What Is an HO-3 Insurance Policy? Special Coverage Explained

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HO-3 insurance is the most commonly purchased type of policy, accounting for 79.09% of policies sold in 2018, according to the National Association of Insurance Commissioners.

HO-3 insurance, however, is not all-encompassing coverage and you should know where you're vulnerable if you have this type of policy. Keep reading to learn how HO-3 policies work, what's covered and what's not.

What Is an HO-3 Policy?

An HO-3 policy is a form of homeowners insurance that provides dwelling, personal belonging, and personal liability coverage for your home, your outbuildings, personal belongings and your liability if someone gets hurt on your property. A homeowners policy special form (HO-3) policy is an open-peril policy, which provides coverage against all events except those specifically excluded in the declaration page of your policy. If the peril that causes a loss is not excluded in your policy, you'd have coverage for your home's structure and other structures, liability protection and loss-of-use coverage if your house were to become uninhabitable.

HO-3 policies are the most commonly purchased policies in the country.

Your personal property damage or loss, however, must be caused by a named-peril listed in your policy (e.g., theft, property damage from fire, windstorms). Otherwise, you'd have to buy an HO-5 policy, which costs more.

An HO-3 policy is one of eight types of homeowners insurance policies. Compared to HO-1 and HO-2 policies, HO-3 insurance offers broader coverage but not quite to the level of an HO-5 policy (more on that later).




Named-peril policy with the most limited coverage (protects against 10 perils, no personal liability, no personal belongings).


Named-peril policy with more coverage than an HO-1 policy (16 named perils plus personal liability and personal belongings)


Open-peril policy with more coverage than an HO-2 policy. 


Insurance policy for renters


Most comprehensive form of insurance coverage. Includes open-peril policy for personal belongings. 


Insurance policy for condo owners.


Insurance policy for mobile homeowners.


Insurance policy for older properties.

What's Covered In an HO-3 Policy?

HO-3 insurance policies are the most popular and for good reason — they provide all the basic coverage to satisfy most homeowners (and their mortgage lenders). Under an HO-3 policy, you're protected against 16 perils and gain the six primary coverage types.

Covered Perils

HO-3 insurance policies provide coverage to your dwelling and other structures on your property against 16 perils:

  • Fire or lightning

  • Theft

  • Windstorm or hail

  • Volcanic eruptions

  • Explosion

  • Falling objects

  • Riot or civil commotion damage

  • Weight of ice, sleet, snow

  • Damage by aircraft

  • Freezing of household systems

  • Damage by vehicle

  • Sudden/accidental power surges

  • Smoke

  • Freezing of home systems

  • Vandalism or malicious mischief

  • 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 

Dwelling coverage pays to repair or rebuild the structure of your home if it's ever damaged for any reason except what's excluded in your policy. Excluded events typically include earthquakes, floods and more. Depending on your policy, the payout on a covered claim may be for replacement cost value (RCV) or actual cash value (ACV).

Coverage B: Other Structures 

Besides the actual structure you live in, you're also covered for any other structures on your property, including fences, detached garages and sheds.

Coverage C: Personal Property

Your HO-3 policy has personal property protection, which pays for loss or damages to your belongings (up to policy limits) if the peril is listed in your policy. Claims commonly involve furniture, jewelry, clothing, televisions, computers and other electronics. 

If your personal property is covered for its actual cash value, you may get reimbursed for less than the cost it takes to replace it due to depreciation. A replacement cost policy would cost less but cover more  of the cost.

Coverage D: Additional Living Expenses

Also called "loss of use" coverage, additional living expenses coverage kicks in for daily costs (up to the policy limits) when it's not possible to live in your home. For example, your insurance company would pay for hotel room fare and food while your home is undergoing repairs from a covered claim.

Coverage E: Liability 

If anybody is injured or their belongings are damaged or stolen while on your property, liability coverage will come to the rescue. Legal expenses or court costs that arise when the other party 

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What's Not Covered In an HO-3 Policy?

As mentioned, HO-3 homeowners insurance covers incidents and natural disasters except the excluded perils listed in your policy. Common exclusions include (but are not limited to):

  • Damage to vacant properties
  • Earthquakes
  • Flood
  • Government acts
  • Mold
  • Neglect
  • Pet damages
  • Upgrades of building codes
  • Wear and tear

You always have the option to purchase additional coverage — you can buy a separate home insurance policy or ask if your insurance company can add it to your policy.

HO-3 Policy vs. HO-5 Policy








Open peril

Open peril

Personal Property

Named peril

Open peril





More affordable

Less affordable


Most can qualify

More requirements

Best For

Homeowners who are comfortable with basic coverage and live in a relatively low-risk area.

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

Dwelling Coverage 

HO-3 and HO-5 policies both have an open-peril policy — your dwelling is protected against all perils EXCEPT those marked for exclusion in your policy.

Personal Property 

HO-3 policies have named perils coverage on personal property, but HO-5 policies have open perils coverage. Due to this, HO-5 policyholders enjoy more comprehensive coverage on their personal belongings but pay a bit more for coverage.

Actual Cash Value vs. Replacement Cost Value

On HO-3 policies, you're generally reimbursed for the actual cash value of your property and not the price you purchased for. Due to depreciation, ACV is often lower than the purchase price. HO-5 policies typically offer replacement cost value coverage, giving you enough money to actually replace the item today.

Eligibility for an HO-3 Policy

HO-3 policies are widely available so homeowners should have an easier time getting insured. However, stricter requirements may apply on HO-5 policies, such as the property meets a minimum value, age and claims history. You may need to meet minimum credit score requirements, too.

Which Type of Homeowners Insurance Is Best?

HO-3 policies is suitable for most homeowners, especially if they're seeking affordable coverage. If you need additional protection against specific perils, like floods or earthquakes, you can obtain separate policies for those. 

HO-3 policies is suitable for most homeowners, especially if they’re seeking affordable coverage.

An HO-5 policy does have its advantages, too. If you like the idea of replacement cost coverage on your personal belongings, then an HO-5 policy may be worth the extra cost.

HO-3 Policy FAQs

What does an HO-3 policy cover?

An HO-3 policy provides open-peril coverage for your dwelling and structures, personal liability and additional living expenses while your home is inhabitable. Your personal property coverage is covered against 16 named perils in your policy, including fire, theft and falling objects.

How much does HO-3 insurance cost?

An HO-3 insurance policy costs, on average, $1,249 annually according to a 2018 report by the National Association of Insurance Commissioners (NAIC).

What is the difference between an HO-3 and HO-6 policy?

An HO-3 homeowners insurance policy is for standard homes, while an HO-6 policy is for condos. Since condo owners own only their individual and not the entire structure, dwelling coverage functions differently for HO-6 policies.

Shopping for an HO-3 Insurance Policy at Low Prices

Whether your mortgage lender requires you to buy homeowners insurance or you're considering shopping for a better price with a new policy, comparing prices is key. SmartFinancial can streamline your search by sifting through 200+ top carriers to find one that matches you based on your profile and address. Begin a free quote by entering your zip code below and answering a few questions.

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