The Basics

Homeowners insurance evolved in the late 1950s, when the insurance industry needed a single comprehensive policy to cover a house, its contents, and liability. The standard package policy has two components: property insurance and personal liability. Although the over 900 U.S. insurance companies write many different policies, 80 percent of them are based on a form called HO-3, which provides coverage on the house and other structures for all risks except those excluded by the policy—most commonly floods and earthquakes. HO-2, a cheaper policy, and HO-1, a bare-bones option, cover only those risks that are specifically included. HO-4 is a policy designed for renters while HO-6 covers condominium owners.