HO3 Insurance Policy

HO3 Special Form Home Insurance

(Even your favorite pooch will be protected)

HO3 Special Form

Most of the homeowners you know, including yourself, probably have an HO3 home insurance policy. That’s because an HO3 is one of the most popular types of homeowners insurance for people who own (not rent) their single-family home, multi-family home, or townhome. It also gives you more coverage than the HO1 or HO2. 

Independent insurance agents usually recommend homeowners buy, at the very least, an HO3 homeowners policy, the reason being that an HO3 will cover your property for ANY risks except the ones clearly excluded by the policy documents. (By the way, that’s called an “open perils” or “special forms” policy.) 

HO3 Policies: Covers Property, Possessions, and People

An HO3 home policy is what most people buy to safeguard their families, their property, and their things from a many different events. The actual home and any detached structures also on the property (e.g. garages and sheds) are covered. 

Plus, if someone hurts themselves anywhere on the property, then the HO3 liability coverage will kick in. 

An HO3 home insurance will also cover anyone named on the policy if they happen to damage someone else’s stuff or cause the other person to be injured. This is known in the insurance business as “Coverage E” or Personal Liability. Even the family dog is protected under Coverage E. So if Fido should bite another dog at the local park, it’ll be covered. Bonus!

The A B C’s of HO3 Home Insurance 

In your HO3 home insurance policy, you’ll find a section called “dwelling coverage” (or Coverage A) which outlines the protections for your actual home. 

Check out Coverage B for details about the insurance meant for all the freestanding structures covered by your HO3. The Coverage B form will talk about protections for fences, swimming pools, garages, and the like. 

Next up is Coverage C (called Personal Property) which covers your personal belongings when you’re at home and when you’re away. 

Last up is Coverage D which is known as “loss of use” insurance under your HO3 plan. Coverage D takes care of you when your home becomes uninhabitable. This helps with out-of-pocket expenses when something terrible happens at your home and keeps you from staying there while it’s being repaired. Your HO3 pays for things like a temporary place to live and basic living expenses (e.g. parking, laundry, takeout food) while your home is being fixed. 

Everything Else You Need to Know About HO3

Your independent insurance agent will recommend different home insurance policy types based on how much coverage your property really needs. Most agents recommend an HO3 for owner-occupied houses because it covers many common risks. 

HO3 policies usually protect against the same 16 dangers as an HO2 plan: 

  1. Fire and lightning
  2. Explosions
  3. Smoke
  4. Hail and wind
  5. Malicious mischief and vandalism
  6. Theft
  7. Volcanic eruptions
  8. Falling objects
  9. Freezing of household systems
  10. Weight of sleet, snow, and ice
  11. Accidental flooding from stream or water
  12. Sudden and accidental tearing apart, burning, cracking or bulging of household systems
  13. Sudden and accidental damage from artificially generated electrical current
  14. Riots and civil commotion
  15. Aircraft
  16. Vehicles


On the flip side, HO3 policies usually do have some exclusions (or things the insurer will not cover): 

  • Earthquake, mud flow, and sinkhole (called “earth movements”)
  • Demolition of your residence ordered by a court and to bring it into code
  • Demotion or seizure of property by a public authority or government agency
  • Water damage from water seepage under the foundation, sewer backup, flood
  • Power failure
  • War
  • Neglect
  • Mold

Your independent insurance agent can talk with you about possibly adding endorsements, or extra coverages, to your HO3 policy if you’re not satisfied with its general features. To get those extra protections, you will have to pay a bit more premium but most homeowners think it’s really worth it. The peace of mind is priceless anyway, right? 

Actual Cash Value vs. Replacement Cost Policies

One thing that’s really important to know about is whether your HO3 policy is based on Replacement Cost or Actual Cash Value (ACV). If you opt for replacement coverage, you won’t have to worry about depreciation being deducted from any claims payments. Of course, going with a replacement plan does mean your premium will be a bit higher. 

On the other hand, if you go with an ACV, your HO3 claims payout will have depreciation (or wear and tear) deducted from the amount. 

HO3 May Be All You Need

For millions of American homeowners, HO3 is exactly what they rely on to protect their biggest investment. You may find that HO3 is all you need too. Many banks and mortgage lenders prefer property owners, like yourself, to buy an HO3 policy. When in doubt, it’s always a great idea to work with an independent insurance agent. They can provide loads of insight into which homeowners insurance coverage will be right for you. 

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