Confused about the difference between HO-3 and HO-5 homeowners insurance policies? We can help you explore each and figure out which fits your needs best.
Open vs Named Perils
The first thing you need to consider when comparing homeowners policies is whether the coverage is based on open or named perils.
An open perils policy offers you coverage against just about any type of damage you can think of, except for certain exclusions. The policy does not list what perils your home and/or personal property is covered from—rather, it only lists what perils are excluded. If damage to the home is not caused by something listed on the exclusion list, you are covered.
A named perils policy specifically lists the perils for which your home and/or personal property is covered, instead of a list of exclusions. If your home or personal property is damaged by something not on the named perils list, you are not covered.
What Protection Does an HO-3 Homeowners Policy Offer?
An HO-3 homeowners policy is by far the most common homeowners policy found in the United States. The HO-3 is a hybrid “open perils” and “named perils” policy—that is, your home is covered on an open perils basis and your contents are covered on a named perils basis. So generally the actual dwelling is covered in under most circumstances, but the personal property inside is only protected under the listed circumstances.
There are generally 16 named perils covered in an HO-3 policy:
| 1. Theft
2. Fire or Lightning 3. Smoke 4. Explosions 5. Freezing 6. Vehicles 7. Falling Vehicles |
8. Volcanic Eruption
9. Windstorm or Hail 10. Riots 11. Damage Caused by Aircraft 12. Vandalism 13. Damage due to weight of ice, snow or sleet |
14. Sudden and accidental tearing apart, burning or bulging
15. Sudden and accidental damage from an artificially generated electric current 16. Accidental discharge or overflow of water from plumbing or air conditioning |
What Protection Does an HO-5 Homeowners Policy Offer?
An HO-5 policy is a complete open perils policy—both your dwelling and personal property are covered on an open perils basis. Some exclusions do apply, but they are generally the same as those for the dwelling in an HO-3 policy, as well as the following:
| 1. Earth movement
2. Ordinance or law 3. Water damage 4. Power failure 5. Neglect 6. War 7. Nuclear hazard 8. Intentional loss |
9. Government action
10. Collapse 11. Theft to a dwelling under construction 12. Vandalism 13. Mold, fungus or wet rot 14. Wear and tear 15. Mechanical breakdown |
16. Smog, rust and corrosion
17. Smoke from agricultural smudging 18. Discharge of pollutants 19. Settling, shrinking, expanding 20. Birds, vermin, rodents 21. Animals owned by insured |
Comparing the Two Policies
Coverage: While the two policy types offer identical coverage for dwellings, the HO-5 policy is clearly superior in terms of personal property coverage.
Price: In most cases, the HO-3 policies cost less as the coverage is not quite as comprehensive as the HO-5.
Claims process: A big difference between the two policies is how the claims process is handled. In an open claims process, the burden is on the insurance company to prove that damage sustained was caused by something on the exclusion list, so if it cannot be proven, the homeowner is covered. In an HO-3 policy, the burden is on the homeowner to prove that the damage was caused by a named peril, so if it cannot be proven, the homeowner is not covered.
If you have questions or would like assistance with choosing the correct policy for you, contact our personal lines division and they will be happy to assist you.
Information abstracted from Zywave’s “Homeowners Insurance Policies: HO-3 vs HO-5” article.
