HO-3 vs HO-5: What is the difference?

What is HO-3 insurance?

HO-3 insurance is the most common homeowners insurance policy and gives broad coverage for the structure of your home. It covers your house on an open-perils basis, meaning all perils are covered unless excluded by the policy, but personal property is covered only for specific listed perils, such as fire, theft or wind.

Standard personal property coverage on an HO-3 policy is based on actual cash value, which reduces the payout for depreciation rather than replacement cost, which is the cost of a like item at today’s prices; however, an endorsement is available for replacement cost. An HO-5 includes replacement cost coverage for personal property.

What is HO-5 homeowners insurance?

An HO-5 policy gives you broader homeowners insurance coverage than an HO-3. It covers both your house and personal belongings for all perils not specifically excluded, and it includes replacement cost coverage for personal property. You get stronger protection, which you may need if you own expensive belongings or a high-value home.

An HO-5 policy has open perils coverage for both the dwelling and personal property. It also comes with higher personal property coverage limits for things like jewelry.

HO5 insurance doesn’t include everything. Like the HO-3 (and all home insurance policies), it excludes:

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.

An HO-5 home insurance policy includes replacement cost coverage for personal property, which is often an endorsement on an HO-3.

Know more about HO-5 homeowners insurance.

What is covered by both HO-3 and HO-5 insurance?

Both HO-3 and HO-5 policies cover your house, personal liability, liability, medical payments to others, and additional living expenses after a covered claim. That means you get help repairing your home, paying for temporary housing and covering legal or medical costs if someone is injured and you are responsible.

Additional living expenses coverage helps you when you're temporarily not able to live in your home. The coverage, also called loss of use, can help with paying for hotel rooms, food and other living expenses during a covered claim.

Both HO-3 and HO-5 also have personal liability coverage. You get to choose the level of liability protection, which covers you if you are responsible for injuries or damage to others. Liability also covers legal costs and court damages if you're sued. Similarly, medical payments coverage provides a small payout to cover medical bills if someone is hurt on your property, regardless of fault.

The standard home insurance policy includes $100,000 of liability coverage, but experts recommend at least $300,000.

What's the difference between HO-3 and HO-5 insurance?

The main difference between HO-3 and HO-5 insurance is how your personal property is covered. An HO-3 covers belongings only for named perils, while an HO-5 covers belongings for all perils except those specifically excluded. HO-5 also includes replacement cost coverage and broader protection, but it costs more than HO-3.

HO-5 policies generally offer higher coverage limits and are specifically designed for high-value or newer homes. Because of expanded coverage, insurance companies may have stricter eligibility requirements for an HO-5 policy. An HO-3 meets the minimum requirements for most standard mortgages.

Open perils vs. named perils

There are two systems by which a policy outlines which perils are covered: open perils, which covers anything not excluded, and named perils, which covers a specific list of perils.

Open peril. All perils are covered except those that are specifically excluded.
Named perils. Only the perils listed on your policy are covered.

Open perils coverage offers more protection than named perils.

An HO-3 policy covers named perils for personal property and open perils for the dwelling and attached structures. Some companies may offer an open perils endorsement for personal property.

HO-5 insurance is open perils for both personal property and the dwelling.

A named perils policy covers the following:

Fire or lightning
Smoke
Explosions
Freezing
Windstorm or hail
Water or steam overflow or accidental discharge (such as from HVAC or plumbing)
Theft
Vandalism
Riots
Falling objects
Weight of snow, sleet or ice
Volcano eruptions
Vehicles
Aircraft
Short circuits or artificial electric currents
Sudden and/or accidental cracking, tearing, bulging or burning

As you can see, the coverage is still pretty comprehensive.

HO-3 vs. HO-5

HO-3 is the standard, lower-cost policy that meets the needs of most homeowners, while an HO-5 is the upgraded option with broader personal property coverage. With an HO-3, you get open perils coverage for your home and named perils coverage for belongings. With HO-5, both your home and your belongings are covered for all perils that aren’t excluded.

Differences between HO-3 and HO-5 home insurance policies

HO-3 vs HO-5 comparison
	HO-3	HO-5
Type of coverage	Special form (standard)	Comprehensive form (upgraded)
Cost	Less expensive	More expensive
Dwelling coverage	Open perils	Open perils
Personal property coverage	Named perils (limited coverage), endorsements may be required for higher-value items	Open perils (expanded coverage), the bulk of your personal property is included
Replacement cost	Actual cash value, replacement with endorsement	Replacement value
Requirements	Minimum required by most mortgage lenders	May have restrictions on which homes are eligible; usually newer and high-value homes

Which homeowners insurance policy should you choose?

You should choose HO-3 if you want standard homeowners insurance at a lower cost and do not own much high-value personal property. You should choose HO-5 if you want stronger coverage for your belongings, replacement cost protection and higher limits.

The HO-3 is a standard choice and is what most people buy, but if you have a high-value home and contents, consider an HO-5.