HO-5 insurance

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HO-5 offers substantial coverage to homeowners with fewer exclusions compared to other types of policies. It’s ideal for anyone looking for the most comprehensive policy to protect their home and belongings.

What is HO-5 insurance?

An HO-5 policy is a type of homeowners insurance that covers open perils with the exception of certain exclusions for both your home and personal belongings. This differs slightly from a standard HO-3 homeowners policy, which only covers your personal possessions for named perils.

As an open peril policy, like an HO-5 insurance policy, will list out exclusions. That means your policy tells you what type of events are not covered, and everything else should be covered. Another notable feature of this premium insurance policy is that any claims are paid as replacement costs, not actual cash value. That means if you have damage done to your home or belongings, you’ll be reimbursed to replace them as new, not factoring in any type of depreciation.

When opting for an HO-5 policy, you may also have higher coverage limits for personal possessions like jewelry or electronics, without having to tack on additional coverage.

What does an HO-5 policy cover?

There are several components of an HO-5 policy:

  • Dwelling coverage: This is covered by open perils. So only events specifically listed as exclusions disqualify you from making claims on losses you incur.
  • Personal property: This is similarly covered on an open peril basis. You’ll likely also have higher limits on how much you can claim, along with some built-in flexibility to add more coverage to certain categories if needed. Check what those limits are as soon as you get coverage to see if you need to add any additional policies to cover something that’s particularly expensive.
  • Liability: The third part of an HO-5 policy is liability coverage. This protects you in case someone (or their property) is injured while at your home. It can cover legal fees and settlement costs if someone tries to sue you or it can be applied to an individual’s medical expenses without going to court.

HO-5 also covers loss of use, meaning you’ll be reimbursed for additional living expenses (like hotel and meal costs) if your home is damaged and you can’t live there during repairs. This provision is included in most standard homeowners insurance policies.

HO-5 policy exclusions

It’s smart to check your individual policy for a comprehensive list of HO-5 exclusions. However, it’s common to have the following 21 exclusions that would not cover your home or personal property.

  • Earth movement
  • Power failure
  • Nuclear hazard
  • Collapse
  • Settling or expanding
  • Mold, fungus or rot
  • Smog or corrosion
  • Ordinance or law
  • Neglect
  • Intentional loss
  • Construction theft
  • Birds or vermin
  • Typical wear and tear
  • Smoke from agricultural or industrial site
  • Water damage
  • War
  • Government action
  • Vandalism
  • Mechanical breakdown
  • Pollutant discharge
  • Owned animals

That might seem like a long list of exclusions. But remember that damage caused by anything else is covered. Plus, both your home’s structure and your personal property are covered when a loss occurs from anything other than an exclusion.

Who needs HO-5 coverage?

HO-5 policies may be right for people in a few different situations.

First, it’s a good option if your home is valued highly. You can ask an insurance agent what market value is usually recommended, although most will recommend you get this premium insurance if your home value is $750,000 or more. That way, you’re fully covered for more events, which is important when replacement costs get higher, either because you live in a high cost area or your home has a lot of expensive finishes — or both.

However, not everyone needs an expensive home to benefit from an HO-5 policy. Many homeowners opt for this comprehensive insurance as a financial safety net against potential damages. Depending on your claims history and credit score, you could potentially qualify for an affordable plan regardless of your home’s worth. Then your house and your personal possessions get that extra level of financial protection thanks to the open peril coverage.

Frequently asked questions

Where can I get HO-5 insurance?

Many insurers offer HO-5 insurance, making it easy to shop around and compare quotes. Don’t automatically assume that two offers of coverage are identical. There are a lot of details that can vary even within the same type of homeowners insurance. Look for things like replacement limits on items that are important to you. Also compare how much personal liability coverage you get — the higher, the better. Some insurers also may be willing to offer additional perks that could be attractive. Pay attention to these details compared to the cost of your annual premium to choose the insurance company that is best suited for your needs.

How much does HO-5 insurance cost?

The cost of an HO-5 policy will vary based on many factors, including the value of your home, where you live and the amount of your deductible. You’ll need to shop around for quotes for your specific situation. As expected, an HO-5 policy costs more than an HO-3; after all, you’re getting better coverage. Weigh the value of the coverage against the cost of the annual premium. Also think about how much you’d have to pay out of pocket when comparing open peril coverage to another option with more exclusions.

Is HO-5 better than HO-3?

In terms of coverage, HO-5 is better than HO-3. You get more coverage with higher limits to your claims. The list of exclusions on an HO-5 policy is much shorter compared to other policies, especially when it comes to covering personal property. Of course, that means you’ll have to pay more. It’s up to you to decide whether a more comprehensive homeowners insurance plan is better than a more affordable one.