Understanding the Risks of HO-8 Coverage

fire-damageThere has been some recent coverage about Citizens’ little-known low-cost policy called HO-8. Before you call your agent and ask for it, here’s what you should know about what the HO-8 policy covers versus HO-1 and HO-3 policies.

The HO-8 policy is intended for older homes. Citizens requires that homes be 50 years or older and valued at $200,000 or less. This means that just 122,000 homes in Florida are eligible for this coverage. If you’re one of the 122,000, here are the losses that are covered:

• Fire or Lighting
• Wind
• Hail storms
• Explosions
• Riots or civil unrest
• Aircraft
• Vehicles
• Volcanic eruption
• Smoke
• Theft or Vandalism
• Falling objects (falling trees must be due to one of the above perils, not negligence or lack of maintenance)

This policy, however, does not cover water losses, such as those that are plumbing-related. The other major difference between HO-8 and other more typical HO-1 and HO-3 policies is that the HO-8 doesn’t cover replacement cost. Rather, it covers actual cash value, which is the market value of the home minus depreciation and wear and tear. In other words, it’s a much, much smaller payout than those that come from HO-1 or HO-3.

When the state government mandated that Citizens offer HO-8 last year, the state-run insurance company reluctantly began offering it and put up several roadblocks for homeowners looking to get it. Certainly Citizens is concerned that people would flock to HO-8 if they didn’t put so many restrictions on it because it would save homeowners in Miami-Dade, for example, about 57 percent. But it’s a better option for many homeowners, particularly older ones, who might otherwise opt for no coverage at all. Just be mindful of what you’re getting into with the HO-8 before you decide if it’s the right policy for you.

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