HO-8 is a type of homeowners insurance policy that is specifically designed for homes that are older than 40 years old and are not eligible to be covered by standard types of home insurance like HO-3 or HO-5.
Old houses have a certain charm and characteristics that are hard to resist. It’s hard not to fall in love with them. When you see a Victorian house, you feel like you are transported to a different era. With its history, beauty, and uniqueness, it’s no wonder buyers are still locking their eyes on old houses. In this article, we will take a closer look at what HO-8 homeowners insurance for older homes is, what it covers, what it excludes, and the approximate cost of getting one.
- An HO-8 policy is designed for historic homes that don’t fit under the standard home insurance policy requirements.
- There are fewer hazards covered under an HO-8 policy than a standard policy
- Actual cash value is the basis used for claims under an HO-8 policy.
What is an HO-8 homeowners insurance policy?
An HO-8 policy, otherwise known as a modified coverage form, is a form of homeowners insurance that is specifically designed to protect owners of historic homes, older homes (40+ years), and architecturally significant homes. Registered Landmarks could be included as well. These types of homes don’t generally fit the requirements that insurance companies have in order to provide standard home insurance policies. These types of homes typically don’t qualify due to construction that is no longer up to date or because the home has features that are unique.
An older home is at greater risk of damage caused by fire, burst pipes, and many other risks. This leads to some unique insurance needs. A house that is built significantly differently and/or with different building materials than the way that homes are constructed today causes some challenges for the insurance provider to cover the house; therefore, HO-8 insurance exists.
An HO8 policy is a great fit for someone who owns a historic home and doesn’t intend to make major repairs, renovations, or upgrades to the home. This can also mean that the owner does not need to pass the four-point inspection or make required changes in order to qualify for an HO-8 policy. These would be musts to qualify for a standard policy like HO-3.
HO-8 insurance will cover less than the standard insurance policy due to the lesser requirements to qualify along with the greater risks that are posed to insurance providers.
What does an HO-8 home insurance policy cover?
HO-8 home policies provide coverage along the same lines as an HO-3 or HO-5 policies, but there are some differences in the insurance coverage that are specific to HO-8 policies. The sections of coverage include Coverage A – Dwelling, Coverage B – Other structures, Coverage C – Personal Property, Coverage D – Loss of use, Coverage E – Personal Liability, and Coverage F – Medical Payments.
Under HO-8 home policies, a homeowner is covered for the actual cash value of their property and personal belongings. This is the main difference compared to the replacement cost coverage of an HO-3 policy. The actual cash value protection will take into account depreciation, meaning that over time a covered claim would provide a lower reimbursement as the home is determined to be worth less as time goes on. The replacement cost value as the name indicates will cover the cost to replace the home, not taking into account depreciation.
Dwelling Coverage A
Dwelling coverage covers damage to the home’s structure itself and any attached structures like a chimney, porch, deck, or attached garage.
Typical limit: The actual cash value of the home
Other Structures Coverage B
This section covers any detached structures on the property like a shed or detached garage.
Typical limit: 10% of the dwelling coverage amount.
Personal Property Coverage C
Personal property coverage protects against the loss or damage of personal belongings of the homeowner.
Typical limit: This actual cash value of the belongings lost, stolen, or damaged will be reimbursed. Some belongings will have sub-limits that they will be capped out at.
Loss of Use Coverage D
This section, also known as additional living expenses coverage, will cover the homeowner for any expenses that are incurred while the homeowner is temporarily unable to live in their home due to a covered peril. This can include things like a hotel stay or a meal at a restaurant that would not normally be incurred.
Typical limits: The limits of coverage D differ between insurance policies. One insurance company may provide a higher limit than another. It is important to compare coverage limits among insurance providers.
Personal Liability Coverage E
This section provides coverage to the homeowner for legal expenses or medical bills of someone that may be incurred if the homeowner is found to be at fault.
Typical limit: This limit will vary from insurance company to insurance company and can usually be increased.
Medical Payments Coverage F
This final section will cover the medical expenses of a guest to the homeonwer’s home, regardless of who is determined to be at fault.
Typical limit: This will vary among insurers as well but is typically capped at a low amount of $1,000 to $5,000.
What perils are covered under an HO-8 Policy?
First, it is important to note that insurance coverage is provided to the homeowner under HO-8 insurance for named perils in the policy. The named perils form is less encompassing than the open peril coverage provided under an HO-3 policy, where perils not named in the policy would be covered.
There are 10 named perils that are covered under HO-8 Insurance policies. These include:
- Fire or lightning
- Hail or windstorm
- Explosions
- Riot or civil commotion damage
- Aircraft
- Vehicle not owned by insured
- Smoke
- Vandalism or malicious mischief
- Theft
- Volcanic eruption
Any perils not listed above will not lead to covered claims. It is important to determine what perils are listed in your policy to understand what your insurance will cover.
What is not covered under an HO-8 Policy?
There are many perils not covered under the HO-8 policy form. The most common exclusions to what the policy covers are:
- Earth movement or earthquake damage
- Flood damage
- Falling object
- Normal wear and tear
- water damage
- Intentional, direct damage
- War
- Power failure
One may also notice that some perils that are common in other homeowners insurance policies are not covered under HO-8. Perils like weight of snow, ice, or sleet. This can be due to older homes being less able to support the weight of a heavy snowstorm.
It is possible to obtain separate policies for water damage coverage from something like a burst pipe or provide coverage for damage caused by flooding. A separate policy could also be obtained to cover earthquake damage.
HO-8 vs HO-3
HO-8 policies have the same sections of coverage as the standard HO-3 policy, but there are some differences that are important to keep in mind.
HO-3 policies provide homeowners insurance protection on a replacement cost basis. Replacement costs will typically be higher than actual or market-value reimbursements. HO-3 is also an open perils policy, which will encompass more perils than a named perils policy.
HO-8, the modified coverage form, provides homeowners with insurance protection on an actual or market-value basis. The HO-8 form is also a named perils policy, with 10 perils specifically listed that would be protected. Everything not listed would be excluded.
Another key difference between the two policies is that HO- is designed for older homes, registered landmarks, architecturally significant homes, or outdated building techniques, whereas HO-3 is not. If your home falls under any of the categories listed above. The HO-8 form may be your only choice.
There is one area where the two policies are similar and that is when it comes to the cost to replace personal property. Both HO-3 and HO-8 provide protection via the actual value basis rather than the replacement cost basis. the Limits may differ between the two forms.
What’s the cost of an HO-8 policy?
As with the other types of homeowners policies, the cost of an HO-8 policy can vary dramatically from location to location and property to property. According to data obtained from the National Association of Insurance Commissioners, in 2019 the average cost for an HO-8 policy was $2,035/year. This is significantly more than the average cost of $1,278 for the standard HO-3 policy.
Being that HO-8 is designed to protect an older home there is inherently more risk that is being taken on, hence the more expensive nature of the policy. Older home is more susceptible to damage caused by fire or lightning, water damage, falling objects like a tree branch, or the weight of ice, snow, or sleet.
Getting Home Insurance For Older Houses
The features that you love about older homes – transom windows, wide wooden floorboards, sleeping porch, natural wood built-ins – could also be the same factor that can make finding an insurance policy difficult. Usually, a home insurance plan for an older house will be classified as HO-8 coverage.
As we know, your insurance policy should cover the cost of having your house rebuilt or replaced in the event of a calamity or accident. Older houses would require a much higher replacement cost.
Why is this so?
First, the materials and techniques used in old houses construction are not only harder to find but also more expensive. You would need to find a skilled artisan to replicate an intricate stained glass window. On newer homes, on the other hand, there are a lot of local stores that supply windows, and you don’t need a special contractor to install them.
In addition, just as how rich of history older homes are, they can also be abundant of possible factors that can cause damage. For example, an older roof can cause damage from leaking, and older electrical systems can cause a fire to start. As a consequence of wear and tear, your insurance company may charge you a higher amount.
Because the replacement of an older home is more expensive than its market value, several insurance companies refuse to offer coverage for these types of homes. Those who offer coverage are charging more on their premiums. The premium for an HO-8 insurance policy for older homes can cost 50-80% more than a regular HO-3 policy.
Is it possible to get an affordable HO-8 policy?
Don’t lose your hopes though. You can do something not just to secure a homeowners insurance policy but also to lower your premium.
Despite its intricacy and grandeur, older homes have some issues that can scare insurance companies away. If you want to get coverage at a reasonable amount, you must do some upgrades and restorations first.
Roofing
The maximum lifespan of a roof is only good for 25 years. Older roofs can cause leakage.
Electrical System
Most older houses use small circuit breaker boxes. With the high demand for current electricity users, old electrical wiring and fuse can hardly keep up with the workload. This brings a potential risk of fire.
Plumbing
The old plumbing systems can cause leaks and water damage.
Wood-Burning Stoves
Though a wood-burning stove poses a greater risk of fire compared to electric or gas models, owning it does not automatically get your application for an insurance policy refused. Your home insurer may ask you to have it inspected by a certified technician on an annual basis.
Oil Tank
Heating oil tanks that are older than 25 years are susceptible to deterioration, leakage, and rusting.
Finding the best insurance company
You can’t just find the best insurance company just by getting a quote from a single insurer.
You would need to take time in researching and see which company offers the most coverage at the most reasonable rate. If you want your ancestral house to have its original features and structures preserved, look for a policy that will cover the replacement but won’t strip your pocket off of unreasonable premium charges.
Sure, it would cost more to have your older house insured, but every dollar spent is worth it. Nothing is sweeter than living in a house that is not only rich with texture and style but also with history and memories.
