Alternate name: Special Form policy
Different homeowners insurance forms, such as HO-1, HO-2, and HO-3 policies, have different levels of coverage and correspondingly higher or lower premiums. An HO-3 homeowners insurance policy includes six different coverage sections:
Dwelling: Covers damage to your dwellingOther structures: Covers damage to other structures on your property such as a garage or shedPersonal property: Covers damage to personal possessions such as electronics, furniture, or appliancesLoss of use: Provides living expenses if your dwelling becomes uninhabitable temporarilyPersonal liability: Covers financial loss if you are sued by someone injured on your propertyMedical payments: Covers the medical care expenses if someone is injured on your property
HO-3 insurance policies are “open peril” policies, meaning they cover all risks except the ones specifically named. Coverage for personal content follows a “named peril” policy, meaning only the named perils are covered. So, for example, if your home was damaged by a fire, your HO-3 coverage could pay for the costs to repair your home and replace any personal possessions. It can also help you pay for a place to live if your home is uninhabitable while it’s being repaired. However, if your home was damaged by a flood, and floods were named as an exclusion in your HO-3 policy, you would not receive coverage.
How HO-3 Homeowners Insurance Policies Work
HO-3 homeowners insurance, the standard homeowners insurance policy, provides a range of coverage, but you can also customize these policies to a degree. You may include riders or add-on coverages. When you experience a loss or someone is injured on your property, you’ll inform your insurer by submitting a claim. The insurance company will either assess damages or require documentation to proceed with the claim. If the damage or costs are lower than your deductible, you’ll pay out-of-pocket instead of submitting a claim. If your HO-3 insurance policy contains exemptions such as flood or earthquake, you wouldn’t be eligible to submit a claim for damage caused by those perils. Any other non-excluded perils, however, would be eligible. An insurance agent can help you determine the ideal type of coverage for your situation. For example, if you have a lot of high-value jewelry, they may recommend additional coverage for personal property. If you have high-value structures on your property besides your home, you may want more robust coverage for other dwellings. Let’s look in more detail at the different coverage areas with an HO-3 homeowners insurance policy.
Dwelling Coverage
Dwelling coverage protects the main structure and systems of your home. If covered perils caused substantial damage to your home and you needed to repair it or rebuild it entirely, the dwelling coverage limit is typically aligned with the expected cost of rebuilding the home.
Other Structures Coverage
Other structures coverage protects structures on your property that aren’t your primary dwelling, such as a standalone garage, shed, or fence. While you can request a custom quote, many insurers will quote you a premium based on coverage up to 10% of your dwelling coverage limit.
Personal Property Coverage
With personal property coverage, the policy names the perils that are covered to protect your possession such as clothes, jewelry, or the contents of your home. A common limit for personal property coverage is 50% of your dwelling coverage limit.
Personal Liability Coverage
If you are in a situation where you’re considered personally and legally liable for either bodily injury or property damage to someone else, personal liability coverage pays up to a certain limit, such as $100,000.
Loss of Use Coverage
Loss of use coverage pays for the costs of living somewhere else if you home is uninhabitable. It’s typically granted for the duration of a repair or up to a limit. It provides for expenses such as housing, meals, or warehouse storage.
Medical Payments Coverage
This is an additional coverage related to any bodily injury that happens on your property, but is specifically targeted at paying medical bills for anyone injured on your property. This coverage has standard limits, but you typically can request a customized policy with higher or lower coverage for medical payments.
Do I Need an HO-3 Homeowners Insurance Policy?
An HO-3 policy is the most common form of homeowners insurance. If you have paid off your mortgage, you may consider a lower-cost HO-1 or HO-2 policy that provides a basic level of coverage to protect you from common perils. However, if you have a mortgage on your property, you’ll likely be required to have a certain amount of coverage, which will be an HO-3 policy.
What Does a HO-3 Homeowners Insurance Policy Mean for Your Home Coverage?
An HO-3 homeowners insurance policy coverage includes six areas: dwelling, personal property, other structures, loss of use, personal liability, and medical payments. Insurers may have different coverage amounts and terms, so consider comparing quotes. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
title: “What Is An Ho 3 Homeowners Insurance Policy " ShowToc: true date: “2023-01-16” author: “Etta Haney”
Learn more about HO-3 homeowners insurance policies, how they work, and how they differ from other homeowners insurance forms.
Definition and Examples of an HO-3 Homeowners Insurance Policy
An HO-3 homeowners insurance policy is a form of home insurance that provides coverage for damage to your dwelling, other structures on the property, personal property, loss of use, personal liability, and medical payments. All perils, or causes of loss, are covered for damage to your home and other structures, except those that are specifically named on the policy as exclusions. Exclusions might include earthquakes, floods, wear and tear, neglect, and damage caused by freezing.
Alternate name: Special Form Policy
How an HO-3 Homeowners Insurance Policy Works
Insurance polices are designed to cover damage to property if the loss was caused by a covered peril. Homeowners insurance policies vary according to the types of property and the number of perils they cover. Policies are typically considered “open-perils,” which covers all causes of loss unless excluded, or “named-perils,” which covers only specified sources of loss. A common type of homeowners insurance is one that combines attributes of both types—the special form, or HO-3, homeowners insurance policy. An HO-3 homeowners insurance policy, like other homeowners policies, has two parts: Section I (coverages A, B, C, and D) for your property and Section II (coverages E and F) for liabilities. Here’s a description of each individual coverage and the general limits most insurers will provide:
Coverage A: Your Dwelling
Dwelling coverage pays for damage to your house and any structures attached to it, including plumbing fixtures, electrical wiring, and HVAC systems. Damage must be a result of a covered peril. The limit of your dwelling coverage should be at least 80% or equal to your home’s full replacement cost.
Coverage B: Other Structures
Coverage B pays for damage to structures on your property that are not attached to your house. Covered structures include free-standing garages, sheds, fences, and guest cottages among others. Insurers limit this coverage to 10% of your dwelling coverage.
Coverage C: Personal Property
This coverage reimburses you for the value of the contents of your home, possessions owned by you and people who live with you. Coverage may also include items lost or damaged outside your premises. The coverage limit is usually 50% of your dwelling coverage or any amount agreed on between you and your insurer. Coverage may not include some types of high-value items, also known as scheduled personal property. In an HO-3 policy, coverage for personal property is limited to named perils.
Coverage D: Loss of Use
This coverage helps pay any additional living expenses such as meals and housing if your home is rendered uninhabitable. Insurers limit this coverage to 20% of your dwelling coverage. Insurance companies typically don’t reimburse you for all living expenses. They pay only for the difference between your normal living expenses and extra living expenses.
Coverage E: Personal Liability
This coverage helps offset your financial losses if you’re sued or deemed legally responsible for damages or injuries to others. You are not covered in situations where you acted intentionally. You choose your coverage limits for personal liability, which is usually a minimum of $100,000.
Coverage F: Medical Payments
This coverage pays medical bills for people who are accidentally hurt on your property. Coverage doesn’t apply to those who live in your home. You can choose your coverage limits, which generally must be at least $1,000.
HO-2 vs. HO-3 Homeowners Insurance
Whether you own or rent, you can choose from various packages of home insurance available to protect your home and possessions. Each package protects against specific perils. Insurance carriers sometimes write and file customized policies. Insurers who don’t file their own policies use standard forms available from rating organizations such as the Insurance Services Office Inc. (ISO). Again, Insurance companies will typically avail two approaches to insuring your property: the named-peril policy approach and the open-peril policy approach, which are represented by HO-2 and HO-3 homeowners insurance, respectively. The named-peril policy is a lower-cost approach that names all events you are insured against in the event of a loss. The open-peril policy is a higher-cost approach that, while alluding to unlimited coverage, names exclusions you’re not insured against. An HO-2 policy, which is also referred to as the Broad Form, is a basic homeowners insurance that covers perils listed on an HO-1 policy plus additional perils. Your dwellings, other structures, and personal property are covered against perils explicitly named in the policy. An HO-3 policy is the most widely used form of homeowners insurance. It protects against all risks to your dwelling (and other structures) except those specifically excluded. However, your personal property is insured on a named-perils basis—that is, against damage or loss caused by perils listed in an HO-2 policy.
