What is the primary difference between HO-2 and HO-3 insurance forms?

The primary difference between HO-2 and HO-3 insurance forms lies in how coverage is defined for the property. The HO-2 form, also known as the Broad Form, provides coverage that is specifically listed; it enumerates the perils that are covered, such as fire, theft, and certain types of water damage. This means that if a peril is not included in the list, it will not be covered.

On the other hand, the HO-3 form, known as the Special Form, operates on a different principle as it typically covers the structure of the home on an open-peril basis. This means that it provides coverage for all risks unless they are explicitly excluded in the policy. This approach offers a broader range of protection for homeowners as it assumes more risk by covering everything that is not mentioned as excluded.

Understanding this distinction is crucial when choosing between these two forms of insurance, as it significantly affects the level and type of coverage a homeowner or property owner can expect in the event of a loss.