Basic form vs special form homeowners coverage

Property policies are built on one of two logics. A basic form names the perils it covers, and anything not on the list is not covered. A special form covers direct physical loss from any cause, then lists the causes it will not pay for. The words on the declarations page are dry, but they decide whether a burst pipe, a collapsed patio cover or a scraped floor is a claim or an out-of-pocket repair.

Most owner-occupied homes in the region are insured on a special form, often labelled HO-3. Basic forms still show up regularly, though: on rental dwellings, vacant or seasonal houses, older homes that do not meet a carrier's standard underwriting, some manufactured homes, and properties placed with non-admitted carriers. Knowing which one you hold, and what the gap between them looks like, is the whole point of this comparison.

What a basic form covers

A basic form, known as HO-1 on older homeowner forms and DP-1 on dwelling fire policies, lists a small group of perils. The core list is fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke and volcanic eruption. Some versions add vandalism and theft; many dwelling fire forms leave theft out entirely or offer vandalism only as an add-on. Settlement on the structure is often at actual cash value rather than replacement cost, which means depreciation comes out of the payment.

A broad form, HO-2 or DP-2, sits between the two. It keeps the named-peril approach but adds items that matter a great deal in real houses: falling objects, the weight of ice, snow or sleet, sudden and accidental discharge of water from plumbing or appliances, freezing of plumbing, sudden cracking of a heating or cooling system and electrical surge damage from artificial sources.

What a special form covers

A special form, HO-3 for owner-occupied homes and DP-3 for rental dwellings, covers the structure on an open-peril basis. The insuring agreement pays for direct physical loss to the dwelling unless the cause falls within an exclusion. On an HO-3, personal property is still covered on a named-peril basis using the broad form list; an HO-5 or an endorsement extends open-peril treatment to contents as well.

The exclusions on a special form are where attention belongs. They typically include flood and surface water, earth movement, wear and tear, gradual deterioration, settling and cracking, rust and corrosion, insects and rodents, mould beyond a small sublimit, neglect, intentional acts, and water that seeps over weeks rather than escaping suddenly. Sewer backup and ordinance or law costs are usually excluded unless added by endorsement.

The mechanism that actually differs: the burden of proof

The lists matter, but the deeper difference is who has to prove what. Under a named-peril form the policyholder must show that the damage was caused by one of the listed perils. If the cause is unclear, or is something the drafters never listed, the claim fails. Under an open-peril form the loss is presumed covered, and the carrier must show that an exclusion applies before it can deny.

That shift changes how borderline claims resolve. An oddly shaped loss, such as a contractor's ladder falling through a skylight, a child's toy cracking a glass shower enclosure, or paint poured down a hallway during a move, has no obvious home on a named-peril list. On an open-peril form, the question is simply whether any exclusion fits, and often none does. The special form costs more because it pays for this category of surprises.

A worked water loss

Suppose a landlord owns a 1970s duplex in Ogden and insures it on a DP-1 with a $1,000 deductible and actual cash value settlement. During a January cold snap, the tenant on one side travels for a week, the heat is set low, a supply line in an exterior wall freezes, and it bursts when temperatures rise. Water runs for a day before a neighbour notices. Say drywall, flooring, insulation and cabinets on both sides need $18,000 of work, and the tenants need a place to stay.

Freezing and water discharge are not on the basic form's list, so the DP-1 pays nothing toward the repair, and it would not have paid for the lost rent either unless fair rental value coverage was purchased. Now suppose the same duplex carried a DP-3 with replacement cost settlement and the same deductible. The open-peril form treats the burst pipe as covered, since sudden discharge is not excluded, and pays roughly $17,000 plus any fair rental value coverage on the policy. The carrier might still question whether reasonable heat was maintained, because many forms condition freezing coverage on that. The figures are illustrative; the comparison is between a claim and no claim at all.

Who each form suits

The special form is the right default for a house someone lives in. The basic form is a deliberate choice in narrower circumstances.

• A special form suits nearly every owner-occupied home with a mortgage, and many lenders will accept nothing less on the dwelling.
• A special form also suits a rental property whose owner depends on the rent and cannot absorb a large uninsured water or accidental loss.
• A basic form can make sense for a vacant or unoccupied house, a property awaiting demolition or major renovation, or a structure that does not qualify for a special form, where the realistic choice is basic coverage or none.
• A basic form can also suit a paid-off, low-value rental whose owner has the savings to self-insure most losses and wants only catastrophe protection from fire and wind.
• A broad form is worth pricing whenever a special form is unavailable, because it adds freezing and water discharge, the two perils most likely to matter in a cold-winter market.

Regional context

Fire, windstorm and hail sit on every form, so the region's signature losses from monsoon wind in Arizona, microbursts around Las Vegas and hailstorms along the Wasatch Front and in the Treasure Valley are covered whichever form applies. Flood and earth movement are excluded under both, which is why flood and earthquake coverage are separate conversations. The gap shows up in the losses that come with cold weather and absent owners. Freezing pipes and snow load are real risks in Utah, Idaho, northern Nevada and Arizona's high country, and seasonal homes left empty by winter visitors to Phoenix, Tucson or St. George are exactly the kind of property that ends up on a basic or vacancy form without the owner realising what fell away.

When to keep what you have

If the declarations page shows HO-3, HO-5 or DP-3 and the home is occupied as described, the form is already the appropriate one; the more useful review is of the dwelling limit, the water backup and ordinance or law endorsements and the deductible. If a rental or vacant property is on a DP-1 because nothing else was available when it was placed, it is worth asking again once the house is occupied, renovated or has a clean claim history, since the property may now qualify for a broader form. And if a basic form is covering a property the owner has consciously chosen to self-insure, that can be a reasonable decision that needs no change. We read the policy form itself, not only the declarations, and compare it across the carriers we represent in Arizona, Nevada, Utah and Idaho; if the current form is right, that is what we tell you.