HO5 vs. HO3: Know the difference
How does it work?
The HO3 and HO5 policies both cover a policyholder's house on an open peril basis. The difference is in how it protects personal property.
HO5 comes with better coverage, meaning it also comes with a higher price. The value is based on whether the additional cost is worth the benefit. If you’re speaking with someone that is more budget conscious as a new or existing homeowner, then the less expensive HO3 policy may be the way to go. But if your customer is worried about the cost of having to replace their belongings in the event of a large loss, HO5 can offer peace of mind.
| Coverage | HO3 | HO5 |
| House | Open peril | Open peril |
| Personal property | Named peril | Open peril |
What the difference means
When it comes to homeowners' insurance, there is a small, but important difference to note between an HO3 and HO5 policy.
- Named peril: Coverage for all perils that must be listed by the policy
- Open peril: Coverage for all perils unless specifically excluded by the policy
With a named peril approach, the HO3 policy states exactly what perils can be covered. If the peril is listed, the policyholder is covered.
The open peril language for the HO5 policy form is broader by not itemizing what perils are covered. Instead, it calls out which perils are excluded under the policy. If the peril is not listed specifically under the exclusions, the policyholder is covered.
When to consider an HO5 policy
Here are some examples of times when choosing an HO5 policy instead of an HO3 may make more sense:
- Prestige/preferred accounts: Coverage A $750K+
- Customer is a commercial client within the agency
- Betterment of current policy and broadest coverage available
- Less exposure to E&O
- Less exclusions
LC 2021-341
HO5 vs. HO3: Know the difference
How does it work?
The HO3 and HO5 policies both cover a policyholder's house on an open peril basis. The difference is in how it protects personal property.
HO5 comes with better coverage, meaning it also comes with a higher price. The value is based on whether the additional cost is worth the benefit. If you’re speaking with someone that is more budget conscious as a new or existing homeowner, then the less expensive HO3 policy may be the way to go. But if your customer is worried about the cost of having to replace their belongings in the event of a large loss, HO5 can offer peace of mind.
| Coverage | HO3 | HO5 |
| House | Open peril | Open peril |
| Personal property | Named peril | Open peril |
What the difference means
When it comes to homeowners' insurance, there is a small, but important difference to note between an HO3 and HO5 policy.
- Named peril: Coverage for all perils that must be listed by the policy
- Open peril: Coverage for all perils unless specifically excluded by the policy
With a named peril approach, the HO3 policy states exactly what perils can be covered. If the peril is listed, the policyholder is covered.
The open peril language for the HO5 policy form is broader by not itemizing what perils are covered. Instead, it calls out which perils are excluded under the policy. If the peril is not listed specifically under the exclusions, the policyholder is covered.
When to consider an HO5 policy
Here are some examples of times when choosing an HO5 policy instead of an HO3 may make more sense:
- Prestige/preferred accounts: Coverage A $750K+
- Customer is a commercial client within the agency
- Betterment of current policy and broadest coverage available
- Less exposure to E&O
- Less exclusions
LC 2021-341