HO3 Homeowners Insurance

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Contributor, Benzinga
December 15, 2021

An HO3 homeowner’s insurance policy provides homeowners with a wealth of coverage for both their home and their personal property. But how do HO3 policies vary from other homeowner’s insurance options and what types of coverages should you expect on your policy? Read on to learn everything a new homeowner has to know before getting an HO3 homeowner’s insurance policy. 


Key Points

  • An HO3 homeowner’s insurance policy compensates you for damage to your home’s structure, other structures on your property and your personal property.
  • It also helps cover some common legal liabilities you might face as a homeowner.
  • HO3 policies must specifically state any perils that are not covered under the policy within its contract terms.
  • HO3 policies include replacement cost coverage for your home’s dwelling and sometimes your personal property.
  • An HO3 policy is the most common insurance policy purchased by homeowners.

What is an HO3 Policy Form?

An HO3 policy is a type of homeowner’s insurance policy that helps you pay for the costs of repairs to your home’s structure and other structures found on your property that are not attached to your home. HO3 policies also include coverage for your personal property as well as legal representation if someone is injured on your property or sues you for damage caused to their own property.

While HO3 insurance isn’t required in the same way that car insurance is required to legally drive on the road, most mortgage lenders will require you to maintain a certain level of this coverage as a term of your loan to protect yourself against financial losses caused by natural disasters or theft. In order to qualify for an HO3 policy, the owner of the property must live in the home insured.

When are HO3 Policies Typically Used?

HO3 policies are the most common type of homeowner’s insurance sold on the market, especially for single-family residences. Most homeowners choose an HO3 policy over other types of more limited coverage because these policies offer coverage for personal property and liability damages in addition to the physical structure of your home. 

What do HO3 Policies Cover?

Most HO3 policies include 5 unique coverages.

  • Dwelling coverage: Your dwelling coverage compensates you for physical damage to your home’s structure and its major systems. Most HO3 policies insure your dwelling up to the amount of money that it would cost to completely replace the home.
  • Other structures coverage: This portion of your HO3 policy covers other structures that are not attached to your dwelling but are still on your property. Some examples of structures that would be covered under this protection might include a tool shed, fence or detached garage. Most HO3 policies include other structures coverage equal to about 10% of the total coverage of your dwelling insurance.
  • Personal property insurance: Personal property insurance compensates you for damage done to your personal possessions as a result of a covered peril. For example, if your home catches on fire and your living room furniture is destroyed, your personal property coverage will help you pay for the cost of buying new furniture.

Most HO3 policies include coverage equal to 50% of the value of your dwelling coverage for personal property. However, most homeowner’s insurance policies also include limitations on the total amount of money of this limit that you can use to replace a single item. For example, you might have an HO3 insurance policy with $50,000 worth of personal property coverage — but also a caveat that says that you cannot use more than $1,000 to replace jewelry that is stolen or damaged.

  • Liability coverage: Liability coverage helps you pay for legal expenses if you damage someone’s property or if someone injures themselves on your property and sues you for replacement costs or medical bills. Liability coverage compensates you for both your legal defense and any court-ordered costs you’re required to pay. Liability limits usually begin at $100,000, but you may want to increase this coverage with your insurance provider.
  • Loss of use coverage: Loss of use coverage (sometimes referred to as “additional living expenses” coverage) helps you pay for everyday expenses that you incur if your home is deemed inhabitable and must be rebuilt. For example, your loss of use coverage will cover restaurant meals and hotel costs you incur while your home is being rebuilt.

These are just the most common examples of coverage limits that you’ll find on most HO3 insurance policies. Be sure to read the terms of your unique contract before you sign up for coverage so you know exactly what percentage of your home’s value is covered under each portion of your policy. 

What Perils are Covered Under a HO3 Policy?

In the realm of insurance, a “covered peril” is an event that causes damage to your home that qualifies you to file an insurance claim with your policy provider. If the damage to your property was not caused by a covered peril, your insurance is not liable for the damage caused. The specific perils covered under each type of policy will vary depending on the insurance provider and the policy type.

HO3 policies are sometimes referred to as “open peril” policies, as they provide you with coverage for a wider range of perils when compared to other more limited homeowner’s insurance policies (like HO1 and HO2 policies). Under an HO3 policy, your dwelling is protected from damage from all perils unless they are specifically listed as exclusions under the terms of the policy. Some of the most common perils that you’ll see covered under your HO3 policy include:

  • Fire damage
  • Damage from wind and hail
  • Freezing and snow
  • Lightning strikes
  • Theft of personal property
  • Vandalism

Perils that are not covered under an HO3 policy must be explicitly specified in your contract. Some of the most common excluded perils that you’ll see when signing onto a policy include:

  • Government seizure of your property
  • Damaged that you intentionally caused to your home or personal property
  • Damage that results from neglect on the side of the homeowner
  • Earthquakes
  • Flooding (if you live in a high-risk flood zone, you may need to buy a separate flood insurance policy)

Keep in mind that you’re only covered for damages up to the limits specified on your policy, even if the damages were caused by a covered peril. This makes it especially important to know the terms of your policy and the amount of money that you’d need to fully rebuild after a major natural disaster before you sign up for coverage. 

Replacement Cost Coverage and HO3 Policies

One of the major benefits an HO3 policy offers over other types of homeowner’s insurance is that this type of insurance includes replacement cost coverage for your dwelling. This means that instead of paying the depreciated actual cost value of your property after a total loss, your homeowner’s insurance will fully cover the cost of building a new property with similar amenities as your old home. Some HO3 policies also include replacement cost coverage for personal belongings, while others require you to add this as a separate coverage.  

How to Compare and Get an HO3 Insurance Policy

There are dozens of homeowner’s insurance providers located across the country—and because HO3 policies are the most common type of coverage for traditional homes, you’ll have your choice of policies. Here are a few factors that you may want to consider when you shop for insurance and compare quotes.

  • Premiums: Your premium is the amount of money that you must pay each month to maintain your insurance coverage. Be sure to choose a policy with a premium that you know you can afford. You can often lower your premium by taking on a higher deductible — however, this will increase what you’ll need to pay in the event that you need to file an insurance claim.
  • Replacement cost vs actual value on personal property: While HO3 policies default to replacement cost value of your home, this is not the case for personal property. If you have a number of high-value items that depreciate in value more quickly than others (like electronics) you may want to explore insurance providers offering replacement cost coverage for personal property.
  • Specific coverage limits: Your homeowner’s insurance policy might include limitations on the total amount of money they will pay out for the loss of high-value items. If you have something exceptionally valuable you want to protect (like an engagement ring or musical instrument) look for a homeowner’s insurance policy with extended rider options.

You can typically find HO3 coverage from any major local insurance provider. If you already have another type of insurance coverage (like car insurance or business insurance) you may want to consult with your current insurer to ask about HO3 bundling options, which can allow you to save on both policies. 

Compare Home Insurance

Not sure where to begin your search for homeowner’s insurance? Consider starting with a few of the recommended providers below. 

Finding Affordable HO3 Coverage 

Each homeowner’s insurance company uses its own unique formula to calculate premium rates. The best way to save money on your homeowner’s insurance is by getting a free, fast quote with multiple competing insurance providers before signing onto a policy. Start your search for insurance by staying organized and using the links above to compare all of your options.  

Frequently Asked Questions


What is an HO-3 homeowners insurance policy?


An HO3 homeowner’s insurance policy is a common type of insurance that includes coverage for your home’s structure, other structures on your property and your personal property. It also includes coverage for legal liabilities and court-ordered judgments if someone is injured on your property or you damage their property and they sue you. 


What is not covered under HO3?


If a peril is excluded from damage to your home’s structure, it must be specifically named on the HO3 policy. Some common examples of exclusions include damage resulting from a flood or homeowner neglect.


Will an HO3 policy cover replacement costs?


An HO3 policy will provide replacement costs for your dwelling. It may or may not include replacement cost coverage for your personal property.