A homeowner wants coverage for an old home built in 1850 with high replacement cost but low market value. Which policy would BEST suit this customer?

• A. HO-8
• B. HO-3
• C. HO-5
• D. HO-4

Answer: (A)

When a home is very old, especially one built in 1850, its market value can be quite low while the cost to rebuild could be high due to unique construction and historic materials. You want a policy that doesn’t base payment on replacement cost, which would push premiums up or create over-insurance relative to what the home is worth. The best fit here is the form designed for older or uniquely constructed homes, because it settles claims at actual cash value rather than replacement cost. This means the dwelling is insured for its depreciated value, which aligns better with the low market value while still providing coverage for loss. The other policies typically provide replacement-cost coverage for the dwelling, which would be more expensive and may not reflect the home’s true market value. Renters coverage isn’t applicable to a homeowner. So, using the actual-cash-value approach makes HO-8 the most sensible choice for this scenario.