What is an HO-3 Insurance Policy?
HO-3 insurance provides broad protection for your home’s structure while specifying coverage limits for belongings and liability.
It's the most common of homeowners insurance coverage types and is a good option for the majority of homeowners.
What is an HO-3 insurance policy?
An HO-3 is the most common form of home insurance coverage in the U.S. Among other things, this policy form covers your dwelling, personal property and liability in the event of a covered loss.
HO-3 coverage — also known as a special form homeowners insurance policy — is an open peril policy that covers the physical structure of your home against all perils (a cause of loss) except for those specifically excluded listed on your policy.
Almost every home insurance company provides HO-3 coverage, though you will want to carefully study your homeowners policy to see exactly what is and isn’t covered.
How to Read a Homeowners Insurance Policy
Master the essentials of your homeowners insurance policy, learn how to interpret the declaration page, identify coverage limits & recognize exclusions.
What does an HO-3 policy cover?
An HO-3 insurance policy covers more than just your home and personal belongings. Let's take a look at the different parts that make up this popular option.
✅ Dwelling coverage
Your dwelling coverage extends to your home and any attached structures, covering them up to the replacement cost of the policy on an open peril basis. It’s important to note that the replacement cost and market value of your home are two very different amounts. The market value of your home includes the value of real estate and land. The replacement cost is only designed to rebuild your home in the event it is destroyed.
✅ Other structures coverage
Any other structures — such as a detached garage or fencing — are typically covered at around 10% of your dwelling coverage limit.
✅ Liability coverage
Much like auto insurance liability, homeowners liability insurance protects you if you’re found at fault for damages to someone’s property or for their bodily injuries. We recommend setting your personal liability coverage limits high in order to protect any assets you might have. Unlike your liability on your auto insurance policy, homeowners liability coverage tends to be fairly inexpensive.
✅ Personal property
Personal property coverage protects your belongings—like clothes, furniture, and electronics—against specific named perils. If you want broader “open peril” protection, you may need an HO-5 policy (or your insurer’s equivalent).
Coverage is usually offered as either actual cash value (which factors in depreciation) or replacement cost (which covers the full cost to replace items). Be mindful of sub-limits for high-value items like jewelry or art, since these often have capped payouts.
| Sub-limit | Property | Limitations |
|---|---|---|
| $200 | Money, Gold, Coins | |
| $1,500 | Jewelry, watches, furs | Theft-only |
| $1,500 | Watercraft, trailers | Theft-only |
| $2,500 | Firearms | |
| $2,500 | Silverware | |
| $2,500 | Business property | On-premises |
| $500 | Business property | Off-premises |
| Varies | Electronics |
If the value of any of your belongings exceeds monetary sub-limits, consider additional coverage adding an endorsement or rider to your policy. This will increase the level of coverage for an entire category. For example, a jewelry endorsement would increase the level of jewelry coverage for all of your jewelry. If you have a very valuable piece of jewelry, such as an engagement ring, seek a scheduled endorsement as a coverage option.
A scheduled endorsement is specific to one item. This item will likely need to be appraised and will ensure you are properly covered in the event of a loss.
✅ Additional living expenses
Sometimes referred to as loss of use, your additional living expenses coverage reimburses you for select expenses if your home is rendered uninhabitable after a covered loss. You are covered up to the policy limits.
✅ Medical payments to others
Accidents happen. If a guest to your home injures themselves on your property, your medical payments coverage will help with their medical costs up to your policy limit.
- Medical bills and payments
- Surgical costs
- Cost of X-rays
- Dental procedures
- Ambulance and hospital fees
- Nursing care
- Prosthetic devices
- Funeral services
What perils does an HO-3 policy protect against?
An HO-3 policy treats your home and personal property differently. Your home’s structure—including things like fences and detached garages—is insured on an open peril basis, meaning it’s covered for any cause of loss except those specifically excluded. Because your home is such a major investment, this broad protection is essential.
When filing a claim, you only need to show that the damage wasn’t caused by an excluded peril. This shifts the burden away from you and usually makes the claims process faster and smoother. Let’s break down how coverage works under an HO-3.
| Insurance Terminology | Property Covered Against | Home Contents Covered Against |
| HO 3 - Special Form | Open perils | Named perils |
Open peril: covers you against all claims unless specifically stated.
-
Freezing pipes and systems in vacant dwellings
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Theft from a dwelling under construction
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Vandalism to vacant dwellings
-
Latent defects, corrosion, industrial smoke, pollution
-
Settling, wear and tear
-
Pets, other animals and pests
-
Weather conditions that aggravate other excluded causes of loss
-
Defective construction, design and maintenance
Named peril: your personal belongings are only covered against the threats specifically listed on the policy.
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Lightning or fire
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Hail or windstorm
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Damage caused by aircraft
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Explosions
-
Riots or civil disturbances
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Smoke damage
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Damage caused by vehicles
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Theft
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Vandalism
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Falling objects
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Volcanic eruption
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Damage from the weight of snow, ice, or sleet
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Water damage from plumbing, heating, or air conditioning overflow
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Water heater cracking, tearing, and burning
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Damage from electrical current
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Pipe freezing
What does an HO-3 policy not cover?
Although very popular, HO-3 policies come with a downside: named-peril coverage for personal property. While you remain covered against many perils, you also have a burden of proof to show the damage was caused by one of the covered claims. Depending on the type of claim and individual circumstances, this can slow the claims process.
Additional HO-3 policy exclusions
There are some extra exclusions we should mention. Floods and earthquakes are two of the most common perils that many insurers won't cover. In most cases, homeowners looking for protection against these perils will need to seek out a separate earthquake or flood insurance policy.
Have a look at the list below to see the perils that are commonly excluded from any home insurance policy.
- Flood
- Hurricane
- Mold*
- Vandalism to vacant dwellings
- Wear and tear
- Property damage caused by pets
- Earthquakes**
- Enforcement of building codes and similar laws
- Intentional acts
- Neglect
- Government acts
*Some policies allow you to add limited coverage for mold damage.
**You can add earthquake insurance via your insurance provider, if applicable.
HO-3 homeowners insurance coverage: what to consider
HO-3 policies are the most common type of homeowners insurance in the U.S. They protect your home’s structure against all risks except those specifically excluded.
The main drawback? Your personal belongings are only covered for named perils, which means you’ll need to prove the cause of damage if you file a claim. If you’d prefer broader protection, an HO-5 policy is worth exploring—it covers both your home and personal property on an open-peril basis, making it the most comprehensive option available.
Since coverage details and pricing can vary by insurer, it’s always smart to compare multiple homeowners insurance quotes before choosing a policy. Just enter your ZIP below to see what’s available in your area.
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