are not included.
6. Additional Living Expenses (ALE) – If a home becomes uninhabitable due to covered damage, HO-1 does not typically provide reimbursement for temporary living costs.

Due to these exclusions, many homeowners opt for broader coverage, such as HO-3, to ensure more comprehensive protection.

Replacement Cost vs. Actual Cash Value HO-1 policies usually reimburse homeowners based on the actual cash value (ACV) of damaged property, rather than the replacement cost. ACV considers depreciation, meaning homeowners may not receive enough funds to fully replace lost or damaged property. This can create financial challenges, especially when repairing or rebuilding a home.

Availability of HO-1 Insurance HO-1 policies have become increasingly rare due to their limited coverage. Many insurance companies no longer offer this type of policy, instead focusing on more comprehensive options like HO-3. Some states have even phased out HO-1 policies, as they do not meet the minimum coverage requirements for mortgage lenders.

Who Should Consider an HO-1 Policy? Although HO-1 insurance has limitations, it may be suitable for specific homeowners, including:

• Budget-Conscious Homeowners – Individuals looking for the lowest-cost insurance option who are willing to accept limited coverage.
• Owners of Low-Risk Homes – Those living in areas with minimal natural disaster risks may find HO-1 coverage sufficient.
• Short-Term Homeowners – Individuals planning to own a home for a short period before selling may opt for minimal coverage.
• Landlords or Secondary Homeowners – Some landlords may use HO-1 policies for rental properties with minimal coverage needs.

Comparing HO-1 to Other Homeowners Insurance Policies

Feature	HO-1 (Basic Form)	HO-2 (Broad Form)	HO-3 (Special Form)
Coverage Type	Named Perils	Named Perils	Open Perils (Dwelling), Named Perils (Personal Property)
Perils Covered	10 Specific Perils	16 Specific Perils	All Risks (Except Exclusions)
Personal Liability	Not Always Included	Included	Included
Additional Living Expenses	Not Included	Included	Included
Availability	Limited	More Common	Most Common

Homeowners looking for better protection should consider HO-2 or HO-3 policies, as they offer broader coverage for both the dwelling and personal belongings.

Pros and Cons of HO-1 Insurance Pros:

• Lower premiums compared to other homeowners insurance policies
• Simple and straightforward coverage for specific perils
• Suitable for homeowners seeking minimal coverage

Cons:

• Limited protection with coverage for only 10 named perils
• No coverage for personal liability, medical payments, or additional living expenses
• Actual cash value (ACV) settlements result in lower payouts for claims
• Often unavailable from major insurance providers

How to Purchase an HO-1 Policy If you are considering an HO-1 policy, follow these steps to ensure you make an informed decision:

1. Assess Your Coverage Needs – Determine if the limited coverage of HO-1 aligns with your financial situation and risk tolerance.
2. Check Availability – Since HO-1 is rare, contact multiple insurers to check if they offer this policy.
3. Compare Alternatives – Evaluate the cost differences and benefits of HO-2 or HO-3 policies to determine if a broader plan is more suitable.
4. Understand Policy Terms – Read the fine print to know exactly what is covered and excluded.
5. Consult an Insurance Agent – A licensed agent can help you determine whether HO-1 is a viable option for your needs.

Final Thoughts

HO-1 – Basic Form homeowners insurance provides a minimal level of protection against specific perils. While it is an affordable option, its limited coverage makes it less attractive for many homeowners, especially those seeking comprehensive protection. Before choosing an HO-1 policy, it is essential to weigh the risks, exclusions, and alternative options to ensure that your home and assets are adequately protected. For most homeowners, considering HO-2 or HO-3 policies will provide a better balance of coverage and cost-effectiveness.