Types of Homeowners Insurance Policies: Fire-Only, ACV, Replacement Cost & Rentals

Not every “home” policy is the same

Homeowners insurance is a category — not one product. The form type, valuation method, and how you use the property (owner-occupied vs. rental) all change what is covered and how claims are paid.

Standard homeowners (HO-3 and similar)

Most owner-occupied homes use a broad homeowners form (often called HO-3). It typically covers the dwelling for named or open perils (depending on the form), personal property, liability, and additional living expenses after a covered loss.

This is the starting point for many primary residences — but it is not the only option, and not every home qualifies for a standard market policy.

Fire-only (and limited dwelling) policies

A fire-only or heavily limited dwelling policy focuses on major perils like fire — and may exclude or severely limit other causes of loss such as wind, hail, water, or theft.

These policies are sometimes used when:

• The home does not qualify for a full standard homeowners policy
• The property is older, vacant, or higher risk
• The owner needs a basic financial backstop while improving insurability

Fire-only coverage is not a full homeowners substitute. If you have a fire-only policy, review carefully what is left unprotected.

Actual cash value (ACV) policies

Actual cash value pays the cost to repair or replace damaged property minus depreciation. Older roofs, flooring, and belongings may be valued for less than brand-new replacement.

ACV policies often cost less up front, but claim checks can be smaller — especially on older homes or aging roofs.

Replacement cost policies

Replacement cost coverage aims to pay the cost to repair or rebuild with like kind and quality without deducting depreciation (policy terms and limits still apply). Many homeowners prefer replacement cost on the dwelling and, when available, on personal property.

Ask whether your policy is:

• Replacement cost on the dwelling
• Replacement cost or ACV on personal property
• Subject to a roof payment schedule (some carriers pay roofs on ACV or a depreciating scale)

Market value vs. rebuild cost

Insurance should track rebuild cost, not necessarily what you paid for the home or what it would sell for. Underinsuring the dwelling is one of the most common coverage mistakes after a major fire or storm.

Rental home / landlord (dwelling) policies

If you own a home you rent to others, a standard owner-occupied homeowners policy is usually the wrong fit. Landlords typically need a dwelling fire / landlord policy (often in the DP form family).

Landlord policies commonly emphasize:

• Coverage for the building you own
• Lost rental income after a covered loss (when included or endorsed)
• Landlord liability for the rental property
• Limited or no coverage for a tenant’s personal belongings (tenants need renters insurance)

Short-term rentals and vacation properties may need specialty or endorsed coverage — tell your agent how the property is used.

Other home-related policy types you may hear about

• HO-5 — broader personal property coverage on many forms
• HO-6 — condo unit owners
• HO-4 — renters (tenant personal property + liability)
• Mobile / manufactured home policies — specialized forms and valuation rules
• Vacant home policies — when a property is empty for an extended period
• Builder’s risk — during construction or major renovation

Which type do you need?

Match the policy to how the home is used and how claims should be paid:

| Situation | Often fits | | --- | --- | | You live in the home full-time | Standard homeowners (replacement cost preferred) | | High-risk / limited market home | May see fire-only or restricted forms | | You want lower premium, accept depreciation | ACV options (know the tradeoff) | | You rent the home to tenants | Landlord / dwelling policy | | Condo or rental apartment | HO-6 or renters (HO-4) |

Get the right structure before a claim

Tan's Agency helps homeowners and landlords compare policy types, valuation options, and deductibles. Start a guided homeowners assessment, request a general quote for landlord properties, or call 469-269-6539.