HO-3 homeowners insurance policy, explained

It’s the most common type of homeowners insurance policy, providing comprehensive protection for your home, belongings, and liability at an affordable rate.

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Pat Howard

Pat Howard

Managing Editor & Licensed Home Insurance Expert

Pat Howard is a managing editor and licensed home insurance expert at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

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Michael Reynolds, CSRIC®, AIF®, CFT-I™

Michael Reynolds, CSRIC®, AIF®, CFT-I™

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Michael Reynolds, CSRIC®, AIF®, CFT-I™, is a financial advisor, principal and founder of Elevation Financial, host of the weekly personal finance podcast Wealth Redefined®, and a member of the Financial Review Council at Policygenius.

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An HO-3 policy is the standard homeowners insurance policy offered by insurance companies, accounting for around 80% of all policies today. [1] Also called a special form or open perils policy, HO-3 insurance covers your house against every cause of damage except for those specifically listed in the policy. It also covers your personal belongings against certain types of damage or theft, and your liability expenses if you’re legally responsible for an injury.

While most standard HO-3 policies have the same coverages and protect against the same perils, they can also look vastly different depending on your provider and where you live. Be sure to read your individual policy so you understand what’s covered and whether you need any additional protection.

Key takeaways

  • With HO-3 insurance, your home and additional structures on your property are protected with the more comprehensive open perils coverage, while your belongings are protected with named perils coverage.

  • HO-3 insurance is popular because it covers your home against common perils, including fire, wind, and theft, while not costing as much as the more comprehensive HO-5 policy.

  • Sometimes referred to as a package policy, HO-3 insurance can help pay for property  damage, temporary lodging after a disaster, and legal expenses if you’re liable for an injury.

  • HO-3 policies do not cover damage caused by flooding.

What is an HO-3 policy?

An HO-3 policy is a basic homeowners insurance policy that covers your home, possessions, and personal liability in the event of a covered loss. The policy itself functions as a home insurance user manual of sorts, explaining who is covered, what is covered, what you’re covered against, and how to use your insurance in the event of a loss.

HO-3 policy coverages, explained

A standard HO-3 homeowners insurance policy is made up of six coverages.

Coverage

What it does

Coverage limit

Section I - Property Coverages

Coverage A: Dwelling

Pays to repair or rebuild your house and structures attached to it

Home’s rebuild cost

Coverage B: Other Structures

Pays to repair or rebuild your shed, guest house, fence, or other detached structures

10% of dwelling coverage limit

Coverage C: Personal Property

Pays to repair or replace furniture, electronics, kitchen appliances, and other stuff you own

50% of dwelling coverage limit

Coverage D: Loss of use

Pays for hotel stays, restaurant bills, and other temporary expenses if you can’t stay in your home while it’s being repaired after a covered loss

30% of dwelling coverage limit

Section II - Liability Coverages

Coverage E - Personal Liability

Pays for legal and medical bills if you're held liable for an injury

$100,000 to $500,000

Coverage F - Medical Payment To Others

Pays for your guests' medical bills from minor injuries — regardless of who is at fault

$1,000 to $5,000

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What perils are covered by HO-3 insurance?

In an HO-3 policy, your dwelling and other structures have open perils coverage, and your belongings have named perils coverage.

Named perils 

Named perils are the 16 perils you’re covered against that are specifically listed in your policy. If you file a claim for personal property damage, the burden of proof is on you to prove the loss was caused by one of the following 16 named perils. 

1. Fire or lightning

2. Windstorm and hail

3. Explosion

4. Riot or civil commotion

5. Damage caused by aircraft

6. Damage caused by vehicles

7. Smoke

8. Volcanic eruption

9. Vandalism and malicious mischief

10. Theft

11. Falling objects

12. Weight of snow, ice, or sleet

13. Accidental discharge/overflow of water

14. Sudden tearing/cracking of appliances

15. Freezing

16. Power surges

Open perils

Open perils coverage means you’re covered against all causes of loss except the specific exclusions listed in your policy. When you file a claim for damage to the structure of your home, the burden of proof falls on the insurer to prove the damage or loss is not covered by your policy.

Common home insurance policy exclusions include:

  • Earthquakes

  • Flooding

  • Government action

  • Intentional loss

  • Neglect

  • Nuclear hazard

  • Ordinance or law

  • Power surges that originate off your property

  • War

HO-2 vs. HO-3 vs. HO-5 policies

There are several types of homeowners insurance policies for various property types and coverage needs. An HO-4 policy, for example, is specifically to protect renters. And an HO-6 policy is designed primarily for condo owners. But there are a few different policy types that can be used for owner-occupied single family homes: 

  • HO-2 policy: Also known as broad form insurance, HO-2 insurance is the cheapest and most limited home insurance policy option. It covers your home, additional structures, and belongings from the 16 named perils listed above. 

  • HO-3 policy: With HO-3 insurance, your home and additional structures on your property are protected with the more comprehensive open perils coverage, while your belongings are protected with named perils coverage.

  • HO-5 policy: Also called comprehensive form insurance, HO-5 insurance is the most expensive and robust type of homeowners insurance you can buy. It covers your home, additional structures, and personal belongings with open perils coverage.

Frequently asked questions

What’s the difference between an HO-3 and HO-6 policy?

HO-6 policies are designed for condo and co-op owners, while HO-3 insurance is intended for owner-occupied single-family homes. In terms of coverage, HO-6 policies protect both the condo structure and personal property with named perils coverage, while HO-3 policies have open perils coverage for the dwelling and named perils coverage for personal property.

Does an HO-3 policy cover flood damage?

HO-3 policies do not cover damage caused by flooding, regardless of the cause. To cover your home and belongings from flood damage, you’ll need to purchase separate flood insurance.

Why is it called an HO-3 policy?

Most home, condo, and renters insurance policies are based on standardized “forms” written by the Insurance Services Office (ISO), a company that provides advisory services to the property and casualty insurance industry. The HO-3 policy form is the standard home insurance policy form for owner-occupied single family homes, accounting for the vast majority of active policies.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

editorial standards.
  1. National Association of Insurance Commissioners

    . "

    Dwelling Fire, Homeowners OwnerOccupied, and Homeowners Tenant and Condominium/Cooperative Unit Owner’s Insurance Report: Data for 2018

    ." Accessed January 05, 2022.

Author

Managing Editor & Licensed Home Insurance Expert

Pat Howard

Managing Editor & Licensed Home Insurance Expert

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Pat Howard is a managing editor and licensed home insurance expert at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

Expert reviewer

Michael Reynolds, CSRIC®, AIF®, CFT-I™, is a financial advisor, principal and founder of Elevation Financial, host of the weekly personal finance podcast Wealth Redefined®, and a member of the Financial Review Council at Policygenius.

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