What is the difference between a HO8 and HO3 home insurance policy?

Be careful if you are offered a HO8 policy for your homeowners insurance. This is a non-standard, bare-bones product, and lacks a lot of coverage offered with the more common HO3 policy. 

The HO8 has two major differences from its more mature brother, the HO3: 

1. Replacement Cost (HO3) vs Common Construction (HO8)

If the worst happens to your home, you want to make sure you get a new home that is close to what you were living in before the disaster. Replacement cost is your best friend here, and is included on your building for all standard homeowners policies (HO2, HO3, HO5). Common construction in the HO8 says the insurance company can give you back anything they choose as long as it matches some basic features of the old home, like square footage and number of bathrooms. They can use cheap materials though, so often you see a downgrade in the building quality when the home is rebuilt/repaired. This can make sense on old homes (built before 1900), as it might not be realistic to find/import special materials that were used in the original homes construction 100 years ago - such as heavy stone from the Appalachians.  

2. Open Peril (HO3) vs Named Peril (HO8)

Open peril means you are covered for everything except for the following: 

Named Peril only covers you for what is actually listed in the policy. With an HO8, the list is SHORT. The chart below shows what you are losing that is included with virtually all the other homeowners policy options.

Homeowners Policies - Is it Covered?

Cause of Damage HO2: Basic HO3: Standard Building HO3: Personal Property HO5: Premium HO4/HO6: Renters/Condo

HO8:

Minimal

Fire Yes Yes Yes Yes Yes Yes
Lightning Yes Yes Yes Yes Yes Yes
Wind  Yes Yes Yes Yes Yes Yes
Hail  Yes Yes Yes Yes Yes Yes
Explosion Yes Yes Yes Yes Yes Yes
Riot Yes Yes Yes Yes Yes Yes
Aircraft/Vehicles Yes Yes Yes Yes Yes Yes
Vandalism Yes Yes Yes Yes Yes Yes
Volcano Yes Yes Yes Yes Yes Yes
Smoke Yes Yes Yes Yes Yes Yes
Theft Yes Yes Yes Yes Yes $1,000
Power Surge Yes Yes Yes Yes Yes No
Falling Objects Yes Yes Yes Yes Yes No
Weight of Ice, Snow, or Sleet Yes Yes Yes Yes Yes No
Water Damage Yes Yes Yes Yes Yes No
Appliances Damage Yes Yes Yes Yes Yes No
Freezing Pipes Yes Yes Yes Yes Yes No
Everything else, except the icons listed in the graphics above No Yes No Yes No No

As you can see, the HO3 policy and the HO8 policy share some common characteristics and carry some very specific differences. The named perils coverage will limit how often you can file a claim. Make sure to discuss each policy with a licensed agent and choose the one that works best to cover your home. If you can, avoid the HO8

Hope that helps! 

At your service,
Young Alfred