It is an enormous accomplishment to purchase a home, but also a significant investment. Homeowners insurance is one of the best ways you can protect your investment. The HO-3 Special Form policy is the most popular type of homeowners insurance. This policy covers your home and personal property. It is one of several types of homeowners policies available.
Understanding the differences will help you choose the right homeowners insurance policy to protect your financial assets in case of an unexpected loss.
What is HO-3 Insurance?
The most common home insurance policy is HO-3 insurance. It is offered by almost every private property insurance company. It covers your home, personal property, and your liability as homeowner at a high level.
Single-family, multi-family and townhouses can all be covered by HO-3 insurance policies. You must own the dwelling and live there in order to be eligible for an HO-3 insurance policy.
What is covered by an HO-3 policy?
A HO-3 policy provides basic coverages, which you won’t find in most homeowners insurance policies.
- 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.
- Coverage for medical payments: This coverage covers guests’ medical expenses in the event they are injured at your house.
- 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.
The type of coverage that HO-3 policies offer is what sets them apart from other policies. HO-3 insurance covers your home’s physical structure on an open-perils basis. This means that any loss not specifically excluded by your policy is covered.
Personal property is covered by HO-3 insurance on a named perils basis. This means that your personal items will only be covered for the specific perils listed in your policy. These are the more common perils. There are 16 named perils.
- Fire
- Windstorms
- Water damage from an accident
- Theft
- Weight of ice and snow
- Vandalism
- Explosions
- Freezing pipes
Another important thing about HO-3 policies, is that they provide replacement cost coverage for your home and most often your personal effects. This means that depreciation will not be included in your claim payout for a loss. Your property insurer will reimburse you the full amount of your item if it is damaged by a covered peril.
Exclusions from the HO-3 policy
Although HO-3 insurance covers your house on an open-perils basis it doesn’t cover all. Some exclusions are common:
- Earthquakes
- Floods
- Sinkholes
- Backup sewer
- Intervention by the government
- Wear and tear
- Lack of maintenance can cause damage
- Pest infestation or rodent invasion
- Corrosion, mold, and rust
- Pets can cause damage
It may be a smart idea to add coverage to your HO-3 policy depending on where you live. 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 has HO-3 coverage?
The HO-3 insurance policy is ideal for homeowners. This type of insurance is the most common in the United States. If you require coverage beyond what your policy allows, you can add an endorsement policy to your HO-3 insurance.
There are many other types of home insurance. An HO-5 policy is available if you live in a new house or an area with low crime and natural disasters. An HO-8 policy is available for older homes, particularly those that are historic or architecturally important. Both HO-5 insurance policies and HO-8 policies offer more coverage than HO-3 policies.
What are other types of home insurance?
There are many types of home insurance policies, just like there are multiple types of homes. Different coverages are offered by each home insurance policy.
- HO-1: This is the most basic home insurance policy. The coverage is limited to the home’s structure, attached structures, and permanent items such as carpets. The HO-1 policy covers claims only if the named perils are met.
- HO-2: Everything included in the HO-1 is offered on the HO-2, with limited liability protection. Personal property, detached structures and loss of use are all covered. This policy type can also be called a named perils policy.
- HO-4: This policy type is for renters, providing contents coverage and liability protection. You may be eligible for additional living expenses or guest medical payments. This policy is not covered by a structure and is only for named perils.
- HO-5: The HO-5 is considered the gold standard, offering the same coverage as the HO-3 but with higher coverage limits for jewelry and contents. This policy is usually offered to homeowners with high-value homes. Claims are made on an “open-perils” basis.
- HO-6: The HO-6 is usually for condo unit owners and some townhome owners and covers from the studs into the unit. The exterior of the home is covered by a separate HOA master insurance. It functions in the same way as an HO-3 policy, except that it has limitations on the structure.
- HO-7: The HO-7 policy covers mobile, modular, and manufactured homes. The coverage is similar to that of an HO-3, but the structure is covered on an open-perils basis and contents are covered on a named perils basis.
- HO-8: This policy type can be reserved for homes with historic or architectural significance that are hard or impossible to replace. The HO-3 standard coverage applies and claims are paid according to the named-perils basis.
Questions frequently asked
What is HO-3 insurance?
All of the standard home insurance coverages are included in HO-3 insurance, including dwelling, personal property and liability. Additional living expenses coverage is also available. While HO-3 policies protect your home’s physical structure on an open-perils basis (while your personal property is covered on a named perils basis), HO-3 policies also cover your personal possessions.
Where can I find HO-3 insurance coverage?
Most private insurance companies sell HO-3 homeowners insurance. Insurance can be purchased through either a national or local provider. You may be eligible for a bundle discount if your auto policy is already in force.
What is the cost of HO-3 insurance?
Cost of HO-3 insurance varies for each person. Your state, age and claims history are all factors that can impact your insurance rate. These factors are why it is so important to shop around to find the best insurance provider for you.
