Homeowners Insurance Basics: HO-3, HO-6 and Co-op Policies

If you own a house, you usually buy a “special form” homeowners policy, known as HO-3, that covers the building, your belongings and your liability. If you own a condo or co-op apartment, the building’s master policy covers the structure, and you buy a unit-owner policy for everything from the walls in: your improvements, fixtures, belongings and liability.

Flood is excluded from all of them. Below is what each policy covers, the limits and deductibles that trip people up, and where New York owners can get help.

The policy types

New York’s Department of Financial Services (DFS) describes these standard forms. Insurers can vary their wording, so the declarations page and policy form decide what you actually have.

• HO-3, special form. The most widely used homeowners policy. It covers your home for all risks of physical loss except those the policy specifically excludes, such as flood, earthquake, war and nuclear accident. Mortgage lenders may require this form.
• HO-5, comprehensive form. Like HO-3, but your belongings are also covered on an all-risk basis rather than only for named perils.
• HO-6, condominium unit owners. Covers alterations, appliances, fixtures, improvements and interior walls inside your unit, plus contents and liability. The condo association insures the building and common areas.
• HO-4, tenants and cooperative. DFS lists co-op policies alongside renters policies: they insure the contents of a unit and your personal liability. Policies sold to co-op owners differ in whether they also cover improvements. Ask your agent which form you are being quoted and whether your kitchen, bath and built-ins are covered.
• Market value policy. A modified basic policy for older homes whose rebuilding cost is higher than their market value. It pays to repair with like kind and quality materials, not the exact original materials.

Coverage matrix by property type

For condos, New York’s Real Property Law §339-bb requires the board of managers to insure the building against fire and other hazards when the declaration, bylaws or a majority of owners require it, and to tell owners in writing about the coverage and any changes. It also preserves each owner’s right to insure their own unit. Ask the managing agent for the master policy summary. Whether it is “bare walls” (structure only) or includes original fixtures decides how much unit coverage you need.

Co-ops work similarly in practice: the corporation insures the building, and the proprietary lease usually says who must repair what inside the apartment. Your proprietary lease or house rules may require you to carry your own policy, sometimes with specific limits. Check them before you buy. Our co-op vs condo guide explains the ownership difference.

How limits work

You pick the dwelling limit. Many other limits are set as a percentage of it. The figures below are the typical ones DFS and the NAIC describe for a special form policy; your policy can use different percentages.

Policies also have special limits on certain items. DFS lists typical examples such as $200 for cash, $1,500 for theft of jewelry, watches and furs, $2,500 for theft of silverware, and $2,500 for business property at home. If you own valuable jewelry, art or collections, add a scheduled personal property endorsement (a “floater”).

The 80% rule

Insure a house for at least 80% of its replacement cost, not its market price. Replacement cost is what it would take to rebuild, so it leaves out the land. DFS explains that if you insure for less than 80%, a partial loss won’t be paid in full. In DFS’s example, a $5,000 roof repair on a home with a $100,000 replacement cost insured for only $50,000 paid $3,125, not $5,000. Inflation and renovations push replacement cost up, so review the limit each year. The homeowners insurance coverage estimator helps you size it.

Deductibles, including hurricane deductibles

The standard deductible is the dollar amount you pay before the policy pays. A higher deductible lowers your premium, but only choose one you could pay tomorrow.

Liability and extra coverage worth asking about

• Personal liability. Pays if you are sued for injuring someone or damaging their property. It also usually covers damage your pet causes, though DFS notes an insurer may exclude or surcharge a dog it considers dangerous. A personal umbrella policy adds liability above your homeowners limit.
• Loss assessment. For condo and co-op owners. It helps pay an assessment the building charges you to cover a covered loss to common areas. Some unit policies include it in the base policy; ask for the limit.
• Water backup. The NAIC notes most homeowners policies offer limited or no coverage for sewer or drain backups and sump pump overflow, but endorsements are available. This matters in NYC basements.
• Ordinance or law. Pays extra costs to rebuild to current codes. Worth asking about for an older building.
• Replacement cost on contents. The NAIC explains that actual cash value pays for your loss minus wear and tear and often doesn’t cover the full cost to replace it. A personal property replacement cost endorsement pays to replace your belongings. Check which basis your policy uses.
• Flood. Only from the National Flood Insurance Program or a private flood insurer. See flood insurance in NYC.

Shopping for a policy

1. 1

   Get the building’s documents (apartments)

   Ask the managing agent for the master policy summary and any insurance requirements in the proprietary lease, bylaws or alteration agreement.
2. 2

   Estimate replacement cost and contents

   Use your insurer’s estimate plus a contractor’s figure. DFS suggests a room-by-room inventory with photos or video, kept somewhere outside your home.
3. 3

   Compare at least two quotes

   Get quotes from more than one agent or broker for the same limits and deductibles, then compare forms, covered and excluded perils, and endorsements, not only price.
4. 4

   Read the declarations page

   Check the policy period, insured address, mortgagee, every limit and every deductible, including the hurricane deductible in dollars.
5. 5

   Keep it in force

   If your coverage lapses, the NAIC warns your lender will likely buy a policy for you that costs more and covers only the structure.

If you pay through your mortgage, the premium is part of your escrow payment; the escrow calculator shows how. Renting instead? See the renters insurance guide.