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There are eight homeowners insurance forms, starting with HO1 and ending with HO8. Most are designed for homes, but HO4 is renters insurance, HO6 is for condos and HO7 is for mobile homes.

A couple of common forms of homeowners insurance are:

  • HO3
  • HO5

Knowing the difference between HO3 and HO5 helps you shop for the ideal level of coverage. To get a good grasp at how they differ, let’s start with all the HO3 policy coverage details. 

  • A HO3 policy is the minimum amount of coverage you require for your home, and it provide broad coverage for all types of homes.
  • The HO5 policy is designed to give you more freedom than the typical H03 and increase your personal items' limits, such as jewelry.
  • Both HO3 and HO5 home insurance policies offer coverage for additional living expenses and liability.
  • If you only have a few items to insure, a HO3 with endorsements is a cost-effective option than a broad-coverage HO5 policy.

What is an HO3 policy?

If you have a mortgage, a HO3 policy is the minimum amount of coverage your lender will request. HO3 insurance policies provide broad coverage for all types of homes. 

HO3 homeowners insurance policies typically cover damage from 16 named perils:

  1. Fire or lightning
  2. Smoke
  3. Explosions
  4. Freezing
  5. Windstorm or hail
  6. Water or steam overflow or accidental discharge (such as from HVAC or plumbing)
  7. Theft
  8. Vandalism
  9. Riots
  10. Falling objects
  11. Weight of snow, sleet or ice 
  12. Volcano eruptions
  13. Vehicles
  14. Aircraft
  15. Short circuits or artificial electric currents
  16. Sudden and/or accidental cracking, tearing, bulging or burning

As long as one of those perils caused the damage or created the loss, your homeowners insurance company should cover it. However, HO3 insurance for your contents and other personal property is limited. For instance, an HO3 policy may not reimburse you for all damages to your belongings.

You may also see this coverage also referred to as HO 3 and HO-3 coverage. An HO 3 policy is the same as HO3 insurance.

What is personal property?

Before we move onto HO5, let's first briefly review what's personal property that we just mentioned.

This contents coverage includes your personal belongings, including clothing, appliances, furniture and other items in your home. Insurance policies cover these items, but how much coverage you get depends on the homeowners policy.

The worth of your items may influence whether HO3 or HO5 is a better home insurance policy for you.

What is HO5 insurance?

You can expand your HO3 coverage by adding endorsements to your homeowners insurance policy for personal property. Or you can buy HO5 insurance instead. 

An HO5 policy removes most of the limits you’d find in an HO3 and increases personal items' limits, such as jewelry. 

HO5 insurance doesn’t include everything. Here’s what’s not typically covered in a standard homeowners insurance policy:

  • Mold damage
  • Earthquake
  • Floods

When in doubt, ask the insurance company before you buy. Chances are, you may need to purchase flood or earthquake insurance in addition to homeowners coverage if you want that added protection.

One of the biggest selling features of HO5 insurance is that replacement cost is included. Replacement cost coverage removes the depreciation penalty you’d face if you need to replace your items. With replacement cost coverage, you may purchase a new version of the lost or damaged goods instead of having to settle for an amount that would only cover a second-hand version of the item.

What both HO3 and HO5 insurance covers

Both HO3 and HO5 home insurance policies cover additional living expenses and liabilty.

Additional living expenses coverage helps you when you're temporarily not able to live in your home. This coverage can help after a fire or another incident that requires to live elsewhere. The coverrage, also called loss of use, can help with paying for hotel rooms, food and other living expenses.

Both HO3 and HO5 also have personal liability coverage. You get to choose the level of liability protection, which covers you if someone gets injured on your property. Liability also covers legal costs and court damages if you're sued.

The standard home insurance policy includes $100,000 of liability coverage, but it's often wise to get at least $300,000 worth of protection.

Difference between HO3 and HO5 insurance

The biggest difference between a HO3 policy and a HO5 policy is the exclusions. An HO5 gets rid of most of the limits found in a basic HO3 homeowners insurance policy.

Open perils vs. named perils

A peril policy is the part of your homeowners coverage that decides what the policy covers and what it doesn't.

Here are the two terms to know about peril policy:

  • Open perils -- You’re covered against things like lightning or fire unless they’re specifically excluded from your policy.
  • Named perils -- Only the items listed on your policy are covered.

Open perils coverage offers more protection than named peril.

An HO3 policy covers named perils for personal property and open peril for structures. So, you'll list the named perils that are personal property that the policy will cover. Anything not listed isn’t protected with named peril coverage. As for structures, all perils are included, even if they’re not named or listed. Be sure to check the exclusions list for any that may be disallowed.

HO5 insurance is open peril for both personal property and structures on your property. With open peril, you don't need to name specific items for coverage. It’s the least hassle-free peril policy since there aren’t as many limitations — if it isn’t excluded in your policy, you’re covered.

HO3 vs HO5 comparison

Here’s an overview of the difference between HO3 and HO5. Remember, an HO5 insurance policy is more expensive than basic HO3 coverage, but the extra cost may be well worth it in case of a claim. 

Difference between HO3 and HO5

Type of coverageBasicPremium
CostLess expensiveMore expensive
Structure coverageOpen perilOpen peril
Personal property coverageNamed peril (limited coverage), endorsements may be required for higher-value itemsOpen peril (expanded coverage), the bulk of your personal property is included
Replacement costActual cash valueReplacement value
RequirementsAn HO-3 is the minimum type of home insurance mortgage lenders that requireMay only be available for newer homes or houses at low risk for fire, theft or other natural disasters

Which homeowners insurance policy should you choose?

You may want to get insurance company quotes for an HO3 policy and an HO5 and weigh the price difference if you add personal property endorsements to a less-expensive HO3. If you only have a few personal property items to insure, an HO3 with endorsements may be more affordable than a broad-coverage HO5 policy.

If you don’t have many home furnishings, computers, electronics or valuables in general, an HO3 policy is more affordable and should be enough coverage to protect your home’s structure and keep your mortgage lender happy. 

But if you have fine jewelry or an upgraded home interior, such as custom wood floors, a chef’s kitchen and a marble bathroom, HO5 coverage insures your contents and personal property at higher values. 

And if you need to replace your property in the future, you’ll have the freedom of buying a new version of the items you’re replacing.

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