What Is An HO-3 Homeowners Insurance Policy?

An HO-3 homeowners insurance policy is a form of home insurance. It provides coverage for damage to your dwelling and other structures on the property. It also covers personal property, loss of use, personal liability, and medical payments.

All perils or causes of loss are covered for damage to your home and other structures. However, this excludes those specifically named on the policy as exclusions. Exclusions might include earthquakes, floods, wear and tear neglect and damage caused by freezing.

How HO-3 Homeowners Insurance Policy Works

Homeowners insurance policies are designed to cover damage to property if the loss was caused by a covered peril. Homeowners insurance policies vary according to the types of property and the number of perils they cover.

Policies are typically considered open perils which covers all causes of loss unless excluded or named perils which covers only specified sources of loss

A common type of homeowners insurance is one that combines attributes of both types. It is known as the special form or HO-3 homeowners insurance policy. Like other homeowners policies, an HO-3 policy has two parts. In section 1, coverages A, B, C, and D protect your property. In section 2, coverages E and F cover liabilities.

HO-3 Homeowners Insurance Coverages

Here’s a description of each individual coverage and the general limits most insurers will provide coverage for your dwelling.

Section 1 (Property Coverages)

• A – Dwelling coverage

Dwelling coverage pays for damage to your house. It also covers any structures attached to it, including plumbing fixtures, electrical wiring, and HVAC systems. Damage must be a result of a covered peril.

The limit of your dwelling coverage should be at least eighty percent. It should also be equal to your home’s full replacement cost coverage.

• B – Structures coverage

Structure coverage pays for damage to structures on your property that are not attached to your house. Covered structures include free standing garages, sheds, fences and guest cottages among others.

Insurers limit this coverage to 10% of your dwelling coverage.

• C – Personal property coverage

This coverage reimburses you for the value of the contents of your home. It includes possessions owned by you and people who live with you. Coverage may also include items lost or damaged outside your premises.

The coverage limit is usually fifty percent of your dwelling coverage. Alternatively, it can be any amount agreed on between you and your insurer. Coverage may not include some types of high value items also known as scheduled personal property

In an HO-3 policy coverage for personal property is limited to named perils

• D –  Loss of use

This coverage helps pay any additional living expenses such as meals and housing if your home is rendered uninhabitable. Insurers limit this coverage to twenty percent of your dwelling coverage.

Insurance companies typically don’t reimburse you for all living expenses. They pay only for the difference between your normal living expenses and extra living expenses.

Section 2 (Liabilities Coverages)

• E – Personal liability

This coverage helps offset your financial losses if you’re sued or deemed legally responsible for damages or injuries to others. You are not covered in situations where you acted intentionally.

You choose your coverage limits for personal liability which is usually a minimum of one hundred thousand dollars ($100,000).

• F – Medical payments

This coverage pays medical bills for people who are accidentally hurt on your property. Coverage doesn’t apply to those who live in your home. You can choose your coverage limits which generally must be at least one thousand dollars ($100,000).

Wrapping Up

Explained above are simply everything you need to know about HO-3 homeowners insurance policy.

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