HO-3 vs. HO-5 insurance policies: What's the difference?

The biggest difference between HO-3 vs. HO-5 insurance policies is how your personal property is covered. HO-5 policies offer more robust coverage for your belongings.

Headshot of Rachael Brennan

By

Rachael BrennanSenior Editor & Licensed Auto Insurance ExpertRachael Brennan is a senior editor and a licensed auto insurance expert at Policygenius. Her work has also been featured in MoneyGeek, Clearsurance, Adweek, Boston Globe, The Ladders, and AutoInsurance.com.

Edited by

Jennifer GimbelJennifer GimbelSenior Managing Editor & Home Insurance ExpertJennifer Gimbel is a senior managing editor and home insurance expert at Policygenius, where she oversees our homeowners insurance coverage. Previously, she was the managing editor at Finder.com and a content strategist at Babble.com.

Published|3 min read

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our editorial standards and how we make money.

There are several types of homeowners insurance, including HO-3 and HO-5 policies. Both offer coverage for the structure of your home, other structures on your property, your personal belongings, and personal liability. But they differ in how comprehensive the coverage is. 

The vast majority of homeowners have an HO-3 policy, which offers standard home insurance coverage that you’re likely familiar with. But if you’re in the market for more robust, comprehensive coverage for your belongings, an HO-5 policy might be a better fit.

Ready to shop for HO-3 vs. HO-5 insurance policies?

Get free quotes

HO-3 vs. HO-5 policies

Home insurance policies cover damage in two different ways: named peril and open perils. Named-peril policies only cover damage to your home and belongings caused by perils specifically listed on your policy, while open-peril policies cover damage caused by anything except the perils excluded from the policy.

Both HO-3 and HO-5 policies use open perils coverage for  damage caused to your home and other structures on your property (aka dwelling and other structures coverage). 

However, HO-5 policies also offer open-perils coverage for your personal property coverage, while HO-3 policies only cover your personal belongings for named perils.

HO-3 policy

HO-5 policy

Dwelling coverage

Open perils

Open perils

Other structures coverage

Open perils

Open perils

Personal property coverage

Named perils

Open perils

Dwelling claim reimbursements

Replacement cost

Replacement cost

Other structures claim reimbursements

Replacement cost

Replacement cost

Personal property claim reimbursements

Actual cash value

Replacement cost

Cost

Less expensive because it offers less robust coverage

More expensive because of additional coverage for personal property

Availability

Most common type of coverage, available to most homeowners

Only available to certain homeowners with a reduced risk of claims

Collapse table

Actual cash value vs. replacement cost coverage

When choosing whether an HO-3 or HO-5 policy is best for you, you’ll want to consider whether your belongings should be covered on an actual cash value or replacement cost basis.

Here’s how the two types of coverage compare:

  • Actual cash value: Pays to replace your property at its replacement value minus depreciation. This means the cost of wear and tear is subtracted from the claim reimbursement.

  • Replacement cost: Pays to replace your property with items of similar value at today’s prices.

HO-3 policies that come with actual cash value reimbursement for your belongings give you a much smaller payout for a claim, but you’ll enjoy lower rates. Alternatively, HO-5 policies that come with replacement cost value for your belongings give you a higher claim payout, but in turn you’ll pay higher rates.

Learn more >> Actual cash value vs. replacement cost coverage

What perils are covered by HO-3 vs. HO-5 policies?

HO-3 and HO-5 policies both cover your home on an open perils basis, which means the policy only covers damages listed in the policy. Here are some examples of common named perils:

  • Fire

  • Lightning

  • Hail

  • Theft

But HO-5 policies cover your personal property on a named perils basis, which covers everything except what is listed as excluded on the policy. Here are some examples of common exclusions:

  • Flood damage

  • Earthquakes

What perils aren’t covered by HO-3 and HO-5 policies?

There are several perils that aren’t covered by HO-3 and HO-5 policies, including:

Ready to shop for HO-3 vs. HO-5 insurance policies?

Get free quotes

When to consider an HO-3 policy

The majority of homeowners have an HO-3 policy and find it provides enough coverage to financially protect their home and belongings. If you own a home but don’t have any special situations that may require additional insurance coverage, an HO-3 policy is probably right for you.

Learn more >> HO-3 home insurance policies

When to consider an HO-5 policy

You may want to consider an HO-5 policy if you need additional coverage for your personal belongings. HO-5 policies don’t account for depreciation in your claim payouts and cover your belongings against everything except the perils specifically mentioned in your policy. But this benefit comes with higher premiums to compensate for the additional coverage. HO-5 policies are typically limited to those with newer homes and people living in areas at low risk of weather damage.

Learn more >> HO-5 home insurance policies

Why do I need home insurance coverage?

Home insurance coverage pays for damage to your home and personal belongings, which means you’ll be protected if your house catches fire or someone breaks into your home. It also protects you financially if someone is hurt on your property (or their property is damaged) and you’re found legally responsible.

How much home insurance do I need?

To protect yourself financially, you need to have enough homeowners insurance to:

The best way to make sure you have a sufficient amount of insurance is to work with an insurance expert who can help ensure your policy meets your needs. Our team of licensed insurance agents at Policygenius can help you compare quotes and find the best policy to fully protect your home and belongings.

Learn more >> How much home insurance do I need?

Ready to shop for HO-3 vs. HO-5 insurance policies?

Get free quotes

Frequently asked questions

What perils are excluded under an HO-3 policy?

The most common exclusions on an HO-3 policy are earthquakes, flooding, government action, intentional loss, neglect, nuclear hazard, ordinance or law, power surges that originate off your property, and war.

What does an HO-3 policy cover?

HO-3 policies offer coverage for your dwelling, other structures, personal property, personal liability, loss of use, and medical payments to others.

Author

Rachael Brennan is a senior editor and a licensed auto insurance expert at Policygenius. Her work has also been featured in MoneyGeek, Clearsurance, Adweek, Boston Globe, The Ladders, and AutoInsurance.com.

Editor

Jennifer Gimbel is a senior managing editor and home insurance expert at Policygenius, where she oversees our homeowners insurance coverage. Previously, she was the managing editor at Finder.com and a content strategist at Babble.com.

Questions about this page? Email us at .