What is an HO-5 policy?

An HO-5 policy is the most comprehensive form of homeowners insurance on the market, offering broad protection for both your home’s structure and personal belongings.

Pat Howard 1600

Pat Howard

Published June 25, 2020

KEY TAKEAWAYS

  • An HO-5 policy is a type of homeowners insurance that features more robust personal property coverage than a standard policy

  • With an HO-5, your belongings are covered against everything except the perils specifically mentioned in the policy

  • Your belongings are also covered at their replacement cost, meaning you’ll be reimbursed the value of new items after a loss

An HO-5 policy, also known as a comprehensive form policy, is a superior type of homeowners insurance, offering more protection for both your home and personal property than any residential policy on the market.

What sets an HO-5 policy apart from standard homeowners insurance is the level of protection for personal belongings like furniture, clothes, and appliances.

In a standard HO-3 policy, your personal belongings are covered against named perils, which refer to the 16 perils specifically listed in your policy. When you file a claim that involves your belongings, the burden of proof is on you to prove the damage or loss you’re claiming was caused by one of those perils.

In an HO-5 policy, your personal property is covered on an “all-risks” basis. Also known as open perils, this means you’re covered against everything except the perils exempt from the policy, such as earthquakes, flooding, and intentional acts. When you file an HO-5 claim involving your belongings, you don’t need to prove if the loss is covered or not — the burden of proof is on your insurance company.

In this article:

What is HO-5 insurance?

An HO-5 policy is the most comprehensive form of coverage on the residential market, providing open perils coverage and replacement cost claim settlements for your home and personal property. Around 14% of single-family homes are insured by HO-5 insurance, making it the second most popular form of residential coverage in the U.S. behind the HO-3 policy, which insures 79% of homes.

HO-5 insurance contains all the same coverages as its HO-2 and HO-3 cousins, protecting the structure of the home, detached structures, belongings, additional living expenses, personal liability, and guest medical payments. The biggest difference between the HO-5 and the other policy forms is the scope and quality of personal property coverage.

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Here’s a look at the different coverages in an HO-5 policy:

CoverageWhat does this coverage do?Loss valuation
Section I - Property Coverages
Coverage A - DwellingCovers the structure of your home and built-in appliancesReplacement cost
Coverage B - Other StructuresCovers detached structures on your propertyReplacement cost
Coverage C - Personal PropertyCovers your personal belongings both inside and outside the homeReplacement cost
Coverage D - Loss-of-usePays for additional living expenses while your home is being repaired
Additional CoveragesExplains all the additional coverages in a standard policy—like debris removal, loss assessment and ordinance or law—and the insured limits of each
Section II - Liability Coverages
Coverage E - Personal LiabilityPays for legal and medical bills if you're held liable for injury or personal property damage to someone else
Coverage F - Medical Payment To OthersIf a guest is injured in your home, it pays for their medical bills, regardless of who is at fault

What does an HO-5 policy cover?

An HO-5 covers the structure of your home, any other structures on the property, and your personal belongings against everything except the specific perils listed in the policy. That means if rain entered your home through an opening in the roof and damaged your furniture, you could file a claim without having to prove that the loss is covered. Conversely, if you were to file an HO-3 claim for the same loss, the onus would be on you to reference one of the 16 named perils as a covered loss. If you’re not able to do that, you may not be covered.

Here are some common perils covered by an HO-5 policy:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism
  • Theft
  • Falling objects
  • Weight of ice, snow, or sleet
  • Accidental discharge or overflow of water or stream
  • Sudden and accidental tearing apart, cracking, burning, or bulging of a built-in appliance like a water heater or centralized air conditioner or heating system
  • Freezing
  • Sudden and accidental damage from an artificially generated electrical current
  • Volcanic Eruption

What does an HO-5 policy not cover?

Although an HO-5 policy offers more protection than standard homeowners insurance, there are still a number of exclusions to be aware of. Here’s a look at what your HO-5 policy will not cover:

  • Ordinance or law
  • Earth movement
  • Water damage from flooding, sewer backups, or water that seeps up from the ground
  • Power failure
  • Neglect
  • War
  • Nuclear hazard
  • Intentional loss
  • Government action
  • Theft to a dwelling under construction
  • Vandalism or malicious mischief (if vacant more than 60 days)
  • Mold, fungus, or wet rot (except if it resulted from an accidental discharge or overflow of water)
  • Wear and tear
  • Mechanical breakdown
  • Smog, rust or other corrosion
  • Smoke from agricultural smudging and industrial operations
  • Discharge, dispersal, seepage of pollutants
  • Settling, shrinking, bulging, or expanding of parts of the structure like your foundation or walls
  • Birds, vermin, rodents, insects
  • Animals owned by insured

HO-3 vs HO-5

Policy typeDwelling coveragePersonal property coverageDwelling claim reimbursementsPersonal property claim reimbursements
HO-3Open perilsName perilsReplacement costActual cash value
HO-5Open perilsOpen perilsReplacement costReplacement cost

At the end of the day, you can’t go wrong with an HO-3 or HO-5 — both are light-years ahead of the basic form policies (dwelling fire, HO-1, and HO-2) in terms of coverage quality and availability. But if it’s between the two and you happen to own a lot of stuff, an HO-5 policy is your best bet for providing maximum protection for your personal belongings.

The two policy types also don’t differ in cost as much as you’d think. As of 2017, the average annual premium for an HO-3 was $1,211, while HO-5s averaged out to $1,292, according to the National Association of Insurance Commissioners (NAIC). Where you notice the biggest price discrepancy between the two insurance types is with high value homes, as homes with an insurable value of $500,000 or more had a $2,149 HO-3 premium, and a $2,839 HO-5 premium, on average.

One thing to keep in mind is that HO-5 insurance is usually intended for newer homes in areas at low risk of weather damage or other types of loss. Insurance companies generally avoid writing HO-5s in high-risk areas, as the broader personal property protection offered by these policies often means higher claim payouts. That, coupled with claim frequency, limits the availability of HO-5s in regions with considerable risk exposure.

About the author

Insurance Expert

Pat Howard

Insurance Expert

Pat Howard is an Insurance Editor at Policygenius in New York City and an expert in homeowners insurance. Previously, he was working as a freelance writer for the New York State Nurses Association and wrote for the Michigan Information Research Service. Pat has a B.A. in journalism from Michigan State University.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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