An HO-3 insurance policy is the most common type of homeowners insurance, offering open-peril coverage for your home and named-peril coverage for your personal belongings. This means your house is protected against all causes of damage unless specifically excluded, while your belongings are covered against perils listed in the policy.
At a glance:
- An HO3 policy is a form of homeowner's insurance that provides open-perils coverage for your house and other buildings on the property, while your personal belongings are protected under a named-perils basis.
- HO-3 insurance is popular due to its comprehensive coverage, flexibility, availability and affordability.
- Choosing the right HO-3 policy involves assessing factors like cost, additional coverage options, and the reputation of the insurance company.
What does an HO-3 policy include?
An HO-3 insurance policy consists of several components that work together to provide comprehensive home insurance coverage. The three main components of an HO-3 policy are dwelling coverage, personal property coverage, and personal liability coverage:
- Dwelling coverage—Protects the structure of your home (roof, walls, floors, and attached structures) from covered perils such as fire, theft, or windstorms.
- Personal property coverage—Covers belongings like furniture, clothing, and electronics if they’re damaged or stolen due to a covered peril.
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Liability coverage—Protects you financially if someone is injured on your property or if you cause accidental damage to another person’s property.
What is not covered by an HO-3 policy?
While an HO-3 insurance policy provides broad coverage, it typically excludes certain risks or perils. Exclusions commonly found in HO-3 policies may include:
- Earth movements, including earthquakes and other seismic activity, landslides, and sinkholes
- Flooding, including tidal waves, river overflow and flash floods
- General wear and tear, or damage due to maintenance neglect
- Business activities, including damage or liability from business conducted on the property
- Losses arising from intentional acts resulting in damage or loss
- Damage caused by nuclear hazards
- Losses related to war or military action
In addition, high-value items may have limited coverage. This includes jewelry, art, or other objects whose value may exceed the personal property coverage or replacement cost coverage limits of an HO-3 policy. Homeowners with these types of high-value items may want to add scheduled property coverage via an endorsement to their homeowners policy.
Benefits of HO-3 insurance
The average cost of homeowners insurance in the United States is $1,759 per year.1 However, the cost of HO-3 insurance can vary based on factors such as location, the value of the home, and the desired additional coverage limits. That’s why it’s important to understand the benefits associated with your home insurance policy; and to make sure you are getting the home insurance coverage you need.
Key advantages of an HO-3 policy include:
- Availability—HO-3 policies are widely available and popular among homeowners, offering reliable protection and peace of mind for the majority of homeowners' insurance needs.
- Affordability—Despite their comprehensive coverage, HO-3 policies are often one of the more affordable types of homeowners insurance, making them an attractive option for budget-conscious homeowners. HO-3 insurance is cost effective, offering robust coverage at competitive rates.
- Coverage—HO-3 policies typically offer comprehensive insurance coverage for the dwelling and personal belongings, providing homeowners with peace of mind.
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Flexibility—HO-3 policies can be tailored to fit the individual needs of homeowners by adjusting coverage levels and adding endorsements or riders.
Comparing HO-3 policies
HO-3 policies account for over 78% of active homeowners insurance policies in the United States.2 Needless to say, there are a lot of available options for homeowners looking for home insurance coverage. And a lot of information to compare.
It's important to dispel common misconceptions about HO-3 policies, such as the belief that they only cover the structure of the home and not personal belongings. In reality, HO-3 policies offer comprehensive coverage for both dwelling and personal property, making them a preferred choice for many homeowners. But that doesn’t mean they are all the same.
When comparing HO-3 policies, several key differences emerge. To effectively compare HO-3 policies, we recommend homeowners follow the seven steps outlined below.
1. Assess coverage needs
Determine your specific coverage needs for dwelling, personal property, and liability based on your home’s unique factors, such as the value of your house, personal belongings inventory, and any potential risks in your area (including weather, geography, and crime).
2. Review policy forms
Review the details of each HO-3 policy form offered by different home insurance providers. Pay close attention to the coverage limits, exclusions, and deductibles to determine whether or not the policy suits your financial situation.
3. Compare coverage options
Evaluate the coverage options offered by each HO-3 policy, including available endorsements or riders for specific risks (or items).
4. Consider cost
Compare premiums for each HO-3 policy, taking into account deductibles and any discounts offered by the insurance provider. It’s important to ensure that the cost of a policy aligns with your budget without compromising coverage.
5. Research providers
Research the reputation and financial stability of insurance providers. Read customer reviews and complaints to gauge the quality of service and claims handling.
6. Evaluate customer service
Consider the level of customer service offered by each insurance provider, including responsiveness and ease of communication.
7. Consult with an agent
Seek guidance from a knowledgeable insurance agent who can help you navigate the complexities of insurance and find the best policy to fit your needs.
Choosing the right HO-3 insurance policy
Choosing the right HO-3 policy involves balancing budget, coverage needs, and the reputation of the insurance provider. Understanding the components, coverage types, benefits, and comparisons with other policies like HO-5, enables homeowners to make informed decisions to protect their property and personal belongings. While HO-3 policies offer solid protection, HO-5 policies provide more expansive open-perils coverage for both your dwelling and personal belongings, which may better suit your needs.
At Openly, we offer high value home insurance coverage through independent agents in various states. We can help you find a trusted home insurance agent near you to guide you in purchasing the right policy. Visit us to explore your options and secure tailored coverage solutions for your home.
* We provide this information to help you understand insurance. Any coverage is subject to the terms of your policy. Please refer to your policy and declaration page for complete coverage details.
1 Shannon Martin. “Average homeowners insurance cost in March 2024.” Bankrate. Published 1 March 2024. Accessed 12 March 2024. https://www.bankrate.com/insurance/homeowners-insurance/homeowners-insurance-cost/
2 National Association of Insurance Commissioners. “Dwelling Fire, Homeowners Owner-Occupied, and Homeowners Tenant and Condominium/Cooperative Unit Owner’s Insurance Report: Data for 2021.” NAIC. Published December 2023. Accessed 5 March 2024. https://content.naic.org/sites/default/files/publication-hmr-zu-homeowners-report.pdf
