What is an HO-3 Insurance Policy?

Are you fully protected with an HO-3 homeowners insurance policy?

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What is an HO-3 insurance policy?

An HO-3 is the most common form of homeowners coverage in the US. It covers your dwelling, your personal property, and your liability in the event of a covered loss. An HO-3 covers the physical structure of a home against all perils (a cause of loss) except for the perils specifically listed on your policy — i.e., an open peril coverage. Your personal property is only covered in the cases of specifically listed incidents (named perils).


Insurance Terminology

Property Covered Against

Contents Covered Against

HO 3 - Broad Form

Open perils

Named perils


Open peril: covers your against all claims unless specifically stated. Typically, the following are excluded on an open peril policy:

  1. Freezing pipes and systems in vacant dwellings
  2. Damage to foundations or pavements from ice and water weight
  3. Theft from a dwelling under construction
  4. Vandalism to vacant dwellings
  5. Latent defects, corrosion, industrial smoke, pollution
  6. Settling, wear, and tear
  7. Pets, other animals, and pests
  8. Weather conditions that aggravate other excluded causes of loss
  9. Government and association actions
  10. Defective construction, design, and maintenance

Named peril: your personal belongings are only covered against the threats specifically listed on the policy. The 16 typically covered perils include:

  1. Lightning or fire
  2. Hail or windstorm
  3. Damage caused by aircraft
  4. Explosions
  5. Riots or civil disturbances
  6. Smoke damage
  7. Damage caused by vehicles
  8. Theft
  9. Vandalism
  10. Falling objects
  11. Volcanic eruption
  12. Damage from the weight of snow, ice, or sleet
  13. Water damage from plumbing, heating, or air conditioning overflow
  14. Water heater cracking, tearing, and burning
  15. Damage from electrical current
  16. Pipe freezing

HO-3 policies are very common. Most moderately priced homes are covered under an HO-3 policy — but it’s not the only option. Let’s explore the ins and outs of these coverages to help you decide which level of home insurance is right for you.

  1. HO-3 coverage details
  2. What does an HO-3 policy not cover?
  3. Additional homeowners policies to consider


What does an HO-3 policy cover?

An HO-3 covers your home and personal property differently. The physical structure of your home 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 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. Let’s further explore the different coverage options with an HO-3 policy.

Dwelling and other structures

Your home and any other structures (detached garage and fencing) are covered 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 a 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.

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 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

This includes your clothes, your furniture, your TV, and other belongings. 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. Below are common sub-limits.

Money, Gold, Coins
Jewelry, watches, furs
Watercraft, trailers
Business property
Business property

If any belongings you have exceed monetary sub-limits, consider 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.

A scheduled endorsement is specific to one item. This item will need to be appraised and will ensure you are properly covered in the event of a loss.

Again, all personal property is covered on an open peril basis — only covered against the above list of perils.

Additional living expenses

Sometimes referred to as loss of use, your additional living expenses covers you to live elsewhere if your home is unliveable after a covered loss. You are covered up to the policy limits.

Medical payments to others

Accidents happen. If a guest to your home injuries themselves on your property, this coverage will cover 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 does an HO-3 policy not cover?

Although very popular, HO-3 policies come with a downside: open 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. Many of these coverages are 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 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.

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, 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.

Kristine Lee LinkedIn

Kristine is a licensed insurance agent and one of The Zebra’s in-house content strategists. With a background in copywriting, she covers the ins and outs of the home and car insurance industries. She has contributed to numerous publications focused on the nuances of insurance, including Automoblog, USInsuranceAgents.com, and BestCompany.com.