Although every insurer and homeowners policy has its own specifics, most insurance companies provide the same basic levels of coverage on each policy type, or form. While you can purchase coverage against a small number of perils on some policies, a broad-form policy provides coverage against a standard and wider set of catastrophes that can damage your home.
HO-2 Broad-Form Policies
The HO-2 policy, which provides protection against losses from a wide variety of problems, is commonly known as the broad form because its coverage is much broader than that provided by an HO-1 policy. A HO-2 policy usually covers most ways your home could be damaged: fire, storm damage -- excluding flooding -- smoke, falling objects, theft, weight of ice or snow, freezing plumbing, electrical system damages, vandalism, damage caused by vehicles, riots, explosions and volcanic eruptions.
Insurance sales representatives will tell you a broad-form policy is a named-peril policy. In everyday language, that means that if your house is damaged by anything that isn’t on the list of specifically defined perils, you’re not going to get help from your insurance company. For example, if an elephant escapes from the zoo and tramples your car port, bummer for you: Animal damage isn’t on the list of covered perils, so you’re on your own for paying for repairs. At least you can sleep well knowing you have coverage against a volcanic eruption.
In contrast to an HO-2 -- or named-peril -- policy, some homeowners opt for even broader coverage and purchase an HO-3 or HO-5 policy, which are open-perils policies. These policies provide coverage to just about any type of damage your home can suffer. Named-peril policies also exclude a few special cases, such as floods, earthquakes, war, nuclear accident, vermin, settling and shrinking. If the escaped elephant tramples your car port and you have an open-peril policy, you’re in luck: Rampaging elephants aren’t excluded from your policy.
Replacement Cost Policy
A broad-form policy typically provides replacement cost coverage to your lost goods rather than actual cash value of your losses. These policies pay to replace any lost goods instead than just reimbursing you for their current, depreciated value. For example, when your 12-year-old, spring-shot sofa is lost in a fire, you’ll get enough cash to purchase a similar, albeit brand-new, sofa to replace it. An actual cash value policy might give you a pittance for the furniture, based on the conclusion that it was old, junky and not worth much before it went up in flames.
Wilhelm Schnotz has worked as a freelance writer since 1998, covering arts and entertainment, culture and financial stories for a variety of consumer publications. His work has appeared in dozens of print titles, including "TV Guide" and "The Dallas Observer." Schnotz holds a Bachelor of Arts in journalism from Colorado State University.