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HO-3 Insurance

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A grandpa plays with his grandson in the living room while the family looks on.
Klaus Vedfelt/Getty Images
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Purchasing a home is a huge accomplishment, but it is also a big investment. One of the best ways to protect your new investment is with homeowners insurance. The most common type of homeowners insurance policy is the HO-3 Special Form policy. This policy provides coverage for the home and your personal belongings. It is one of several types of homeowners policies available.

Knowing the differences can help you find the right type of homeowners insurance to provide financial protection in the case of a covered loss.

What is HO-3 insurance?

HO-3 insurance is the most standard home insurance policy. Almost every private property insurance company offers it. At a high level, it covers your home, your personal belongings and your liability as a homeowner.

A crucial aspect of the HO-3 policy is the difference in coverage offered to your home compared to your belongings. Your home and structures fall under ‘open perils.’ Open perils provide coverage for any disaster unless otherwise excluded in your policy. Your belongings, however, fall under ‘named perils.’ Named perils only offer coverage for the losses listed, or named in your policy.

HO-3 insurance policies are available for single-family homes, multi-family homes and townhouses. To get an HO-3 policy, you have to own and live in the dwelling.

What does an HO-3 policy cover?

An HO-3 insurance policy offers basic coverage types that you will find with most homeowners insurance policies, including:

  • Dwelling coverage: Dwelling coverage protects your home’s structure and any attached structures, like a porch or garage.
  • Other structures coverage: Any detached structures, like detached garages, driveways, pools, sheds and fences, are typically covered under other structures coverage.
  • Personal property coverage: Personal property coverage protects your personal items, like clothing and furniture, from covered perils.
  • Liability coverage: Liability coverage will typically pay for your legal fees if someone gets hurt on your property or if you accidentally damage someone else’s property, and you go to court.
  • Medical payments coverage: Medical payments coverage will help pay for a guest’s medical expenses if they get injured at your home.
  • Additional living expenses: Additional living expenses help pay for your hotel, food, laundry and parking expenses if a covered peril damages your home and you have to relocate temporarily.

Remember that HO-3 insurance covers your personal property on a named-perils basis, which means your personal items are only covered from a list of specific perils that are written in your policy. There are typically 16 named perils, which include these more-common perils:

  • Fire
  • Windstorms
  • Accidental water damage
  • Theft
  • Weight from ice and snow
  • Vandalism
  • Explosions
  • Freezing pipes

Another thing to know about HO-3 policies is that they include replacement cost coverage for your dwelling, and typically for your personal belongings as well. That means depreciation is not factored into your claims payout after a loss. So, if a covered peril damages your items, your property insurer will reimburse you for the full value of the item.

HO-3 policy exclusions

Despite the fact that HO-3 insurance covers your home on an open-perils basis, it does not cover everything. In fact, some common exclusions are:

  • Earthquakes
  • Floods
  • Sinkholes
  • Sewer backup
  • Government intervention
  • Wear and tear
  • Damage due to lack of maintenance
  • Rodent or pest infestation
  • Rust, mold and corrosion
  • Damage from pets

Depending on where you live, it’s a good idea to purchase additional coverage to supplement your HO-3 policy. For instance, if you live in California, consider purchasing earthquake insurance. If you live in an area that is prone to hurricanes, like Florida or Louisiana, having flood insurance can save you a lot of out-of-pocket costs.

Who needs HO-3 coverage?

HO-3 insurance policies are ideal for the average homeowner. The vast majority of U.S. homeowners have this type of insurance. You can usually add endorsement policies to your HO-3 insurance if you need coverage above and beyond the policy limits.

However, there are other types of home insurance. If you live in a new home, somewhere that has a low risk of natural disasters and crime, you might qualify for an HO-5 policy. If you live in an older home, especially one that is historic or architecturally significant, you can purchase an HO-8 policy. Both HO-5 and HO-8 insurance policies provide more coverage than HO-3 policies.

What other types of home insurance are there?

Just like there is more than one type of home, there is more than one kind of home insurance policy. Each home insurance policy offers different coverage types:

  • HO-1: This is the most basic home insurance policy. Coverage is limited to the structure of the home, attached structures, appliances and permanently installed items like carpets. The HO-1 policy pays claims on a named-perils basis.
  • HO-2: Everything included in the HO-1 is offered on the HO-2, with limited liability protection. Detached structures, personal property and loss of use are also covered. This policy type is also a named-perils policy.
  • HO-4: This policy type is for renters, providing contents coverage and liability protection. Additional living expenses and guest medical payments may also be offered. There is no structure coverage and this is also a named-perils policy.
  • HO-5: The HO-5 is similar to an HO-3, but it covers your home and personal property on an open-perils basis. It also sometimes includes extra coverage for expensive items like jewelry. The HO-5 is typically offered to those in high-value homes.
  • HO-6: The HO-6 is usually for condo unit owners and some townhome owners and covers from the studs into the unit. A separate HOA master policy covers the home’s exterior. Besides the limitations on the structure, it functions much like an HO-3 policy.
  • HO-7: Mobile, modular and manufactured homes are covered by the HO-7 policy. Coverage is similar to an HO-3 but the structure is covered under an open-perils basis while contents are insured under a named-perils basis.
  • HO-8: This policy type is typically reserved for historic or architecturally significant homes that are difficult or impossible to replace. Standard coverage types apply like the HO-3 and claims are paid on a named-perils basis.

HO-3 vs. HO-4 policies

When it comes to HO-3 vs. HO-4 policies, the difference is straightforward. An HO-3 policy is a typical homeowners policy, while the HO-4 is a renters policy.

An HO-4 policy protects a renter’s possessions and provides liability coverage. Sometimes, it also includes coverage for additional living expenses. If a renter must relocate while their home is being repaired due to a covered loss, additional living expense coverage can help them pay for a hotel or temporary rental. HO-4 insurance does not cover the structure of the building you rent. Instead, the landlord covers the structure through a policy of their own.

HO-3 vs. HO-5 policies

HO-3 vs. HO-5 policies is an easier comparison, since they are both homeowners policies. An easy way to keep these policies straight is that the HO-5 policy is like an upgraded version of the HO-3. An HO-5 policy provides open-perils coverage for both your structure and your possessions. An HO-3, on the other hand, still covers your structure under open perils but gives named-perils coverage for your possessions. Additionally, an HO-5 policy can offer additional coverage for expensive items like jewelry, but not always.

In other words, there are more coverage restrictions on your possessions under an HO-3. This usually makes an HO-3 policy cheaper than an HO-5 policy.

Frequently asked questions

Written by
Elizabeth Rivelli
Insurance Contributor
Elizabeth Rivelli is a contributing insurance writer for Bankrate and has years of experience writing for insurance domains such as The Simple Dollar, Coverage.com and NextAdvisor, among others
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Insurance Writer & Editor