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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 basic form 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.
HO2 policies remain a niche product in 2026. Industry data shows HO3 policies hold about 63.5% of the U.S. homeowners insurance market by revenue, with HO3 and HO5 together accounting for roughly 85% of the market, leaving HO2 in a low single-digit share nationally (about 6.7% of single-family policies as recently as 2021). For a broader look at every form type, see our overview of home insurance policy types HO-1 through HO-8.
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. For a full breakdown, see our guide on replacement cost vs actual cash value.
Learn more about how named perils vs. all-risk home insurance 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, though many carriers will push these homeowners to an HO8 modified coverage policy instead.
- Budget-constrained homeowners: With Insurify projecting the average annual home insurance cost will rise another 4% in 2026, from $2,948 at the end of 2025 to $3,057 by December 2026, cost-conscious buyers may find HO2's savings meaningful.
- 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, high-risk home insurance options including HO2 in the standard market may be your best path before turning to E&S carriers or state FAIR plans.
- 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. Our full breakdown of what home insurance doesn't cover applies even more strictly under an HO2 form.
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 | Off-premises outage-related losses unless the failure stems 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. To understand how coverage components fit together, review our guide to home insurance coverages A through F.
The Cost Difference in 2026: Is the Savings Worth It?
National average premium estimates for 2026 vary depending on coverage level and methodology. NerdWallet pegs the average at about $2,490 a year for $400,000 of dwelling coverage, LendingTree reports the U.S. average at $2,395 per year, Insurify's data puts the national average at $2,844 per year for a policy with $300,000 in dwelling coverage, and The Zebra reports that the average homeowner is now paying $2,966 a year for home insurance. U.S. home insurance rates rose a cumulative 46.8% from 2020 to 2025, with annual increases peaking at 12.7% in 2024 before easing to a still-significant 6.0% jump in 2025. Insurify projects California will see the largest 2026 rate hikes at roughly 16%, followed by Nebraska (13%), New Mexico (11%), and Georgia (10%). Regionally, NAIC data shows premiums have risen 18% in the Northeast, 25% in the Midwest, 27% in the Southeast, and 43% in the West over the past seven years, even after adjusting for inflation. And most U.S. homeowners (71%) say the cost of their homeowners insurance has gone up over the last few years, including 42% who say it has gone up a lot.
While no major 2026 national studies isolate HO2 vs HO3 pricing separately, industry practice consistently shows HO2 policies cost roughly 10-20% less than a comparable HO3. For a typical mid-coverage home:
| Policy Type | Estimated 2026 Annual Premium |
|---|---|
| HO2 (Broad Form) | $2,050 - $2,450 |
| HO3 (Special Form) | $2,490 - $2,966 |
| HO5 (Comprehensive) | $2,700 - $3,300 |
At roughly $25 to $50 in monthly savings, the question becomes: is that worth assuming the risk of any gap claim? For most homeowners, the answer is no, which is why 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. For a deeper dive into top-tier coverage, see our guide to comprehensive home insurance.
If you rent or own a condo instead, see our guides on HO4 renters coverage and HO6 condo insurance. Mobile and manufactured homeowners should review the specialized HO7 mobile home policy instead.
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 in 2026?
Yes, HO2 policies are generally 10-20% less expensive than HO3 because they offer narrower coverage. With the 2026 national average homeowners premium ranging from roughly $2,395 to $2,966 per year and Insurify projecting rates to reach $3,057 by year-end, the savings can add up. However, the gap may not be substantial enough to offset the added financial risk of a coverage denial 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.
How does the March 2026 FHFA roof rule affect HO2 policies?
On March 18, 2026, the FHFA approved Fannie Mae and Freddie Mac to accept actual cash value (ACV) roof coverage instead of requiring full replacement cost value on backed mortgages for single-family homes and condos, while the rest of the dwelling still needs RCV coverage. Since HO2 policies already tend to pay claims at ACV, this rule change reinforces the pre-existing weakness of broad form coverage for older roofs. If your roof is more than 10 to 15 years old and covered at ACV, your payout after a hail or wind loss could fall well short of a full replacement. Ask your insurer to quote both ACV and RCV roof options before renewing.