When you’re talking about home insurance with your agent, they may mention a series of letters and numbers that can make your head spin. To start off, they may mention an HO-3 insurance policy, which is one of the most common in the U.S. However, what if you want more coverage than that policy has to offer? Introducing the HO-5 policy! Here we’ll tell you what it is and what exactly it can cover.
What is a named peril vs. open perils policy?
It might first help to understand the key phrases that are going to come up a LOT when explaining HO-3 and HO-5 policies. Usually, home insurance plans come with a set of named perils and open perils. Named perils are the hazards to your home that your insurance specifically says it can cover. Open perils, on the other hand, describes a policy that can help you cover damages to your home caused by almost anything except what is listed as not covered in the policy.
For example, let’s say your hometown is hit by some heavy rains and your basement floods. A named perils policy usually doesn’t list flood damage as a covered loss. So, you wouldn’t be covered by your home insurance (unless you specifically have flood insurance).
Now that we’ve got that out of the way, here’s how HO-3 and HO-5 policies usually work.
What is an HO-3 policy?
An HO-3 home insurance policy is a hybrid of a named peril and an open perils policy. Specifically, it means that the actual structure of your home can be covered on an open perils basis. HOWEVER, your personal property (all of the stuff inside your home) could only be covered on a named perils basis. These named perils are typically:
- Fire
- Lightning
- Windstorms and hail damage
- Damage due to the weight of snow or sleet
- Falling objects (like trees or aircrafts – yes, the latter is weird, but it could be covered.)
- Smoke damage
- Explosions
- Freezing
- Theft
- Vandalism
- Riots
- Damage caused by vehicles
Many people choose the HO-3 policy because it’s less expensive and because HO-5 policies aren’t available everywhere. However, HO-5 home insurance can offer a lot more protection for your belongings.
What is an HO-5 insurance policy?
An HO-5 policy can help you cover both the structure of your home and your personal belongings on an open perils basis.
Let’s take another example. Let’s say that (for whatever reason) a wrecking ball materializes and falls out of the sky…and into the second story of your home. An HO-3 policy might help you repair the actual structure of your home, but if anything like your bed, dresser, or TV was destroyed in the fallout, it may not be covered by your insurance if wrecking ball destruction is not considered one of the named perils.
However, if you had an HO-5 policy and wrecking ball damage is not specifically excluded from your policy’s coverage, your insurance could help you repair your home’s structure AND replace your belongings.
Typical HO-5 policy exclusions are:
- Earth movement
- Bringing your home up to codes or laws
- (Standing) Water damage
- Power failure
- Neglect
- Acts of war
- Nuclear hazards
- Intentional loss
- Government action
- Collapse
- Theft to a building that’s under construction
- Vandalism (if the home has been vacant for more than the specified number of days)
- Mold, fungus, or wet rot
- Wear and Tear
- Mechanical breakdown
- Smog, rust, and corrosion
- Smoke from architectural smudging
- Pollution discharge
- House settling, shrinking, or expansion
- Birds, vermin, or rodents
- Animals owned by the insured
This type of coverage can be more useful if you’re in an area where there are specific hazards that typical insurance policies don’t cover. There could also be more extensive coverage offered in an HO-5 policy than the HO-3 policies in your area. So, it’s important to talk to your agent about which perils can be covered in each type of home insurance policy before making a decision.
What’s the difference between the HO-3 and the HO-5 insurance policies?
Overall, these are the key differences between the HO-3 and HO-5 insurance policies:
- An HO-5 insurance policy offers more extensive coverage for both the structure of your home AND your belongings.
- Because an HO-5 policy deals with losses on an open-perils basis, it falls on the insurance company to prove that an incident falls on their list of exclusions if they decide not to cover the damage.
- Because an HO-3 is a hybrid policy, it’s your responsibility to prove that damage to your home doesn’t fall under an exclusion and/or that damages to your personal belongings were caused by the named perils in your policy.
- HO-5 policies may be more expensive because of the more comprehensive coverage it offers.
Again, it’s important to speak with your agent about the specifics of your policy or look at your declarations page to see exactly what’s covered. It may vary by your location and your specific situation.
These factors and many others can also affect the types of coverage and rates you need as well. That’s why our insurance professionals get to know you and the specifics of your home to get you the best home insurance for the best rates. Call us today or fill out our online form to get your free quotes and find out why our clients have rated our agents 9.9 out of 10.