There are several types of homeowners insurance, including HO-3 and HO-5 policies. Both offer coverage for the structure of your home, other structures on your property, your personal belongings, and personal liability. But they differ in how comprehensive the coverage is.
The vast majority of homeowners have an HO-3 policy, which offers standard home insurance coverage that you’re likely familiar with. But if you’re in the market for more robust, comprehensive coverage for your belongings, an HO-5 policy might be a better fit.
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HO-3 vs. HO-5 policies
Home insurance policies cover damage in two different ways: named peril and open perils. Named-peril policies only cover damage to your home and belongings caused by perils specifically listed on your policy, while open-peril policies cover damage caused by anything except the perils excluded from the policy.
Both HO-3 and HO-5 policies use open perils coverage for damage caused to your home and other structures on your property (aka dwelling and other structures coverage).
However, HO-5 policies also offer open-perils coverage for your personal property coverage, while HO-3 policies only cover your personal belongings for named perils.
HO-3 policy | HO-5 policy | |
|---|---|---|
Dwelling coverage | Open perils | Open perils |
Other structures coverage | Open perils | Open perils |
Personal property coverage | Named perils | Open perils |
Dwelling claim reimbursem*nts | Replacement cost | Replacement cost |
Other structures claim reimbursem*nts | Replacement cost | Replacement cost |
Personal property claim reimbursem*nts | Actual cash value | Replacement cost |
Cost | Less expensive because it offers less robust coverage | More expensive because of additional coverage for personal property |
Availability | Most common type of coverage, available to most homeowners | Only available to certain homeowners with a reduced risk of claims |
Collapse table 
Actual cash value vs. replacement cost coverage
When choosing whether an HO-3 or HO-5 policy is best for you, you’ll want to consider whether your belongings should be covered on an actual cash value or replacement cost basis.
Here’s how the two types of coverage compare:
Actual cash value: Pays to replace your property at its replacement value minus depreciation. This means the cost of wear and tear is subtracted from the claim reimbursem*nt.
Replacement cost: Pays to replace your property with items of similar value at today’s prices.
HO-3 policies that come with actual cash value reimbursem*nt for your belongings give you a much smaller payout for a claim, but you’ll enjoy lower rates. Alternatively, HO-5 policies that come with replacement cost value for your belongings give you a higher claim payout, but in turn you’ll pay higher rates.
Learn more >> Actual cash value vs. replacement cost coverage
What perils are covered by HO-3 vs. HO-5 policies?
HO-3 and HO-5 policies both cover your home on an open perils basis, which means the policy only covers damages listed in the policy. Here are some examples of common named perils:
Fire
Lightning
Hail
Theft
But HO-5 policies cover your personal property on a named perils basis, which covers everything except what is listed as excluded on the policy. Here are some examples of common exclusions:
Flood damage
Earthquakes
What perils aren’t covered by HO-3 and HO-5 policies?
There are several perils that aren’t covered by HO-3 and HO-5 policies, including:
Flooding: Includes water damage caused by outside flooding — you’ll need a separate flood insurance policy to protect you from this type of damage.
Earthquakes: Defined as damage caused by earth movement, including earthquakes, tremors, landslides, mudslides, subsidence, and sinkholes. You may be able to purchase an earthquake endorsem*nt to cover these types of damage.
Normal wear and tear or lack of maintenance: Damage caused by neglect or poor maintenance, like mold problems or long-term water damage, is not covered by either type of policy.
Pests or vermin: Damage caused by mice, rats, termites, bed bugs, and other types of pests or animals are excluded from both types of policies.
Ordinance or law: Losses associated with the government’s enforcement of local building codes typically aren't covered. While some policies offer a small amount of coverage for ordinance or law losses, this typically only kicks in if your home is damaged by a covered peril.
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When to consider an HO-3 policy
The majority of homeowners have an HO-3 policy and find it provides enough coverage to financially protect their home and belongings. If you own a home but don’t have any special situations that may require additional insurance coverage, an HO-3 policy is probably right for you.
Learn more >> HO-3 home insurance policies
When to consider an HO-5 policy
You may want to consider an HO-5 policy if you need additional coverage for your personal belongings. HO-5 policies don’t account for depreciation in your claim payouts and cover your belongings against everything except the perils specifically mentioned in your policy. But this benefit comes with higher premiums to compensate for the additional coverage. HO-5 policies are typically limited to those with newer homes and people living in areas at low risk of weather damage.
Learn more >> HO-5 home insurance policies
Why do I need home insurance coverage?
Home insurance coverage pays for damage to your home and personal belongings, which means you’ll be protected if your house catches fire or someone breaks into your home. It also protects you financially if someone is hurt on your property (or their property is damaged) and you’re found legally responsible.
How much home insurance do I need?
To protect yourself financially, you need to have enough homeowners insurance to:
Rebuild your home
Replace your personal belongings
Pay for temporary living costs if your home is unlivable
Protect your assets in case of personal liability
The best way to make sure you have a sufficient amount of insurance is to work with an insurance expert who can help ensure your policy meets your needs. Our team of licensed insurance agents at Policygenius can help you compare quotes and find the best policy to fully protect your home and belongings.
Learn more >> How much home insurance do I need?
Ready to shop for HO-3 vs. HO-5 insurance policies?
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Frequently asked questions
What perils are excluded under an HO-3 policy?
The most common exclusions on an HO-3 policy are earthquakes, flooding, government action, intentional loss, neglect, nuclear hazard, ordinance or law, power surges that originate off your property, and war.
What does an HO-3 policy cover?
HO-3 policies offer coverage for your dwelling, other structures, personal property, personal liability, loss of use, and medical payments to others.
