The HO-2 “Named Peril” Policy: A Long List of Things That Are Covered.
If Your Problem Isn’t on the List, You’re Out of Luck.
An HO-2 policy, also known as a “Broad Form,” is a “named peril” policy. This means it has a specific, numbered list of about 16-18 perils (like fire, wind, hail, theft, etc.) that it will cover. If your home is damaged, you have to be able to point to that list and show that the cause of your damage is on it. If your specific, bizarre problem—like a deer crashing through your living room window—is not on that list, you have zero coverage. The burden of proof is on you.
The HO-3 “Open Peril” Policy: A Short List of Things That Aren’t (Which is Way Better).
The “All-Risk” Approach That Protects You From the Unknown.
An HO-3 “Special Form” policy, the most common type of home insurance, completely flips the script. For your dwelling, it is an “open peril” or “all-risk” policy. This means it covers damage from every possible cause, unless that cause is specifically listed on a short exclusions page (like flood, earthquake, or war). This is a massively broader and more powerful form of protection. It covers you for all the bizarre, unforeseen events that a “named peril” policy won’t.
Why an HO-2 is a Cheaper, Inferior Product That Leaves You Exposed.
The Discount Comes at the Price of a Huge Coverage Gap.
An HO-2 policy will almost always have a slightly lower premium than an HO-3. The insurance company is giving you a discount because they are taking on significantly less risk. By limiting their exposure to only a specific list of named perils, they are leaving you exposed to a whole universe of other potential, uncovered losses. That small savings on the premium is a terrible trade-off for the massive, unknown coverage gaps you are accepting.
A Bizarre Claim Scenario That an HO-2 Denied but an HO-3 Paid.
A Tale of a Raccoon and a Garden Hose.
My friend had an HO-2 policy. A raccoon got into his garage, somehow turned on the garden hose, and flooded the entire space, causing thousands in damage. The insurance company denied the claim. Why? Because “damage caused by a raccoon with a garden hose” was not one of the 18 specifically named perils on his policy. My HO-3 policy would have covered the exact same event, because it covers everything unless it’s excluded, and “raccoon vandalism” is not on the exclusion list.
The HO-3 is the Gold Standard for a Reason. Don’t Settle for an HO-2.
The Industry Standard for Comprehensive Protection.
The HO-3 policy form is the standard, default, and most popular type of homeowners insurance in America for a reason. It provides a robust, comprehensive, and reliable level of protection that meets the needs of the vast majority of homeowners. An HO-2 is a relic of the past, a cheaper and inferior product that offers a much weaker level of protection. You should never settle for an HO-2 unless it is the absolute only option available to you.
The Burden of Proof is on YOU with an HO-2. It’s on the Insurance Company with an HO-3.
A Critical Legal Distinction That Matters in a Claim.
This is a key legal difference. With an HO-2 (Named Peril) policy, if you have a claim, the burden of proof is on you, the homeowner, to prove that your loss was caused by one of the perils named in the policy. With an HO-3 (Open Peril) policy, the burden of proof is on the insurance company. They have to pay the claim unless they can prove that the loss was caused by one of the specific exclusions. This gives the homeowner a much more powerful and advantageous position.
If a Peril Isn’t Specifically Named in an HO-2, You Get $0.
The Brutal Reality of a “Closed” List.
The “named peril” list of an HO-2 policy is a closed and finite universe. It typically includes the big ones like fire and wind, but it leaves you completely exposed to anything outside that list. A power surge that fries your electronics, a buildup of ice that causes a roof collapse, a strange chemical spill from a passing truck—all of these real-world events would likely not be covered. If it’s not on the list, you get nothing.
Why Do HO-2 Policies Even Still Exist? (And Who Buys Them).
A Niche Product for a Specific Market.
HO-2 policies are much rarer today, but they still exist as a low-cost alternative for certain situations. They might be offered for older homes that don’t qualify for a full HO-3, or for homeowners on an extremely tight budget who are willing to accept the coverage gaps in exchange for a lower premium. However, for the vast majority of homeowners, the small savings are not worth the significant risk.
The Small Premium Savings of an HO-2 is Not Worth the Massive Coverage Gap.
A Classic Case of Being Penny Wise and Pound Foolish.
The decision to buy an HO-2 policy to save what might amount to $10 or $20 a month is a textbook example of being “penny wise and pound foolish.” You are saving a small, known amount, but you are exposing your single biggest asset to a massive, unknown number of uncovered perils. A single, bizarre, uncovered claim can wipe out a lifetime of those tiny premium savings. It is a gamble that is simply not worth taking.
The Most Common Homeowners Policy (HO-3) vs. its Weaker, Older Brother (HO-2).
Evolution in the Insurance World.
Think of the HO-2 as the older, weaker, less evolved version of homeowners insurance. The HO-3 is the modern, superior, and more robust product that replaced it as the industry standard. The HO-3’s “open peril” approach was a major evolutionary leap forward, providing a much broader and more reliable form of protection for homeowners. While the older brother still exists, you should always choose to partner with the stronger, more capable sibling.