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The best homeowners insurance policies protect your financial investment in your house if disaster strikes.
Not all problems are covered by a standard homeowners insurance policy, which is often known as an HO-3. For those willing to pay extra, an HO-5 homeowners insurance policy can offer extended protection against problems and higher coverage limits for your house and personal property.
What Is an HO-5 Homeowners Insurance Policy?
An HO-5 policy, also known as a comprehensive policy, offers the broadest coverage of any homeowners insurance policy. Compared to a standard HO-3 homeowners policy, an HO-5 has two defining features:
- “Open peril” coverage for both your house and your personal property
- Replacement cost coverage for your personal property
Open peril coverage
The most significant advantage of an HO-5 policy is that it offers open peril coverage for both your dwelling (house) and your personal property (belongings). This means you are covered for damage to your house structure and your belongings under all circ*mstances except those specifically excluded by the policy—such as floods and earthquakes.
By contrast, a standard HO-3 homeowners insurance policy provides open peril coverage only for structures. An HO-3 provides “named peril” coverage for personal property. This means your personal property is only covered when damaged by a problem listed in the policy, such as fire or a tornado.
Replacement cost coverage
An HO-5 policy includes replacement cost coverage. This means if your belongings are stolen, damaged or destroyed, you will receive reimbursem*nt at today’s price to replace the item, not the depreciated value of the item.
Standard HO-3 homeowners policies offer actual cash value coverage, although you can generally upgrade to replacement cost coverage for a higher cost.
Related: Replacement vs. actual cash value coverage
What Does HO-5 Insurance Cover?
An HO-5 homeowners insurance policy covers:
- Dwelling, or the physical structure of the house.
- Other structures on the property, including fences, detached garages and sheds.
- Personal property, meaning your belongings, such as furniture, kitchenware and clothes.
- Loss of use, which is also called additional living expenses coverage. This reimburses you for expenses that exceed your typical living costs if you have to temporarily move out of your house while it’s being repaired after a problem covered by your policy.
- Liability insurance to pay for accidental bodily injury or property damage to others that you are responsible for. Coverage extends past your property, such as if your dog bites someone at the park or your child hits a baseball through a neighbor’s window. If you are sued, liability insurance will also cover your legal defense and any judgments and settlements against you.
- Medical payments to cover minor medical expenses if someone is injured on your property.
Related: What does homeowners insurance cover?
What Is Not Covered by HO-5 Insurance?
Although an HO-5 policy offers broader coverage than you would get with other types of homeowners insurance, it will have specific exclusions:
- Earthquake
- Flooding
- Industrial smoke or pollution
- Intentional damage
- Mold, fungus or wet rot
- Negligence
- Normal wear and tear
- Nuclear hazard
- Pet and insect damage
- Power failure
- Vandalism or malicious mischief if the home is left vacant for more than 60 days
- War
How Much Does an HO-5 Policy Cost?
The national average cost of an HO-5 policy is $1,412 a year, according to the National Association of Insurance Commissioners.
How much you’ll pay for coverage depends on factors such as:
- Age and location of the home
- Materials used to build the home
- Cost to rebuild the house
- Coverage, limits and deductible you choose
- Your personal claims history
- The claims history for the property
- Your credit (except in California, Maryland and Massachusetts)
Do You Need an HO-5 Home Insurance Policy?
Buying an HO-5 homeowners insurance policy can make sense if you want more comprehensive coverage than a standard HO-3 policy. Specifically, the HO-5 provides coverage for your belongings for all problems except those listed as exclusions. An HO-3 will give you personal property coverage only for a list of 16 perils—although the perils covered are common problems like fire.
Typically, you can also choose to pay extra for replacement cost coverage on an HO-3 policy. But your personal property protection would still be limited to the problems specified in the HO-3 policy.
Another way to get expanded coverage for belongings is to buy the less expensive HO-3 policy and then add scheduled personal property coverage for specific high-value items.
If you are unsure of whether an HO-5 policy makes sense for you, speak with your insurance agent to better understand your options. HO-5 policies are not offered by all insurance companies.
Neither the HO-3 nor HO-5 will cover floods or earthquakes.
Related: Types of home insurance policies
What to Look For in an HO-5 Policy
When you shop for an HO-5 policy, you should expect some standard features, such as all perils coverage for your house and personal items, and replacement cost coverage.
It’s a good idea to compare additional coverage or perks offered by insurers. For instance, Chubb offers risk consulting, the option to choose a cash settlement after a total loss, and extended replacement cost coverage. Extended replacement cost will pay for your house to be rebuilt to its original condition, even if the cost is more than the dwelling limit listed in your policy.
Be aware of what problems are excluded from coverage, such as earthquakes or floods. Earthquake insurance and flood insurance are available to purchase separately if you need coverage for these natural disasters.
It’s also a good idea to note coverage limits for personal property, especially if you have expensive items that you want insured. You can schedule personal property separately for high-value items that will be expensive to replace.
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HO-5 Insurance FAQ
Where can you buy an HO-5 Policy?
If you are interested in an HO-5 policy, be sure to tell your insurance agent, as not all companies sell them.
Compare homeowners insurance quotes from several insurers and choose the one that offers the best coverage at the best price.
Can every homeowner purchase an HO-5 Policy?
Not every homeowner is eligible for an HO-5 policy. This type of homeowners insurance is typically offered for newer houses that have a relatively low risk for loss.
If you live in an area in high danger of wildfires or in a place where crime rates are high, this type of policy might not be available to you.
Is an HO-5 policy worth it?
If you want homeowners insurance that will cover a wider range of problems than a standard HO-3 policy, an HO-5 policy may be worth it to you. The same is true if you want extended protection for your personal property.
That said, it’s worth evaluating your needs to determine if an HO-5 policy is best or if you can get what you need by purchasing a standard HO-3 homeowners insurance policy and adding replacement cost coverage and/or scheduling personal property.
