What does an HO-3 insurance policy cover?

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If you have just bought a house, you can opt for HO-3 insurance. Learn more about what it covers and how it differs from other policies. (Shutterstock)

Home insurance policies come in several different forms, ranging from HO-1 to HO-8. The best home insurance policy for you depends on the type of home you live in and the level of coverage you need. An HO-3 policy is the most common type of home insurance and offers fairly comprehensive coverage.

Here’s what HO-3 insurance covers and how it compares to other home insurance policies.

With Credible, you can easily compare home insurance rates with the best insurance companies.

What is HO-3 Insurance?

HO-3 insurance protects your home and other structures on your property, as well as your personal belongings, against various perils – events that cause loss or damage to your home, such as a break-in or fire. This type of insurance also provides protection against liability claims and additional living expenses if you have to move temporarily (more on that later).

This home insurance covers the structure of your dwelling in open jeopardy and your personal belongings in named jeopardy. An open risk policy covers all risks unless something is listed as an exclusion. In contrast, a named peril policy only covers the perils listed in your policy.

HO-3 insurance generally covers your home against the following 16 perils:

  • Storm or hail
  • fire or lightning
  • Smoke
  • Blast
  • Riot
  • Flight
  • Aircraft damage
  • Vehicle damage
  • Vandalism or malicious mischief
  • falling objects
  • Weight of ice, snow or sleet
  • Accidental discharge or overflow of water from HVAC or household appliances
  • Sudden and accidental tearing, cracking, burning or bulging of systems
  • Freezing household appliances and systems, such as your heating or air conditioning
  • Sudden and accidental damage caused by artificially generated electric current
  • Volcanic eruption

Why do you need HO-3 insurance?

To start with, if you have a mortgage, your mortgage lender will probably ask you to buy a type of home insurance to protect their interest in your property. If you don’t have a policy or it expires, your lender will buy one for you—often at a much higher rate than you’d get yourself—until you get insurance.

Even if you own a home without a mortgage, home insurance is still essential as it can protect your home and belongings against various unpredictable events. This can protect your hard-earned money as it limits your outgoings for covered damages.


HO-3 Insurance Coverages

An HO-3 policy typically gives you coverage in these six areas:

  • Housing coverage — If a covered peril damages the structure of your home, your insurance company will help cover the cost of repairs.
  • Coverage of other structures — Your policy also protects against damage to other structures on your property, such as a fence or a shed.
  • Personal Property Coverage — HO-3 insurance covers your personal effects from covered events.
  • Coverage of additional living expenses — If a windstorm or another covered peril makes your home uninhabitable, your insurer will help pay for your additional living expenses, such as hotel and food bills.
  • Personal liability insurance — If someone gets hurt on your property, or if you or someone else on your policy accidentally damages someone else’s property, your insurance can help if the person takes legal action against you.
  • Coverage of medical payments — This coverage helps pay for a certain amount of medical expenses for a guest who is injured on your property, whether or not they take legal action against you.

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What does HO-3 insurance not cover?

Although an HO-3 insurance policy protects your home against a wide range of unfortunate events, it doesn’t cover everything.

Here are some events that standard home insurance often excludes:

  • Flood – Floods are one of the most common natural disasters nationwide, but standard home insurance does not cover floods. However, you can purchase a separate flood insurance policy through the National Flood Insurance Program (NFIP) or a private insurer. If you have a federally guaranteed mortgage and live in a high-risk flood zone, your lender will require you to purchase this type of insurance.
  • movement of the earth If an earthquake, mudslide, or sinkhole damages your home, your insurer won’t pay for the damage. But you can purchase a separate earthquake insurance policy for additional protection.
  • Normal wear – Over time, it’s common for systems or materials in your home (like your air conditioner and roofing materials) to need repairs or replacements. If normal wear and tear is the reason you need to repair or replace these items, your insurance company will not cover the cost.
  • act of war If an act of war destroys or damages your home, your insurer won’t pay the bill.
  • Sewer backup – Your insurer generally won’t pay to fix a sewer backup or any damage it causes.


How much does an average HO-3 font cost?

According to data from National Association of Insurance Commissioners.

But the price you’ll pay for HO-3 insurance will vary depending on many factors, such as:

  • Location
  • Crime rate in your neighborhood
  • Age of your house
  • Deductible amount
  • The cost of replacing your home
  • Distance from a fire station
  • Your home security devices
  • Your credit history (if your state uses credit-based insurance scores)
  • Your claims history
  • Coverage amount

Your policy will also include a deductible. Your deductible is the amount you pay before your insurance takes effect. For example, let’s say your deductible is $2,000 and a heavy snowfall collapses your roof, causing $10,000 in damage. In this scenario, you would pay $2,000 out of pocket and your insurer would only pay $8,000 when you file an insurance claim.

If you choose a lower deductible, your insurance premium will be higher, but you will pay less out of pocket. To reduce the cost of home insurance, you can increase your deductible. But the downside is that you will have to pay more if something happens to your house.

How much HO-3 insurance do you need?

How much home insurance you need depends on several factors, such as the cost of rebuilding your home, the cost of replacing your belongings, and the amount of liability coverage you need.

It’s a good idea to buy enough coverage to completely rebuild your home in case a fire or other covered peril destroys it. You should also consider making a list of your personal belongings, such as furniture, jewelry, and clothing, to determine the amount of coverage you need to replace these items. If you have valuables, consider getting insurance endorsements (policy top-ups) for additional coverage.

To determine how much liability coverage you need, first calculate your net worth. This is the total of all your assets. Consider getting enough coverage to protect the value of all your assets in the event someone sues you for bodily harm to your home or property damage. You may want to get coverage for at least $300,000 to $500,000, depending Insurance Information Institute.

How is HO-3 insurance different from other policies?

Home insurance comes in eight different forms. Although HO-3 insurance is a fairly comprehensive form of insurance, it does not offer as much coverage as an HO-5 policy.

Here is an overview of what each form typically covers:

How to Get HO-3 Home Insurance

If you’re ready to take out home insuranceproceed as follows:

  1. Determine the type of coverage you need. Choose the home insurance option that suits the structure of your home. For example, if you own a condo, you must select HO-6 insurance.
  2. Calculate the coverage you need. Determine how much coverage you will need to replace your home and belongings if your home is destroyed. Remember to obtain sufficient liability coverage to protect your assets. To easily estimate the replacement cost value of your home, multiply the total square footage of your home by the cost per square foot to rebuild a home in your area. An insurance agent or appraiser can help you get a more accurate figure.
  3. Compare the prices. To find a policy that fits your needs and budget, get quotes from at least three to five insurers. When comparing quotes, make sure they are for similar coverage.
  4. Choose and buy your policy. Once you’ve found the right insurance company, select the amount of coverage you need and proceed to purchase your policy.

Credible makes it easy to compare home insurance purchases. Get quotes from the best insurance companiesall in one place.

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Justin D. O'Neill