HO-3 Homeowners Insurance Policy Explained
The most typical form of homeowners insurance coverage is a HO-3 policy, which covers all causes of damage to the main house and associated structures except those explicitly excluded in the policy, such as floods and earthquakes. Other types of homeowner's insurance plans are generally HO-3 policies.
Learn more about HO-3 homeowners insurance plans, including how they function and how they vary from other types of coverage.
Definition and Examples of an HO-3 Homeowners Insurance Policy
Damage to your residence, additional structures on the property, personal property, loss of use, personal responsibility, and medical costs are all covered under a HO-3 homeowners insurance policy.
Except for those expressly listed on the policy as exclusions, all perils, or sources of loss, are covered for damage to your house and other structures. Earthquakes, floods, wear and tear, negligence, and damage caused by freezing are all possible exclusions.
- Alternate name: Special Form Policy
NOTE:Your house and other structures are insured on a "all-risk" basis ( everything except named exclusions is covered). The contents of your house, or personal property, are insured on a "named-peril basis" (only damages from perils named are covered).
How an HO-3 Homeowners Insurance Policy Works
Property damage is covered by insurance policies if the loss was caused by a covered danger.
The types of property and the number of risks covered by homeowner's insurance policy differ. Typically, policies are classified as "open-perils," which cover all types of loss unless specifically excluded, or "named-perils," which only cover certain kinds of loss.
The special form, or HO-3, homeowners insurance coverage is a typical sort of homeowners insurance that includes features from both categories. An HO-3 homeowners insurance policy, like other homeowners policies, is divided into two sections: Section I (property coverages A, B, C, and D) and Section II (liability coverages E and F).
Here’s a description of each individual coverage and the general limits most insurers will provide:
Coverage A: Your Dwelling
Damage to your house and any buildings linked to it, including as plumbing fixtures, electrical wiring, and HVAC systems, is covered under dwelling coverage. A covered risk must have caused the damage. The limit of your dwelling coverage should be at least 80% of the entire replacement cost of your house.
IMPORTANT: Damage to your home and any other structures on your property is covered under an open-perils policy. Except for losses caused by risks explicitly excluded in the policy, an insurer will compensate you for property losses.
Coverage B: Other Structures
Damage to structures on your property that are not related to your house is covered by Coverage B. Free-standing garages, sheds, fences, and guest cottages are examples of covered constructions. This coverage is limited to 10% of your home coverage by insurers.
Coverage C: Personal Property
This coverage reimburses you for the value of your home's contents, personal belongings, and individuals who reside with you. Items lost or destroyed outside your property may also be covered. The coverage limit is normally 50% of your dwelling coverage or whatever amount you and your insurer agree on. Some high-value objects, commonly known as scheduled personal property, may be excluded from coverage. Personal property coverage is confined to specific dangers in a HO-3 policy.
NOTE: Your home's contents are insured on a named-peril basis. The wide form HO-2, which is a HO-2 insurance policy, is used to list these dangers. Damage from lightning, fire, and robbery are among them.
Coverage D: Loss of Use
If your house is deemed uninhabitable, this coverage helps pay for extra living expenses such as meals and accommodation. This coverage is limited to 20% of your home coverage by insurers. Typically, insurance providers do not compensate you for all of your living expenditures. They simply cover the difference between your regular and additional living expenditures.
Coverage E: Personal Liability
If you're sued or found legally accountable for damages or injuries to others, this coverage can assist offset your financial losses. In circumstances when you behaved deliberately, you are not protected. You set your personal liability coverage limits, which are normally a minimum of $100,000.
Coverage F: Medical Payments
This insurance covers medical expenses for persons who are injured on your property by accident. Those who reside in your house are not covered. You can set your own coverage limitations, which must be at least $1,000 in most cases.
TIP:Some insurance providers provide more extensive coverage by adding policy riders to the HO-3 policy that remove particular exclusions.
HO-2 vs. HO-3 Homeowners Insurance
Whether you own or rent, you can safeguard your house and belongings with a variety of home insurance products. Each package guards against a unique threat.
Customized policies are occasionally written and filed by insurance companies. Standard forms are available from rating agencies such as the Insurance Services Office Inc. for insurers that do not file their own policies (ISO).
The named-peril policy strategy and the open-peril policy approach, which are represented by HO-2 and HO-3 homeowners insurance, respectively, are the two most common techniques of insuring your property.
The named-peril insurance is a less expensive option that names all of the occurrences you're covered for in the case of a loss. The open-peril policy is a more expensive option that, although implying limitless coverage, lists exclusions you're not covered for.
WARNING: With a named-hazard policy, the policyholder must show that their property was damaged by a covered peril. With an open-peril policy, the insurer must show that an exclusion applies to the damage-causing event.
An HO-2 policy, also known as the Broad Form, is a basic homeowners insurance policy that covers all of the dangers covered by a HO-1 policy plus a few more. Your home, other structures, and personal belongings are all insured against risks that are specifically included in the policy.
The most common type of homeowners insurance is a HO-3 coverage. Except for those dangers explicitly excluded, it protects your home (and other structures). Your personal property, on the other hand, is covered by a named-dangers insurance, which protects you against damage or loss caused by perils mentioned in a HO-2 policy.
Key Takeaways
Except when the loss is caused by an excluded risk, a HO-3 homeowners insurance policy covers all causes of damage to your house and other structures.
The qualities of an open-peril policy and a named-peril policy are combined in a HO-3 homeowners insurance policy.
An HO-3 coverage protects your personal belongings from risks specified in the contract.
