What Is An HO-3 Homeowners Insurance Policy?

Most insurance companies' standard homeowners insurance is some kind of an HO-3 policy. It's also called an open perils policy, as it covers homes for all dangers except those specifically excluded in the terms. You should always research a policy before buying one, to ensure you fully understand the scope of the coverage.

HO-3 insurance policy definition

Also called a homeowners policy special form, an HO-3 policy is the most common form of home insurance. What separates an HO-3 from policies with more limited coverage — such as HO-1 and HO-2 — is that your dwelling is covered against all perils except those specifically listed as exclusions. This type of coverage is called an open perils policy, with a peril defined as any risk or cause of loss to your home.

On the other hand, damage to your personal property — an item not considered part of the home or land — is only covered on a named perils basis with an HO-3. This means the cause of damage has to be explicitly stated in the HO-3 form to ensure coverage.

Most HO-3 policies offer six primary coverage types.

HO-3 coverage features

HO-3s are typically based on homeowners policies written by the Insurance Services Office (ISO), a company that provides data and advisory services to the insurance industry. However, the fact that a policy is based on the standard ISO HO-3 is no guarantee that it adheres precisely to those standards. Nor do different insurance companies offer the exact same coverage in their individual HO-3 policies.

You should always discuss a prospective policy with your insurance agent so you fully understand the scope of coverage.

What events are covered by an HO-3 homeowners insurance policy?

HO-3 policies are an invaluable financial safeguard against a variety of events and disasters. The foundation of an HO-3 policy is its property damage coverage, but it also protects against legal liability, injuries and the costs of living away from home after an emergency.

HO-3 policies cover dwelling damage

The primary purpose of HO-3 special form homeowners insurance is to cover your dwelling. Being covered means your insurance company will reimburse you for damage to the dwelling — the structure of your home — up to the policy limits. HO-3 policies cover a variety of common hazards, and any perils it excludes must be explicitly listed in the policy.

Below are some of the most common perils. HO-3 policies almost always cover these and many more.

Exclusions may vary by company, but certain perils are almost always omitted from standard HO-3 insurance policies. The most notable are flood and earthquake damage, but exclusions can go beyond these dangers. You should always read your HO-3 policy to understand which events aren't covered.

Dwelling coverage also extends to other structures on your property, such as fences and freestanding garages. Coverage is typically up to 10% of the overall limit.

HO-3 policies cover personal property damage

Although HO-3 policies cover your dwelling on an open perils basis, personal property coverage is usually on a named perils basis. This means your personal belongings — clothes, furniture, appliances — are only covered by dangers specifically cited in your HO-3 policy.

A standard HO-3 policy usually covers many or all of the common perils above. Effectively, your personal belongings are, too, but named perils coverage is not as thorough. Read all the named dangers before buying a policy to ensure you're fully covered.

You should also note that some personal belongings — specifically, high-value items — are only covered up to specified sublimits. Items that are assigned sublimits are only covered for damage or theft up to that lower limit, not your full limit.

HO-3 policies cover liability expenses and costs of living elsewhere

HO-3 homeowners insurance covers you for a number of expenses related to your home beyond your physical property. Common coverages include personal liability, loss of use and medical payments.

The most important of these is personal liability coverage. This covers you for expenses related to bodily injury or property damage you're liable for, including defense in court (chosen by the insurance company). A standard HO-3 policy includes $100,000 in liability coverage, but you can usually up this number by hundreds of thousands of dollars — at a limited cost.

Loss of use coverage, also called additional living expenses coverage, reimburses you for expenses above and beyond your norm if your home is made uninhabitable by a covered peril. For example, loss of use would cover the costs of a hotel or Airbnb. Coverage is usually limited to a period of time or dollar amount, with the latter usually set at 10% of your overall dwelling limit. Some companies may allow you to adjust your limit if you want more coverage.

Finally, an HO-3 policy covers a limited amount of medical payments. This pays for medical bills if someone is hurt on your property or by your pet. This is unrelated to legal liability and provides limited reimbursement for basic medical expenses. You choose the limits, which are generally only a few thousand dollars.

What are HO-1, HO-2, HO-4, HO-5 and HO-6 policies?

Although the special form HO-3 is the most common type of homeowners insurance policy, it's not the only kind available. Some companies offer other types, including HO-1 and HO-2, which provide more modest levels of coverage, or HO-5 forms, which have more generous coverage.

Similar policy forms can have slight variations in names and coverage, such as the HO-B, an alternate version of an HO-3 policy. Finally, HO-4 and HO-6 are targeted at renters and condo owners, respectively, and provide different types of coverage to fit their needs.

HO-3 vs. HO-1 or HO-A policies

An HO-1, also called the basic form, is a named perils policy for both dwelling and personal property. As the most stripped-down homeowners insurance policy, HO-1 forms cover fewer perils than an HO-2 or HO-3.

Compared with an HO-3 policy, the most notable perils excluded from HO-1 coverage are damage from falling objects, including trees; damage from the weight of ice, snow or sleet; and non-flood water damage.

HO-1 policies are no longer available in most states due to their sparse coverage. Texas homeowners might see this type of policy referred to as HO-A insurance, but its definition remains the same.

HO-3 vs. HO-2 policies

An HO-2 policy, also called the broad form, offers more coverage than an HO-1 but less coverage than an HO-3. Like the HO-1, an HO-2 is a named perils policy, so your dwelling is only covered for the types of damage specifically named in the policy.

However, as its form name suggests, a typical HO-2 provides a broader range of coverage than an HO-1.

This list only shows what may be included. As a named perils policy, an HO-2 is not guaranteed to cover any individual peril on the list. While an HO-2 will only cover you if a peril is explicitly named in the policy, an HO-3 will cover you for everything not specifically excluded.

HO-3 vs. HO-B policies

You may be offered (particularly if you live in Texas) an HO-B policy when shopping for insurance. An HO-B is very similar to an HO-3.It provides open perils coverage for your dwelling and named perils for your personal property. However, HO-B policies are targeted to homeowners near coastal areas and generally have broader coverage for water damage.

HO-3 vs. HO-4, HO-5 and HO-6 policies

Other policy forms cater to specific types of homeowners or residents. An HO-5 policy is the broadest homeowners insurance policy, offering even more generous coverage than an HO-3. One of the key features of an HO-5 policy versus an HO-3 is that open perils coverage is extended to personal property, providing extensive protection of your dwelling and your belongings.

HO-4 policies, also called renters insurance, are for tenants. When you rent an apartment, your landlord is responsible for damage to the structure of the building. You're only responsible for your own possessions.

Finally, HO-6 policies are for condo owners. HO-6 coverage reflects the fact that condo owners do not always take responsibility for the cost of unexpected damage to common areas of their building or built-in property within the condo, such as fixtures and appliances.

Comparing HO-3 to HO-6 (condo insurance) policies, an HO-6 provides personal property, liability and loss of use coverage while excluding the unnecessary dwelling coverage included in an HO-3.