HO3 Homeowner Insurance Policy

HO3 is the most popular and common form of homeowners insurance. While designed to protect your property from storm damage and personal liability, just like HO1 and HO2, HO3 insurance is considered an “all-risk” or open perils policy.

Where named peril policies protect you from only the types of storms and disasters listed in the policy, an HO3 “all risk” policy works in exactly the opposite manner. In an HO3 policy, your home is covered for anything and everything unless it’s specifically listed as excluded from coverage.

NOTE: While your home is protected on an “all risk” or open perils basis, your personal property within your home is typically covered based on a named perils list similar to the one in an HO2 policy. In this sense the HO3 is really a hybrid form of coverage that employs both named perils and open perils types of coverage. An HO5 policy, the premium policy available to most homeowners, covers both your dwelling and your personal property using the broader coverage available in an “all-risk” form.

Typical Exclusions in an HO3 Policy

The following list contains the commonly listed exclusions in an HO3 policy. Exclusions mean you are NOT covered for damage caused by any of the following perils unless you purchase additional coverage.

  1. Enforcement of building codes and similar laws
  2. Earthquakes
  3. Flooding
  4. Power failures
  5. Neglect (meaning your failure to take reasonable steps to protect your property)
  6. War
  7. Nuclear hazard
  8. Intentional acts
  9. Freezing pipes and systems in vacant dwellings
  10. Damage to foundations or pavements from ice and water weight
  11. Theft from a dwelling under construction
  12. Vandalism to vacant dwellings
  13. Latent defects, corrosion, industrial smoke, pollution
  14. Settling, wear, and tear
  15. Pets, other animals, and pests
  16. Weather conditions that aggravate other excluded causes of loss
  17. Government and association actions
  18. Defective construction, design, and maintenance

The most commonly overlooked type of coverage is flood insurance. Many people assume, incorrectly, that their basic homeowners insurance policy would cover water damage from flooding. In order to be covered for damage caused by flooding, the most common type of storm damage, you have to purchase a separate insurance policy that specifically covers flooding. The same rules apply for earthquakes and the other exclusions listed above.

Like the other HO forms, HO3 usually consists of a mix of replacement value coverage for your home and actual cash value coverage for your personal property. If you are not familiar with these terms, visit our common insurance terms page as it’s critical that you understand the difference between the two valuation methods when purchasing or evaluating your home insurance coverage.

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