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What Is an HO2 Insurance Policy?
An HO2 insurance policy — commonly known as "broad form" homeowners insurance — is a named-perils policy that covers your home's structure, other structures (like garages and fences), and personal belongings against a specific list of 16 threats. It also includes personal liability, medical payments to others, and additional living expenses (ALE) if a covered loss forces you out of your home temporarily.
Think of it as the middle ground between the bare-bones HO1 policy and the far more popular HO3. While it covers 6 more perils than an HO1, it's still a step behind the broader protection most homeowners rely on. If your damage isn't caused by one of those 16 named events, your claim will be denied — no exceptions.
The 16 Named Perils Covered by an HO2 Policy
Here are the perils that a standard HO2 broad form policy protects against. These apply to both your dwelling and personal property:
| # | Named Peril | What It Means |
|---|---|---|
| 1 | Fire or lightning | Structure damage or total loss caused by fire or lightning strikes |
| 2 | Windstorm or hail | Wind and hail damage to your roof, siding, or windows |
| 3 | Explosion | Gas explosions or similar sudden explosive events |
| 4 | Riot or civil commotion | Damage to your property resulting from civil unrest |
| 5 | Aircraft | Damage caused by an aircraft or parts falling from one |
| 6 | Vehicles | Damage when a vehicle collides with your home or structure |
| 7 | Smoke | Sudden smoke damage from a malfunctioning appliance or fireplace |
| 8 | Vandalism or malicious mischief | Intentional destruction by a third party |
| 9 | Theft | Stolen belongings or damage caused during a break-in |
| 10 | Falling objects | Trees, branches, or debris that fall and damage your home |
| 11 | Weight of ice, snow, or sleet | Roof or structure collapse from heavy winter accumulation |
| 12 | Accidental water/steam discharge | Sudden overflow from pipes, plumbing, or appliances |
| 13 | Tearing apart/cracking of HVAC systems | Sudden failure of heating, cooling, or hot water systems |
| 14 | Freezing of plumbing or appliances | Pipes or appliances that freeze and burst during cold weather |
| 15 | Electrical current damage | Sudden surges that fry appliances or wiring |
| 16 | Volcanic eruption | Lava flow, ash, or shock waves from a volcanic event |
Important: The exact wording and scope of each peril can vary by insurer and state. Always review your policy's declarations page carefully.
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HO2 vs HO3: How They're Different
The primary difference between HO2 and HO3 comes down to how your dwelling is covered. Understanding this distinction is critical when deciding which policy to buy.
The Named Perils vs. Open Perils Gap
With an HO3, your home's structure is covered on an open-perils basis — meaning it's protected against everything unless specifically excluded (like floods or earthquakes). With an HO2, you have to prove that the damage was caused by one of the 16 listed perils, or the claim is denied.
For personal property, both HO2 and HO3 use a named-perils approach. However, HO3 policies typically come with higher coverage limits and often pay replacement cost value (RCV), while HO2 generally pays actual cash value (ACV) — meaning your payout is reduced by depreciation. That's a meaningful difference when you're replacing furniture, electronics, or appliances.
Learn more about how named perils vs. open perils policies compare and which coverage type makes sense for your situation.
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Who Should Consider an HO2 Policy?
HO2 isn't the right fit for everyone — but it does serve a real purpose for certain homeowners. Here's who benefits most:
The Profiles Most Likely to Benefit From HO2
- Owners of older homes: Homes with aging roofs, outdated wiring, or older plumbing may not qualify for HO3 coverage. An HO2 may be the best option your insurer is willing to offer. Learn more about the challenges of insuring older homes and what to expect.
- Budget-constrained homeowners: If premium costs are a top concern, the savings on an HO2 can help — though you should understand what you're giving up.
- High-risk property owners: Some insurers will only write an HO2 for properties they deem too risky for more comprehensive coverage. If you've been turned down for an HO3, an HO2 may be your standard-market option before turning to excess and surplus insurance.
- Homeowners in low-risk environments: If you live in an area with minimal exposure to unusual weather events, flooding, or other unlisted perils, the gap between HO2 and HO3 may feel less significant.
HO2 Trade-offs: What You Don't Get Covered
Before committing to an HO2 policy, it's important to fully understand what it does not cover. Any peril not on the named list is your financial responsibility.
Common Exclusions in an HO2 Policy
| Category | What's Not Covered |
|---|---|
| Natural disasters | Flooding, earthquakes, mudslides, sinkholes, landslides |
| Water-related | Sewer/drain backups, ground seepage, continuous slow leaks |
| Wear & tear | Routine deterioration, rust, rot, mold (except from a covered discharge), corrosion |
| Pests & animals | Insects, rodents, birds, pets — and the damage they cause |
| Neglect | Damage resulting from failure to maintain your property |
| Power failure | Outage-related losses unless the power failure is from a covered peril |
| Government actions | Seizure, demolition, or ordinance enforcement costs |
| Intentional acts | Self-caused damage or fraud |
For homeowners with older structures, ordinance or law costs can be a particularly painful gap. If your home suffers a covered loss but must be rebuilt to current code, that extra expense isn't included. See our guide on ordinance or law coverage to understand this risk.
The Cost Difference: Is the Savings Worth It?
HO2 policies are generally less expensive than HO3 because they offer more limited coverage. Historical data places the average HO3 annual premium around $1,411, while HO2 policies have averaged closer to $1,234 — a difference of roughly $177 per year. However, 2025–2026 estimates for standard HO3 policies on $300K homes have pushed into the low-to-mid $2,000s annually, and HO2 savings may scale proportionally.
At roughly $15/month in savings, the question becomes: is that worth assuming the risk of any gap claim? For most homeowners, the answer is no — which is why the HO3 remains the dominant choice in the market.
Why Most Homeowners Choose HO3 Instead
The HO3 "special form" policy is the most widely purchased homeowners insurance policy in the U.S. — and for good reason. Its open-perils approach for the dwelling means you're covered for almost any unexpected event, and you don't have to prove a named cause of loss to file a successful claim. That shifts the burden of proof to the insurer, not you.
If you want to explore options beyond HO3, the HO3 vs HO5 comparison breaks down what you gain by upgrading to open-perils protection for personal property as well. And for homes that simply don't qualify for standard coverage, our hard-to-insure homes guide can point you in the right direction.
Older homes with unique characteristics may also want to explore the HO8 modified coverage policy, which is specifically designed for homes that can't meet standard underwriting criteria.
Frequently Asked Questions About HO2 Insurance
What does HO2 insurance cover?
An HO2 insurance policy covers your home, other structures, and personal property against 16 specifically named perils, including fire, lightning, windstorm, hail, theft, vandalism, and accidental water discharge. It also includes personal liability coverage, medical payments to others, and additional living expenses if a covered loss displaces you from your home. Any damage caused by a peril not on the named list is excluded from coverage. Always review your specific policy's declarations page since the exact wording of perils can vary by insurer and state.
How is an HO2 policy different from an HO3?
The biggest difference is how your dwelling is protected. An HO2 uses named perils for both the structure and personal property, meaning you're only covered for events specifically listed in the policy. An HO3 uses open perils for the dwelling — covering everything except named exclusions — while still using named perils for personal property. HO3 policies also typically pay replacement cost value for the dwelling, whereas HO2 policies often pay actual cash value (depreciated) for personal property.
Is an HO2 policy cheaper than an HO3?
Yes, HO2 policies are generally less expensive than HO3 because they offer narrower coverage. Historical averages show HO2 premiums running roughly $150–$200 less per year than comparable HO3 policies, though the actual gap depends on your home's value, location, and the insurer. As overall homeowners insurance premiums have risen in 2025–2026, both policy types have become more expensive, but HO2 still tends to come in lower. The savings may not be substantial enough to offset the added financial risk of a coverage gap for most homeowners.
Who should get an HO2 insurance policy?
HO2 coverage is best suited for homeowners who cannot qualify for an HO3 policy — often due to the age or condition of their home — as well as those with tight budgets who need to meet minimum lender requirements. It's also a practical option for homeowners whose insurer determines their property risk is too high for a more comprehensive policy. For most homeowners with newer or well-maintained homes, an HO3 is the recommended choice because it provides significantly broader protection for a modest additional cost.
Does HO2 cover flooding or earthquakes?
No. Flooding and earthquakes are not among the 16 named perils covered by an HO2 insurance policy — and they're also excluded from HO3 and most standard homeowners policies. To be protected against flood damage, you'll need a separate flood insurance policy through the National Flood Insurance Program (NFIP) or a private insurer. Earthquake coverage typically requires a separate policy or endorsement as well. These are critical gaps to address regardless of whether you have HO2 or HO3 coverage.