Are you fully protected with an HO-3 homeowners insurance policy?
Why you can trust The Zebra
An HO-3 is the most common form of home insurance coverage in the US. 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. Find out more about what an HO-3 policy provides by reading our detailed guide below.
An HO-3 insurance policy covers more than just your home and personal belongings. Have a look at the guide below to get a better sense of how this policy form can keep you and your assets protected.
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. Refer to this list for the perils for which your dwelling won't be covered with an HO-3 policy. 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 is it destroyed.
Any other structures — such as a detached garage or fencing — are typically covered at around 10% of your dwelling coverage limit.
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 coverage includes your clothes, your furniture, your TV and other belongings. Your personal property is only covered in the cases of specifically listed incidents (named perils). If you are interested in an open peril policy for your personal belongings, you may consider looking into an HO-5 policy (or your insurer's equivalent).
Your personal property is typically covered at actual cash value or replacement value. Actual cash value factors in wear and tear when considering your payout, while replacement cost coverage will pay the full cost to replace your items.
Sub-limits are important to consider when setting up personal belongings coverage. For valuable belongings, such as jewelry or fine art, the insurance provider may limit the amount of coverage for the homeowner. Below are common sub-limits.
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.
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.
Accidents happen. If a guest to your home injuries themselves on your property, your medical payments coverage will help with their medical costs up to your policy limit.
An HO-3 covers your home and personal property differently. The physical structure of your home and any other structures — fences or a detached garage — are covered in all circumstances except those specifically excluded. Because your home is a major investment, you should absolutely insure your dwelling on an open peril basis.
In the event of a claim, you only have to prove to your homeowners insurance company that one of the excluded perils did not cause the damage. In this sense, there is much less burden of proof. This can greatly expedite any claims process with your insurance carrier. Let’s further explore the different coverage options with an HO-3 policy.
Property Covered Against
Home Contents Covered Against
HO 3 - Special Form
Open peril: covers your against all claims unless specifically stated. Typically, the following are excluded on an open peril policy:
Named peril: your personal belongings are only covered against the threats specifically listed on the policy. The 16 typically covered perils include:
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.
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.
*Some policies allow you to add limited coverage for mold damage.
**You can add earthquake insurance via your insurance provider, if applicable.
HO-3 policies are among the most common for homeowners in the US. An HO-3 covers your home’s structure against all perils excluding the ones specifically listed.
In general, the only downside to an HO-3 coverage is the named peril coverage for your personal property. This leaves your personal belongings vulnerable and puts the burden of proof on you in the event of a claim. If you’re worried about your personal property or wish for more robust coverage options, you may want to consider an HO-5 policy. This will cover both your personal belongings and your dwelling on an open-peril basis. This is the most comprehensive coverage available.
Remember that home insurance companies may differ in their coverage options and pricing. When shopping for HO-3 coverage — or any other type of coverage — it always pays to shop around. Insert your ZIP below to compare quotes and find the best cheap homeowners insurance for your budget and needs.
The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.