Which policy form is appropriate for insuring an older home with replacement cost greater than market value?

• A. HO-8
• B. HO-3
• C. HO-6
• D. HO-4

Answer: (A)

When an older home has a replacement cost that’s higher than what the home is worth in the market, the best fit is the HO-8 form, the older-home coverage form. This policy is designed for such properties and settles losses on actual cash value rather than replacement cost, so the payout reflects the home's market value after depreciation rather than the cost to fully rebuild it. That alignment helps keep insurance affordable and appropriate for a house whose rebuild price exceeds its current value. By contrast, the standard HO-3 form provides replacement-cost coverage for the dwelling (more typical for newer homes), while HO-4 and HO-6 are for renters and condo owners, respectively. So HO-8 is the right choice for an older home where replacement cost exceeds market value.