If you’re shopping for home insurance, there are several different policies you can choose from. The most common policy is HO-3, which offers standard protection against things like property damage and liability. However, you may need more or less coverage depending on your circumstances. Before you buy HO-3 insurance, check out the information in this article to learn more about what is and isn’t covered by this type of policy.

What is HO-3 insurance?

HO-3 insurance is a type of home insurance policy. It’s the most common home insurance policy, and is offered by almost every home insurance provider. HO-3 insurance includes dwelling, other structures, personal property, liability, medical payments, and additional living expenses coverage.

Other types of home insurance policies include HO-2 for high-risk homes, HO-4 for rental units, HO-6 for condos, and HO-8 for historical or architecturally significant homes.

The main difference between HO-3 insurance and other policies is the type of coverage it includes. HO-3 insurance includes open peril coverage for your dwelling and named peril coverage for your personal belongings. In comparison, HO-2, HO-4, HO-6 and HO-8 insurance policies typically include named peril coverage for both your personal property and dwelling.

Open peril

HO-3 policies include open peril coverage for your dwelling. That means any loss that is not explicitly excluded from your policy is covered. Here are the events that are typically excluded from open peril policies:

• Wear and tear
• Negligence
• Mold, rust or corrosion
• Pet damage
• Pests or rodents
• Earthquakes
• Floods
• Building code enforcement
• Government action

Named peril

HO-3 insurance includes named peril coverage for your personal property, which means your belongings are only covered from specific events listed in your policy. Examples of covered named perils include:

• Fire and lightning
• Smoke
• Hail and wind
• Riots
• Explosions
• Falling objects
• Theft
• Vandalism
• Weight of ice, snow, or sleet
• Accidental or sudden water damage

Who needs HO-3 insurance?

HO-3 insurance is the standard home insurance policy and it’s a good option for a majority of homeowners. Assuming your home is moderately priced and in relatively good condition, HO-3 insurance should provide adequate coverage. Keep in mind that HO-3 insurance is only available to homeowners, not renters or condo owners.

HO-3 insurance covers your dwelling under an open peril policy, so this type of insurance offers good protection from a number of potential hazards. However, HO-3 insurance covers your personal belongings under a named peril policy, which has limitations. If you own a lot of belongings, particularly high-value ones, it may be beneficial to purchase an add-on policy for added protection.

The table below includes the common coverage limits and limitations for personal property under an HO-3 insurance policy. 

What does HO-3 insurance cover?

Dwelling coverage

Dwelling insurance covers the physical structure of your home, as well as attached structures, like a garage or porch. Any damage that occurs to the exterior of your home, the roof or the foundation is covered by dwelling insurance. 

Other structures coverage

Other structures coverage protects detached structures on your property, like sheds, fences, guest houses, and even in-ground pools. If any detached structure on your property is damaged by a covered event, HO-3 insurance will provide financial compensation up to policy limits. 

Personal property coverage

Personal property insurance covers your personal items. This includes everything from clothing to furniture to electronics. Most insurance policies, including HO-3, have specific coverage limits for valuable items, like jewelry or coins. If you keep valuable personal property in your home, such as collections or antiques, you can buy endorsements to increase your coverage limits.

Liability coverage

Liability insurance protects your liabilities as a homeowner. Specifically, this type of coverage pays for your legal fees if you damage someone else’s property, or a guest injures themselves in your home, and you have to go to court. Liability coverage will compensate you for legal fees and settlements.

Medical payments coverage

If a guest or visitor gets hurt on your property, medical payments coverage will help pay for their medical fees. Medical payments coverage applies to everything from ambulance rides to scans to surgery. This type of coverage can be used even if you were not directly responsible for the person’s injury.

Additional living expenses coverage

Additional living expenses coverage, sometimes called loss of use, covers your living expenses if your home is damaged by a covered peril and you have to move out while it’s being repaired. Additional living expenses will cover things like hotel bills, restaurant visits, parking fees, laundry costs, and more. 

What does HO-3 insurance not cover?

Earthquakes

Earthquakes are not covered by homeowners insurance policies, including HO-3 policies. If your home is damaged or destroyed by an earthquake, you won’t receive any compensation from your insurance company if you have an HO-3 policy. However, fire damage resulting from an earthquake may be covered by some policies. To protect your home from other earthquake damage, you need to buy a separate earthquake insurance policy.

Flooding

Flood damage is also never covered by HO-3 insurance, or any other type of home insurance policy. Even after a major storm, any flood damage that occurs in your home must be paid for out-of-pocket unless you have flood insurance. If you live in an area with a high flood risk, you should purchase a separate flood insurance policy.

Neglect

Any damage determined to be the result of neglect is not covered by HO-3 insurance. This also includes general wear and tear. For instance, things like gradual foundation cracks, paint that is chipping off the walls or old and leaky pipes are not covered. 

How much HO-3 insurance do I need?

When you purchase HO-3 insurance, you need to decide how much coverage will be adequate. The exact amount of coverage you need depends on the rebuild value of your home, the value of your belongings and how much risk you can afford to take. Here are some things you should consider when determining how much HO-3 insurance to purchase:

• Your home’s replacement cost: With an HO-3 policy, you can choose your dwelling insurance coverage limit. It should at least be enough to cover the cost of rebuilding your home, which includes the average cost-per-square-foot in your area, the cost of labor and materials and the cost of windows, doors, flooring, etc. 
• The value of your personal items: As a general rule of thumb, your personal property coverage should be 50-70% of your dwelling coverage. If you own valuables or collectibles, you might need to raise your coverage limit or buy an endorsement.
• How much liability you face: Consider how much liability you face as a homeowner. If you frequently have guests over, or host dinner parties or events, you might want to raise your coverage limit for more financial protection.

Ho-3 vs Ho-5

Although an HO-3 policy is suitable for most homeowners, it doesn’t offer the highest level of protection. If you want more coverage than what HO-3 insurance includes, consider looking into an HO-5 policy. 

HO-5 insurance covers your dwelling and personal property on an open peril basis, and has higher coverage limits. If you’re on a budget, keep in mind that HO-5 policies do come at a higher premium for the extra coverage.

Differences Between HO-3 and HO-5

HO-3 insurance considerations

HO-3 insurance policies are a good option for most homeowners. However, there are some things you should consider before buying a policy. For example, HO-3 insurance only covers your personal belongings under a named peril policy, which means your coverage is limited. People who own a lot of high-value or expensive items may need to buy additional coverage.

Although HO-5 insurance is more expensive, it offers higher coverage limits, and is a better option for some people. Before you buy home insurance, it’s important to weigh the pros and cons of different policies and determine what makes the most sense for your budget and your living situation.  

The takeaway

• HO-3 insurance is the most popular type of home insurance policy.
• HO-3 covers your dwelling under an open peril policy, and your personal items under a named peril policy.
• HO-3 insurance does not cover earthquakes, floods, wear and tear, and negligence, among other things. 

HO-3 insurance is a standard home insurance policy that almost every property insurance company sells. It offers good coverage for the average homeowner, but there are some limitations. Homeowners who are looking for more coverage should consider purchasing an HO-5 policy, which includes higher coverage limits and open peril coverage for both your dwelling and personal property.