More on Home Insurance
More on Home Insurance
If you have homeowners insurance, you most likely have what’s called an HO-3 policy — the most common type of home insurance policy in the industry. Also referred to as the Homeowners Policy Special Form 3, an HO-3 is the form or template behind most standard homeowners insurance policies.
Your HO-3 policy form is essentially the insurance manual that breaks down how each of the six coverages in your policy work. It also details which perils are covered and which aren’t. But since no one person should ever go through the trouble of deciphering this 22-page collection of legalese, we did the dirty work and highlighted the important information you should know about.
An HO-3 policy is insurance-speak for “standard homeowners insurance”, but it also refers to the specific legal document that states what the insurance company covers and what they don’t cover
With an HO-3 policy, your home and detached structures on your property are protected from “open perils” meaning all risks (minus the ones specifically excluded from your policy), and “named perils” for your personal belongings which cover 16 specific risks
Common exclusions in an HO-3 policy include floods, earthquakes, regular wear and tear, and water damage
An HO-3 policy is just standard homeowners insurance, it covers your home and personal belongings from unexpected damage and also covers your liability in case you’re responsible for injury or property damage. There are eight different types of home insurance — one suited for renters, one for condo owners, and so on — but HO-3 policies, which cover standalone homes, are the most common type.
Here’s a look at the coverages included in a standard homeowners insurance policy and the typical reimbursement limits of each component:
|COVERAGE||WHAT DOES THIS COVERAGE DO?||WHAT IS THE INSURED COVERAGE LIMIT?|
|Section I - Property Coverages|
|Coverage A - Dwelling||Covers the structure of your home and built-in appliances||The home's replacement cost|
|Coverage B - Other Structures||Covers detached structures on your property||10% of the dwelling limit|
|Coverage C - Personal Property||Covers your personal belongings both inside and outside the home||50% of the dwelling limit|
|Coverage D - Loss-of-use||Pays for additional living expenses while your home is being repaired||20% of the dwelling limit|
|Additional Coverages||Explains all the additional coverages in a standard policy — like debris removal, loss assessment and ordinance or law — and the insured limits of each||Varies by coverage|
|Section II - Liability Coverages|
|Coverage E - Personal Liability||Pays for legal and medical bills if you're held liable for injury or personal property damage to someone else||$100,000-$500,000|
|Coverage F - Medical Payment To Others||If a guest is injured in your home, it pays for their medical bills, regardless of who is at fault||$1,000-$5,000|
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There are two categories of property damage protection within an HO-3 policy: open perils, also called all risks coverage for your home and detached structures on your property and named perils coverage for your personal belongings.
Open perils coverage covers your home and other structures against every peril except for those specifically excluded from your policy. With named perils coverage, your personal property is covered against the 16 perils named in your policy, including:
Windstorm or hail
Weight of ice, sleet, or snow
Vandalism and malicious mischief
Sudden and accidental damage to water heater or HVAC
Riot or civil commotion
Section I of an HO-3 policy includes a list and description of both insured perils, the damage you’d be reimbursed for if you filed a claim for a loss and excluded perils, the damage that wouldn’t be covered.
Common HO-3 exclusions include:
Earthquakes, sinkholes, and other earth movements
HO-3 policies do not cover flood damage — in fact, none of the eight basic types of home insurance will cover flooding. But you can purchase flood insurance which is separate, additional coverage that protects your home from water damage caused by storm surges, high tides, overflowing lakes and rivers, and other natural floods.
➞ Learn more about flood insurance
HO-6 policies are designed for condo owners and are the second most common type of homeowners insurance. Both HO-3 and HO-6 policies feature open perils coverage for the dwelling and other structures portions of your policy and named perils coverage for personal belongings, but the main difference between the two is the particulars of dwelling coverage, or the structure of the home or condominium.
Since your condo or co-op building’s HOA insurance or master policy includes a certain amount of coverage for the structure of the unit (typically the interior walls, floors, electrical wiring, and plumbing), an HO-6 essentially acts as supplemental coverage for what’s already covered by the HOA policy. If your condo is renovated or repaired, for example, your HO-6 dwelling coverage should be enough to cover whatever upgrades were made.
➞ Learn more about the different types of homeowners insurance policies
Pat Howard is a homeowners insurance editor at Policygenius in New York City. He has written extensively about home insurance cost, coverage, and companies since 2018, and his insights have been featured on Investopedia, Lifehacker, MSN, Zola, HerMoney, and Property Casualty 360.
Stephanie Nieves is an insurance editor at Policygenius in New York City, specializing in auto and home insurance. She's been writing about insurance, finance and financial planning since 2018, and loves helping readers get the knowledge they need to make financial decisions with confidence. Her words can also be found on PayScale, Fairygodboss, and The Muse.
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