What Is an HO4 Policy and What Does It Cover?

An HO4 policy, commonly known as renters insurance, provides financial protection for individuals who rent their homes, apartments, or condominiums. This specialized insurance safeguards personal belongings and offers liability coverage. It helps renters mitigate potential losses from unexpected events.

HO4 Policy Coverages

An HO4 policy offers several layers of protection, beginning with personal property coverage. This covers a renter’s belongings, such as furniture, electronics, and clothing, against specified perils. These often include fire, theft, vandalism, and certain weather events like windstorm or hail. This coverage extends to personal items whether inside the rented dwelling or elsewhere, even when traveling. For instance, if your laptop is stolen from your car while on vacation, your HO4 policy could provide coverage up to your policy limits.

Personal liability coverage is another important aspect of an HO4 policy. This protects the insured if they are found legally responsible for bodily injury or property damage to others. Coverage applies whether the incident occurs within the rented dwelling or at another location. For example, if a guest slips and falls inside your apartment, or if you accidentally damage a neighbor’s property, your liability coverage can help pay for medical bills, legal fees, and settlement costs. Typical liability limits range from $100,000 to $500,000.

Additional Living Expenses (ALE), also known as Loss of Use coverage, is included in an HO4 policy. This coverage helps with extra costs incurred if the rented dwelling becomes uninhabitable due to a covered loss. Such expenses can include hotel stays, temporary rent for another dwelling, and increased food costs.

What an HO4 Policy Does Not Cover

An HO4 policy has specific exclusions renters should understand. It does not cover the physical building or dwelling itself, including walls, roof, or permanent fixtures. This responsibility typically falls to the landlord, who usually carries their own property insurance, such as an HO3 policy, to cover the structure.

Certain perils are almost always excluded from standard HO4 policies and require separate coverage or endorsements. Common exclusions include damage caused by floods and earthquakes. These events necessitate specialized policies, such as flood insurance through the National Flood Insurance Program, to provide protection.

Although personal property is covered, there are often sub-limits for high-value items within a standard policy. Items like jewelry, art, collectibles, furs, and firearms may have specific maximum payout amounts, such as $500 for jewelry or $100 for cash. To ensure adequate coverage for these valuable possessions, policyholders may need to purchase special endorsements, also known as riders, or schedule these items individually on their policy. Damage or injury from intentional acts by the insured is also not covered by an HO4 policy.

Key Policy Components

Understanding an HO4 policy involves recognizing several key components. Policy limits represent the maximum amount an insurer will pay for a covered loss. These limits apply to overall coverage, such as personal property, and may also include specific sub-limits for certain categories of items like jewelry or electronics. For example, a policy might have a $30,000 personal property limit but a sub-limit of $1,500 for jewelry.

Deductibles are another financial aspect, representing the amount the insured pays out-of-pocket before the insurance company begins to pay for a covered loss. For renters insurance, common deductible amounts typically range from $250 to $1,000, with $500 often being a standard choice. Selecting a higher deductible generally results in lower annual premiums, while a lower deductible leads to higher premiums.

When it comes to personal property, policies often use one of two valuation methods: Actual Cash Value (ACV) or Replacement Cost Value (RCV). Actual Cash Value pays for the depreciated value of the damaged or lost items, accounting for wear and tear. In contrast, Replacement Cost Value pays the cost to replace the item with a new one of similar kind and quality without deducting for depreciation. While RCV policies typically have higher premiums, they offer more comprehensive financial protection by allowing for the full replacement of items.