South Carolina Personal Lines Practice Exam

How is coverage typically written for HO-8 forms?

1. At replacement cost of the property

2. For the depreciated value of the property

3. For market value of the property

4. At a fixed dollar amount

The correct answer is: For market value of the property

The correct approach for coverage typically written for HO-8 forms is based on insuring the property for its market value. The HO-8 policy is designed specifically for older homes that may not be adequately covered under standard homeowner policies that use replacement costs. This type of policy takes into consideration the actual cash value of the property, which is influenced by the current market conditions and the condition of the home rather than the cost to replace it. The HO-8 is commonly utilized for homes that are deemed historic or have a unique construction that would make it financially impractical to replace them at current building costs. This is why determining coverage based on market value is appropriate; it reflects what the property could realistically sell for in today’s market rather than what it would cost to rebuild or repair it. While replacement cost coverage and depreciated value concepts apply to other forms of homeowner policies (like HO-3 or HO-5), the HO-8 form focuses on an outdated property’s market economics. Therefore, understanding this key difference helps clarify why market value is the right choice for homeowners seeking HO-8 coverage.