If you’re looking for home insurance, you might have discovered that there are quite a few different types of policy out there. The HO-3 home insurance policy is your standard, typical policy – it’s the most common one in the United States. However, there’s another type of policy, the HO-5, that differs slightly from the HO-3 and can offer more extensive coverage. We’ll explain the difference between these two policies so you can decide which might be right for you.
What is the HO-3 home insurance policy?
Like we mentioned above, the HO-3 policy is basically your standard home insurance policy. It’s a combination of open-perils and named perils coverage. That means that the dwelling of your home and your “other structures” such as your garden shed or fence are covered on an open-perils basis while your personal belongings are covered on a named-perils basis.
Hang in there – we’re going to explain what that means.
Open-perils means that your insurance will offer coverage for all losses EXCEPT those that are specifically listed as exclusions. (This is the coverage that your home and other structures would have.)
Named-perils means that your insurance offers coverage ONLY for the losses that ARE listed in the policy. (This is the coverage that your personal belongings would have.)
Some typical named perils are…
- Theft
- Fire/Lightning
- Smoke
- Explosions
- Freezing
- Vehicles
- Falling objects (i.e. trees)
- Volcanic eruptions
- Windstorm or hail
- Riots
- Damage caused by aircrafts
- Damage due to ice, sleet, or snow
- Sudden or accidental damage from an artificially generated electrical current
- Accidental discharge or overflow of water from air-conditioning or plumbing
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What is the HO-5 insurance policy?
The HO-5 insurance policy is a completely open-perils policy, meaning that the structure of your home and your personal belongings have open-perils coverage. That means that your house and belongings would be covered for losses EXCEPT those that are listed as exclusions in your policy.
Examples of exclusions in an HO-5 policy include:
- Earth movement
- Law or ordinance
- Water damage
- Power failure
- Neglect
- War
- Nuclear hazard
- Intentional loss
- Government action
- Collapse
- Theft to a dwelling under construction
- Vandalism (if the home has been vacant for more than the specified amount of days)
- Mold, fungus, or rot
- Wear and tear
- Mechanical breakdown
- Smog, rust, and corrosion
- Smoke from agricultural smudging
- Discharge of pollutants
- Settling, shrinking, or expanding
- Birds, vermin, rodents
- Animals owned by the insured
So long as the loss to your home and your personal belongings was not caused by one of the things on the list of exclusions, you’re good to go. While the HO-5 isn’t too different from the HO-3 in the grand scheme of things, you can see how it provides more extensive coverage for your personal property. So, that’s one of the major things to think about if you’re scratching your head and debating what type of policy is right for you.
We know this can be overwhelming, so if you want to talk some more about what home insurance policy is right for you and get some quotes, you can fill out our online quote form or give us a call. We’re happy to help you out with your insurance.
The other thing to keep in mind about the HO-5 policy is how the insurance claims process would work. Because your home and your personal belongings are covered on an open-perils basis, the burden is on the insurance company to prove that the loss was caused by something on the list of exclusions. (With named perils, the burden would be on you to prove that your loss was caused by something that’s on the list of covered perils.)
As far as pricing goes…
The HO-5 policy may be more expensive than the HO-3 policy because it provides more extensive coverage. The slightly higher premium reflects that. You’re basically paying a higher rate because you have more thorough coverage.
Comparing the HO-3 policy to the HO-5 policy.
To summarize a few quick comparisons between the two policies…
- The HO-5 policy provides more extensive coverage because it covers both your home and your personal belongings on an open-perils basis. The HO-3 policy covers your belongings on a named-perils basis.
- Since the HO-5 policy is completely open-perils, this means that the burden is on the insurance company to prove that the loss was caused by an exclusion on the list if they’re not going to cover the claim. With the named-perils coverage in the personal belongings section of the HO-3 policy, you as the homeowner would have to prove that the loss was caused by a named peril for the claim to be covered.
- The HO-5 might be a bit more expensive than the HO-3 because it offers more comprehensive coverage.
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