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What Is an HO-5 Insurance Policy? Comprehensive Coverage Explained

If you want top-shelf homeowners insurance, HO-5 is the way to go. An HO-5 insurance policy is a form of homeowners insurance that provides the most comprehensive coverage and highest coverage limits. It also costs more than standard homeowners insurance.

If you want top-shelf homeowners insurance, HO-5 is the way to go.

However, don't mistake the best with complete — you're protected against a lot, but not everything. In this guide, we'll break down how HO-5 insurance works and whether it's right for you.

Table of Contents:

What Is an HO-5 Policy?

A homeowners policy comprehensive form 5 (HO-5) is a type of homeowners insurance that offers a broader coverage and additional perks on top of basic homeowners insurance. HO-5 policyholders also have open-peril coverage, which means that your home and belongings are protected against all events except those excluded in your policy. Just like HO-3 insurance, an HO-5 policy covers all 16 perils plus coverage for: 

  • Dwelling

  • Other structures

  • Personal property

  • Loss-of-use

  • Liability 

  • Medical payments

Where HO-5 insurance shines above an HO-3 policy is with its open-peril policy on personal property coverage. Your personal property is insured against all events except those listed in your policy. Your insurance company will also pay you for your personal property's replacement cost value (and not actual cash value, as is the case with some HO-3 policies).

Just like HO-3 insurance, an HO-5 policy covers all 16 perils plus it offers expanded coverage and RCV payouts.

HO-5 insurance is just one type of policy among eight. Here's how each is different:

Policy 

Description

HO-1

Named-peril policy with bare-bones coverage (protects against 10 out of 16 perils, no liability, no personal property).

HO-2

Named-peril policy that protects more than an HO-1 policy (16 named perils plus personal property and personal liability coverage).

HO-3

Standard homeowners insurance with an open-peril policy that offers more coverage than an HO-2 policy. 

HO-4

Insurance policy for renters.

HO-5

Most comprehensive form of insurance coverage. Includes open-peril policy and replacement cost coverage for personal property. 

HO-6

Insurance policy for condo owners.

HO-7

Insurance policy for mobile homeowners.

HO-8

Insurance policy for older properties.

What Does HO-5 Insurance Cover?

As you might expect from the best, an HO-5 insurance policy covers all 16 perils including some natural disasters..

Covered Perils

  • Vandalism or malicious mischief

  • Theft

  • Explosion

  • Volcanic eruption

  • Riot or civil commotion

  • Damage by aircraft

  • Weight of ice, sleet, snow

  • Damage by vehicles

  • Freezing of home systems

  • Smoke

  • Sudden/accidental power surges

  • Sudden/accidental tearing, cracking, burning, or bulging of home systems

  • Water/steam discharge from home systems and appliances

Coverage A: Dwelling 

Your dwelling coverage will pay for the cost to fully rebuild your home if it's ever damaged under a covered claim, such as a fire. However, you're not covered for events listed as exclusions in your policy.

Coverage B: Other Structures 

Insurance pays for both the dwelling and other structures on your property. If any fences, sheds or detached garages get damaged, they're covered.

Coverage C: Personal Property

Coverage for damaged property is extended on an open-peril basis — your stuff is covered for any event except those explicitly excluded in your policy (see your declarations page for exclusions). Your insurance company will pay for your property's replacement cost value, the price it would cost to buy a new item today.

Your insurance company will pay for your property’s replacement cost value, the price it would cost to buy a new item today.

Coverage D: Additional Living Expenses

Often called loss-of use coverage, you're covered for daily living costs if you're displaced from your home. For example, you would receive compensation for hotel bills and meals while your home is being rebuilt after a fire.

Coverage E: Liability 

The personal liability portion of your policy comes in handy if anybody is injured or their property is damaged while on your property. Your legal fees and various court costs are paid for under insurance if that person decides to bring a lawsuit to your door.

Coverage F: Medical Payments to Others

If somebody, like a house guest, sustains an injury while on your property, medical payments coverage would pay for their medical bills, including x-rays, surgeries and nursing services, even if the incident wasn't your fault.

Best Rates for Comprehensive Home Insurance

What Does HO-5 Insurance Not Cover?

HO-5 insurance is comprehensive but not all-encompassing. Compared to other policies, you're more protected, but generally not against these excluded perils:

  • Earthquakes

  • Flood

  • Government acts

  • Hurricane (in certain areas; or there may be an additional deductible in hurricane-prone states)

  • Infestation of animals and pests

  • Mold

  • War

  • Wear and tear

  • Pet damages

If you want to gain coverage against these incidents, you will likely need to purchase a separate policy or rider to address that specific peril. 

HO-5 Policy vs. HO-3 Policy


HO-5

HO-3

Level

Premium

Standard

Dwelling

Open peril

Open peril

Personal Property

Open peril

Named peril

Payout

RCV

ACV or RCV

Cost

Less affordable

More affordable

Best For

Homeowners who want the highest level of protection for their homes and personal property.

Homeowners who are comfortable with standard coverage.

Dwelling Coverage 

Both standard homeowners insurance policies and HO-5 policies function on an open-peril basis. You can file an insurance claim for any event except for the excluded perils that are specifically mentioned in your policy. 

Personal Property 

HO-5 policyholders enjoy extra coverage on personal property. Similar to dwelling coverage, your belongings are covered against all events except those excluded in your policy. 

Personal property damage on a standard homeowners insurance policy, on the other hand, is covered under a named-peril basis, providing less comprehensive coverage.

Actual Cash Value vs. Replacement Cost Value

HO-5 insurance typically covers your personal property at replacement cash value (RCV). HO-3 insurance typically defaults to actual cash value (ACV) unless you request otherwise. Since the value of your items typically goes down over time due to depreciation ACV is almost always a lower payout than RCV. 

What Homeowners Need to Know About HO-5 Coverage 

HO-5 policies are not as commonly purchased as standard home insurance (HO-3) policies. HO-5 insurance accounted for only 12.82% of policies underwritten in 2018, according to the National Association for Insurance Commissioners. HO-3 policies comprised 79.09%. 

Two reasons that may explain why HO-5 insurance is not as commonly sold are the higher cost and additional requirements:

  • Higher premiums: More coverage and perks means a higher price tag.

  • More requirements: Insurance carriers may require your home to meet a minimum value, be less than a certain age, and you may need to show you have a minimal claims history and a good credit score, as well.

How To Get an HO-5 Insurance Policy

Many insurance companies that sell HO-3 policies will likely offer HO-5 insurance products, as well. While you shop around, keep in mind that insurance coverage and policies can vary by company.

Therefore, should always ask your insurance agent the following questions before committing to a home insurance plan:

  • Is the policy a named-peril or open-peril homeowners insurance policy? 

  • What exactly are you NOT protected against? 

  • Will I have replacement value or cash value coverage?

  • Can you go over the coverage limits available to me?

HO-5 Policy FAQs

Who needs HO-5 insurance?

Homeowners who want additional financial protection against loss, a no-fuss claims process and can afford higher premiums can benefit from an HO-5 policy. Homeowners with high-value homes and personal property tend to opt for HO-5 policies.

How much does HO-5 insurance cost?

An HO-5 insurance policy costs, on average, $1,396 annually according to a 2018 report by the National Association of Insurance Commissioners.

Is an HO-5 policy worth it?

If your home and personal property are of high value, then an HO-5 policy can be worth the investment. But if an open-peril and replacement cost value policy on your belongings isn't a priority, then basic home insurance may save you some money.

The Best Homeowners Insurance For You

With HO-5 insurance, your home and personal property have the highest level of coverage against most perils. But this premium form of insurance isn't required and it's not for everybody. One important thing to consider is whether or not you need the extra perks, like replacement cost value on personal property, versus a cheaper HO-3 policy with an actual cash value payout.

Shopping for home insurance is about finding the right level of coverage that meets your needs and budget. SmartFinancial has partnered with 200+ insurance partners to bring you free homeowners insurance quotes. They'll even find the policy that best matches your profile and budget. Just enter your zip code below and answer a few simple questions to get the most competitive rates in your area.

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