HO-3 vs HO-5 insurance

Two types of homeinsurance are called “HO-3” or “HO-5”. Each type provides coverage for your home, your property, and liability coverage in the event of an injury to your home. The most popular homeowner policy in the U.S. is the HO-3.

An HO-5 policy, like an HO-3 policy, provides home and property coverage along with liability. HO-5 policies are often considered premium coverage because they cover a wider range of situations. It is important to know which policy type is best for you.

Different types of home insurance policies

There are eight types of homeowner policy forms, HO-1 to HO-8. These policies provide different levels of coverage for homeowners of mobile/manufactured and fixed-site homes, as well as renters. It is crucial to determine which type of coverage you need, if you’re a homeowner. This includes the differences between the HO-3 policy and the HO-5 policy.

It is helpful to understand the differences between them by defining two common insurance terms: named Perils, and Open Perils. Peril is the insurance term for anything that could cause damage to your house, such as a fire or a volcanic eruption.

Named perils

The HO-3 policy covers your personal property against damage due to a set of named perils. These perils are listed in the policy. These policies have 16 options. They are generally the same across the U.S. but may differ depending on where you live and what your insurer is. These are the most common named perils.

  • Lightning and fire
  • Hailstorms and windstorms
  • Explosions
  • Riots and civil unrest
  • Aircraft damage
  • Vehicles can cause damage
  • Smoke
  • Vandalism
  • Theft
  • Falling objects (such a tree that has fallen on your house)
  • The weight of sleet, snow, and ice
  • Unintentional overflow of steam or water
  • In household systems, sudden and accidental tearing or cracking, burning, or bulging
  • Freezing
  • An electrical current can cause accidental and sudden damage.
  • Volcanic eruption

Open perils

Open perils policies cover any peril that is not explicitly excluded by the policy. Flood damage, sewer backups or mold damage are all common exclusions.

Many insurance companies offer endorsements or additional coverage options that cover certain perils that may otherwise be excluded. Common endorsements, for instance, cover sewer backup damage.

HO-5 vs HO-3 policies

Both HO-3 policies and HO-5 policies provide open peril coverage to protect the structure of your house. There is a difference in the coverage you get for personal property. This covers everything, from clothing and electronics to curtains and furniture. The HO-3 policy does not cover personal property, except for the named perils. An HO-5 policy will provide open perils coverage to your belongings.

CoverageOpen perilsOpen perils
CoverageOpen perilsOpen perils
Personal Property CoverageNamed perilsOpen perils

It is always a good idea for you to review your policy documents and ask any questions. The exact coverage that you purchase may differ from one company to the next. Talking to your agent or company about the coverage of your homeowners policy is a good idea.

How to choose between an HO-3 and an HO-5

Premium policies are more expensive than HO-3 policies because HO-5 policies are considered premium policies. However, if you pay a higher premium, your personal assets will be covered in most loss scenarios, compared to if it were an HO-3.

An HO-5 policy will provide you with more coverage for personal property than an equivalent HO-3 policy. An HO-3 policy might be the right choice for you if you don’t have the funds for additional coverage or aren’t concerned about personal property coverage.

Questions frequently asked

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

Generally, yes. Because they provide greater coverage for personal property, HO-5 policies tend to be more expensive than those with HO-3. There are many factors that can impact the cost for homeowners insurance. These include where you live and where your home is. It may be helpful to get quotes from multiple insurance companies for both HO-3 or HO-5 policies.

I live in a flood area. Which is better? HO-3 or 5?

Flood damage will not be covered by either an HO-3 or an HO-5. You will need separate flood insurance to cover flood damage. This can be purchased through the National Flood Insurance Program. Flood insurance is also offered by private insurance companies. It may be worthwhile to get multiple quotes in order to compare premiums.

What is the replacement cost coverage for an HO-3 policy.

You will need to determine whether your policy covers actual cash value coverage. This subtracts depreciation from a payment, or replacement cost coverage. An HO-3 policy will have replacement cost coverage, but it’s more common to see an HO-5 policy. It is a good idea to ask questions as you work with your agent to create your policy.