What Is a HO8 Policy and What Does It Cover?

Homeowners insurance provides financial protection for property owners against various risks. While many properties fit standard insurance policies, certain homes possess unique characteristics that necessitate specialized coverage. An HO8 insurance policy is a tailored option for properties that might not qualify for more common policy forms.

Core Coverage of an HO8 Policy

An HO8 policy is a type of homeowners insurance that operates on a “named perils” basis. This means the policy provides coverage only for losses specifically listed within the policy document. In contrast, “open perils” policies cover any cause of loss unless explicitly excluded.

Common named perils covered by an HO8 policy include fire or lightning, windstorm or hail, explosions, riot or civil commotion, and incidents involving aircraft or vehicles not owned by the insured. Smoke damage, vandalism or malicious mischief, theft, and volcanic eruptions are also covered. Claims are generally settled based on the actual cash value of the damaged property.

Valuation Method: Actual Cash Value

The actual cash value (ACV) method is a fundamental aspect of HO8 policies, determining the payout for covered losses. ACV is calculated by taking the replacement cost of an item and subtracting depreciation, which accounts for the item’s age, wear, and tear. This valuation means that the payout received will reflect the item’s worth at the time of loss, not the cost of purchasing a brand-new replacement.

For example, if a 15-year-old roof is damaged by a covered peril, an ACV settlement would consider its current depreciated value, not the cost of a new roof installation. Similarly, for a five-year-old appliance destroyed in a fire, the payout would be the original purchase price less five years of depreciation. This method is standard for HO8 policies because it aligns with the nature of older or unique properties where the cost to rebuild or replace with modern materials might far exceed the property’s market value or practical replacement cost.

Ideal Properties for an HO8 Policy

An HO8 policy is suited for properties that present challenges for standard homeowners insurance due to their age, construction, or unique characteristics. Older homes, often built decades ago, frequently feature construction methods or materials no longer readily available or expensive to replicate.

Historic properties, with specific preservation requirements or unique architectural elements, also benefit from HO8 coverage. The cost to repair or rebuild such homes to original specifications, or to meet modern building codes, can be very high, making standard replacement cost policies impractical or unaffordable. An HO8 policy offers a viable insurance solution by valuing the property at its actual cash value, acknowledging the disparity between market value and potential replacement costs for these distinctive homes.