What Is an HO-4 Policy? Renters Insurance Explained

An HO-4 policy is a specific type of renters insurance, designed to protect individuals who rent their living spaces. It primarily safeguards personal belongings and provides liability coverage, offering financial security in the event of unexpected incidents.

Defining HO-4 Insurance

HO-4 insurance is a specialized policy tailored for renters. Unlike homeowners insurance, it does not cover the physical dwelling structure, as that responsibility rests with the landlord or property owner. This policy protects the tenant’s personal property and provides personal liability coverage. It is often called renters insurance or tenant insurance.

Personal property coverage operates on a “named perils” basis, meaning it covers losses only from specific events or incidents listed in the policy. Common named perils include fire, lightning, windstorm, hail, explosion, smoke, theft, and vandalism.

Understanding HO-4 Coverages

An HO-4 policy generally provides three main types of coverage, each addressing different financial risks for renters. Personal property coverage protects belongings such as furniture, clothing, and electronics against the specific named perils outlined in the policy. This coverage can be Actual Cash Value (ACV) or Replacement Cost Value (RCV). ACV reimburses the depreciated value of an item, considering its age and wear, while RCV pays the amount it would cost to purchase a new, similar item without deducting for depreciation.

Personal liability coverage protects the policyholder if they are found legally responsible for injuries to another person or damage to someone else’s property. This coverage helps pay for legal expenses, medical bills, or property repair costs. Many policies offer liability limits starting around $100,000, with higher options available.

Additional Living Expenses (ALE), also known as loss of use coverage, helps cover necessary expenses if the rented home becomes uninhabitable due to a covered peril. These expenses can include hotel stays, temporary rent, and food costs.

What HO-4 Does Not Cover

While an HO-4 policy offers important protections, it also comes with specific exclusions. The dwelling structure itself is not covered by the tenant’s HO-4 policy, as these fall under the landlord’s property insurance. Certain perils are also commonly excluded, such as damage from floods and earthquakes, which typically require separate insurance policies for coverage.

An HO-4 policy usually covers only the named policyholder’s personal property, meaning a roommate’s belongings are generally not covered unless they are specifically added to the policy or covered by their own separate policy. High-value items, such as expensive jewelry, fine art, or collectibles, often have sub-limits within a standard policy, meaning there is a maximum payout for these categories, which may be less than their full value. For example, jewelry theft might be capped at $1,500, even if the overall personal property limit is much higher. Property used for business purposes is also typically excluded or has very limited coverage under a standard HO-4 policy.

Factors Affecting HO-4 Policies

Several factors influence the structure and cost of an HO-4 policy, impacting both premiums and potential payouts. Deductibles represent the amount the policyholder pays out-of-pocket before coverage begins for a claim. Common deductible amounts range from $250 to $2,500 for personal property claims, with higher deductibles often leading to lower premiums.

Coverage limits determine the maximum amount the insurer will pay for personal property and liability claims. Policyholders select these limits based on the estimated value of their belongings and their desired liability protection. Personal property limits can range from $10,000 to $100,000.

Endorsements, also known as riders or floaters, are optional additions to a standard policy that provide extra coverage for specific items or perils not fully covered. These can include scheduled personal property coverage for high-value items that exceed standard sub-limits or coverage for perils like identity theft. Other elements, such as location, claims history, and credit score (where permitted by law), also influence policy premiums.