HO-3 vs HO-5 insurance

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The terms “HO-3” and “HO-5” refer to two types of home insurance. Both types provide coverage for your home and your property, as well as liability coverage if someone is injured at your home. However, HO-3 policies are the most common type of homeowner policy written in the U.S.

Like an HO-3, an HO-5 policy has home and property coverage as well as liability. But because HO-5 policies extend coverage to a broader range of situations, they are sometimes considered “premium” coverage. Knowing which type of policy is right for you is an important part of being a homeowner.

Types of home insurance policies

There are eight different types of policy forms available to homeowners, called HO-1 through HO-8. These forms provide varying levels of coverage for owners of homes, condos and mobile/manufactured homes, as well for renters. If you are a homeowner, it is important to know what type of coverage is best for you — in particular, the difference between the HO-3 and the HO-5 policy types.

To understand the differences between the two, it helps to define two commonly-used insurance terms: named perils and open perils. A peril, in general, is insurance terminology for something that can cause damage to your home, from a fire to a volcanic eruption.

Named perils

HO-3 policies cover your personal property from damage by a list of named perils that are spelled out in the policy. There are 16 of these, and they are generally the same throughout the U.S., though there might be differences depending on the state you live in and your insurer. The most commonly covered named perils are:

  • Fire and lightning
  • Windstorm and hail
  • Explosions
  • Riots or civil unrest
  • Damage caused by aircraft
  • Damage caused by vehicles
  • Smoke
  • Vandalism
  • Theft
  • Falling objects (such as a tree that falls on your house)
  • The weight of ice, snow and sleet
  • An accidental overflow of water or steam
  • Sudden and accidental tearing, cracking, burning or bulging in household systems
  • Freezing
  • Sudden and accidental damage due to an electrical current
  • Volcanic eruption

Open perils

A policy written to cover open perils means you are covered for any kind of peril not specifically excluded in the policy. Common exclusions include flood damage, sewer backups, mold or fungal damage, earthquakes and mechanical breakdowns.

Many insurers offer endorsements, or added coverage options, that will cover some of these additional perils that might otherwise be excluded. A common endorsement, for example, covers sewer backup damage.

HO-5 vs HO-3 policies

Both HO-3 and HO-5 policies include open peril coverage for the actual structure of your home. The difference between the two is the coverage for your personal property. This includes everything from your clothing and electronics to your curtains and furniture. HO-3 policies only cover personal property for named perils. If you want open perils coverage for your belongings, you will need an HO-5 policy.

HO-3 HO-5
Dwelling coverage Open perils Open perils
Other structures coverage Open perils Open perils
Personal property coverage Named perils Open perils

As always, it is a good idea to read your policy documents and ask questions, since the exact coverage you are purchasing may vary from company to company. If you are unsure what your homeowners policy covers, talking to your company or your agent might be a good idea.

How to choose an HO-3 or an HO-5

Since HO-5 policies are generally considered premium policies, they tend to cost more than HO-3 policies. However, by paying a higher premium, your personal property will be covered for most loss scenarios than if you purchased an HO-3.

If an HO-5 policy is within your budget, it is important to note that it will give you more extensive coverage for your personal property than an HO-3 policy. If you do not have the budget for the additional coverage, or if you are not concerned about having the additional coverage for your personal property, an HO-3 policy may be right for you.

Frequently asked questions

Is an HO-5 policy more expensive than an HO-3 policy?

Generally, yes. HO-5 policies are usually more expensive than HO-3 policies because they offer broader coverage for personal property. However, there are many factors that impact the cost of your homeowners insurance, including what state you live in and where in that state your home is located. Obtaining both HO-3 and HO-5 quotes from multiple insurance companies may help you determine which policy is right for you.

I live in a flood zone. Is an HO-3 or HO-5 better for me?

Neither an HO-3 nor an HO-5 will cover you for flood damage. To cover damage from floods, you will need a separate flood insurance policy. You can purchase this through the National Flood Insurance Program. Some private insurance companies also offer flood insurance, so it may be worth getting multiple quotes to compare premiums.

Can I get replacement cost coverage with an HO-3 policy?

Whether your insurance policy includes actual cash value coverage, which subtracts depreciation from a payout, or replacement cost coverage is something that you will work out when you purchase your policy. Many insurers do offer replacement cost coverage as an endorsement with an HO-3 policy; it is more likely to be standard with an HO-5. As always, it is best to ask questions when you are working with your agent to design your policy.