Home insurance requirement of an individual is definitely not the same as that of his neighbor. To fit the requirements of the individuals, the home insurance policies take different forms. HO3 and HO5 are two common home insurance policies which find use amongst the homeowners.
The basic difference between HO3 and HO5 policies
Standard homeowner's insurance offers coverage for the named perils only. The insured would only receive compensation if it is proved that the property damages or losses took place as a result of the named perils.- A HO-3 policy is a combination of an open peril and a named peril policy.
- A HO-5 policy is an open peril policy.
What is an open peril policy?
Insurance policy which offers coverage against almost all forms of risks that can cause damage to a property. Certain exclusions are however mentioned even in an open perils policy, which are not covered.
What is a named peril policy?
In a named peril policy, specific risks are mentioned against which the insurer provides coverage. If the property damages occur due to any other peril other than those mentioned in the policy, the insurers deny paying for the loss.
HO-3 - How it act likes a combination of open peril and named peril policy?
The HO3 policy acts like an open perils policy when it offers coverage against the property structure. This means the insurer will compensate for the damages to the structure of the insured building or residence, under any circumstances. However, if the damage is caused by any of the excluded peril, the insurers are not liable to pay for it.
The HO3 policy acts like a named peril policy when it offers coverage for the contents of the insured property. Loss or damages to the personal belongings of the homeowner and the home content will only be covered, if those have been caused by the specific perils as pointed out in the policy.Top
HO5 - How it acts like an open perils policy?
HO5 policy acts like an open perils policy, and doesn't discriminate between the home content and structure. Thus, no matter what kind of damage affects the insured property, this form of homeowner's insurance will offer protection. Coverage will only be denied if the cause behind the loss or damage is any one of the excluded perils, specifically mentioned in the policy.Top
Named perils for HO3 policy.
A standard HO3 policy offers coverage for 16 named perils as mentioned below:- Theft
- Fire or Lightning
- Explosion
- Smoke
- Freezing
- Vehicles
- Falling Objects
- Volcanic Eruption
- Windstorm or Hail
- Riot or Civil Commotion
- Damage caused by Aircraft
- Vandalism or Malicious Mischief
- Damage due to weight of Ice, Snow, or Sleet
- Sudden & Accidental Tearing Apart, Cracking, Burning, or Bulging
- Sudden & Accidental Damage from Artificially Generated Electric Current
- Accidental Discharge or Overflow of Water from Plumbing, Air conditioning etc.
Excluded perils for both HO3 and HO5 policy
The exclusions are more or less same for both HO3 and HO5 insurance policies as mentioned below:- Power failure
- Industrial pollution or smoke
- Earth movement (earthquake)
- Water damage due to flood
- Intentional loss
- War
- Nuclear Accidents
- Pets and other animals, insects and pests
- Settling, wear and tear
- Act of negligence
- Actions taken by government and other associations
- Legal action due to lack of proper permits, defective construction, design or maintenance
- Theft or Damage from vandalism in vacant dwellings or in dwellings under construction
- Deterioration due to weather conditions, that aggravates other excluded causes of loss
Which is better?
HO3 and HO5 policies can be compared on the basis of certain parameters as mentioned below:- Coverage - A HO5 policy is considered better than a HO3 insurance policy as far as coverage is concerned. It is so, since the former ensures wider coverage for both the structure and the contents of the insured home.
- Cost - A HO5 Policy is more expensive than a HO3 insurance policy. For those who are looking for an affordable coverage, HO3 policy seems to be the better choice.
- Popularity - HO3 insurance policies are apparently more popular with the homeowners. It is economical and offers coverage against most of the common perils.
The limitations of the HO3 can be overcome, if additional endorsements are added on to the basic coverage. However, that will raise the costs.
If you've to pick between a HO3 and a HO5 policy, the latter ensures the better coverage. An open perils policy is evidently a better choice than a named perils policy.
All said and done, your preference between the two forms of policy will essentially be influenced by your financial limits and the extent of coverage that you need. Top
Related discussions
- HO3 vs HO8: Which one the homeowner should choose
- Home Insurance: Home owners guide to insurance
- HO3 - Ho2
Posted: Mon Dec 06, 2010 08:51 pm Post Subject: insurance on townhouse
i sold townhouse contract for deed and need a new policy for the townhouse as unoccupied by owner.
Posted: Tue Dec 07, 2010 06:09 pm Post Subject:
Do you still own the property or does someone else now own the property?
If someone else is now the owner of the property, you have no insurable interest and cannot lawfully insure it.
On the other hand, if you are acting as the "lender", that is a different story. Your insurable interest is the unpaid loan balance. That may be insured.
Posted: Sun Dec 12, 2010 06:14 am Post Subject: aetna vision insurance
I am very glad you wrote that???
Posted: Wed Dec 29, 2010 05:17 am Post Subject: Sil is clueless!
I am an insurance professional and I stumbled across this posting. Some of the perils, e.g., Water damage, Power Interuption, and Ordinance of law are all covered perils under a HO-3 policy. It's pretty scary how many uneducated insurance professionals there are out there. :!: I am glad I don't employ people like Sil who doesn't have a clue about insurance.
Posted: Wed Dec 29, 2010 04:27 pm Post Subject:
Standard ISO property policies all include the following as covered causes of loss:
Fire; lightning; extended coverages; vandalism & malicious mischief; theft; falling objects; weight of ice, snow, and sleet; accidental discharge of water, sudden tearing apart of heat, A/C, hot water system; freezing; artificially generated electrical current
Common exclusions under ISO "broad form" property policies include:
Theft, liability, land, other structures used for commercial, manufacturing, farming or rental, animals, birds, fish, aircraft, boats other than rowboats or canoes, accounts, bank notes, bills, coins, currency, deeds, credit cards, motor vehicles, data, flood, earth movement, nuclear hazards, war, power failure, ordinance or law, neglect, intentional acts
An HO-3 is a "broad form" of coverage -- but specifically known as "open perils" coverage on the dwelling/structures and "named perils" coverage for personal property. This means all causes of loss to the dwelling itself are covered EXCEPT THOSE SPECIFICALLY EXCLUDED by the insurance company, and only the named causes of loss apply to personal property.
Although the prior post states:
Water damage, Power Interuption, and Ordinance of law are all covered perils under a HO-3 policy
that will only be true if they are not excluded by the language of the contract (and the term "water damage" is poorly used here -- the real word is "flood" -- water damage is covered under many circumstances other than as a matter of "neglect", such as that caused by a leaking pipe over many years). The "common" exclusions are often found in HO-3 contracts. Earth movement, flood, nuclear hazard, and war/riots/insurrection are almost always excluded from homeowner's/dwelling policies.
Contracts do vary from one insurance company to another, so it pays to know what to look for and to read the contract to be certain what is not in the list of exclusions, since insurance companies are free to describe what they do or do not cover under an HO-3 policy.
Specifically, however, an HO-3 would never cover under "Ordinance or Law" (if O-or-L is not excluded) a retrofit of an existing dwelling to comply with earthquake safety laws or modifications to the premises to comply with the Americans with Disabilities Act (ADA). Those things might be covered as contingent losses in the reconstruction of a dwelling following a total loss due to another covered cause.
So even some other "insurance professionals" don't always get it right, either.
Posted: Sun Apr 10, 2011 11:40 pm Post Subject: HO-3
suggestions on a good ho-3 policy provider?
Posted: Mon Apr 11, 2011 08:00 am Post Subject:
An HO5 is a comprehensive homeowner's policy that provides all-risk coverage for the home, personal property, other structures, and loss of use. It was created to give those considered to be better risks broader coverage than an HO/3 at a better price. An HO5 essentially covers the personal property the exact same way it covers the home structure itself. There is coverage for anything that could possibly happen....except for what is excluded in the policy. In an H03 the personal property is covered for only 16 perils (which are listed in the policy). If anything else happens to the property there is no coverage.
[Link removed - Admin]
Posted: Fri Apr 15, 2011 12:14 pm Post Subject:
suggestions on a good ho-3 policy provider?
The one that will insure your property at the price you can afford.
Posted: Mon Jun 06, 2011 03:19 pm Post Subject: HO 5
Sil - your explanation on the HO5 is inaccurate. Most of the exclusions you listed under the HO3 are also excluded under the HO5. Additionally, water damage is covered under the HO3 if its from a wind storm. It's not covered if it's from a flood.
Posted: Wed Mar 28, 2012 09:42 pm Post Subject: 16 perils
what are the 16 perils?
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