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What is HO3 special form? What Events Does it Cover?

HO3 special form homeowners insurance policy is a form of home insurance that will protect policyholders against property damage, legal liabilities and other expenses associated with unexpected disasters befalling your home. Most insurers’ standard homeowners insurance offering is some variant of an HO3 policy, also called an open perils policy, as it covers homes for all dangers except those specifically excluded in its text. But shoppers should always do research into a policy before purchasing it to ensure they fully understand the scope of its coverage.

Damage to your personal property, on the other hand, will only be covered on a named perils basis with an HO3. This means that the cause of damage has to be explicitly stated in the HO3 special form to ensure coverage by your insurer.

Open Vs Named Perils

While there are a few different types of coverage options for when something bad happens, homeowners are most often covered for Structural Damage (Cov A) and Other Structures (Cov B) by something called an ‘open perils policy.’ This simply means unless something is explicitly excluded in your policy, it’s covered.

The alternative to ‘open perils’ is ‘named perils,’ which refers to a list of 16 specific perils that are covered by your insurer. These types of perils include fire, explosions, smoke, and theft. So unlike ‘open perils,’ if your policy doesn’t specify you’re covered for an earthquake or a flood— you aren’t.

Under your HO3 policy, your stuff, also known as Personal Property (Coverage C) is covered under named perils, whereas your Dwelling Coverage (Coverage A) is covered under open perils.

Note: Like all insurance policies, the peril, (or bad thing), must be accidental and sudden. If there’s a chance the damage was caused by negligence, you won’t be covered. So if ‘burst pipes’ wasn’t mentioned on your ‘open perils’ policy, but you previously knew your pipes weren’t in the best shape, your insurer may not cover you.

What Types of Events Do HO3 special form homeowners insurance Policies Cover?

HO-3 policies cover a variety of events and serve as an invaluable financial safeguard against many disasters. The foundation of an HO-3 policy is its coverage of property damages, but it also serves as protection against legal liability, the costs of living outside your home after an emergency, as well as medical damages.

1: HO3 special form homeowners insurance Policies Cover Dwelling Damage: The primary purpose of HO3 special form homeowners insurance is to cover your dwelling. Being covered means that damage to the dwelling—the structure of your home—will be reimbursed by your insurance company up to policy limits. HO-3 policies cover a variety of common perils that could afflict your home, and any perils it excludes from coverage must be explicitly noted in the policy. Below are some of the most common home insurance perils. HO-3 policies will almost always cover these and many more.

The most common insurance perils by claims frequency…

  • Wind and hail
  • Water damage and freezing
  • Theft
  • Fire and lightning

HO-3 insurance policy exclusions may vary from insurer to insurer, but a certain set of perils is almost always omitted from standard HO-3 special forms. The most notable of these are flood and earthquake damage, but exclusions can go beyond these dangers. Homeowners should always read their HO-3 form to understand which events they won’t be covered for.

Perils typically excluded from HO-3 homeowners insurance dwelling coverage…

  • Government seizure, demolition or requirement to rebuild to match building codes
  • Earth movements, including earthquakes, sinkholes and landslides
  • Power failure (if the source of failure is off-residence)
  • Homeowner neglect
  • War and nuclear hazards

Dwelling coverage also extends to other structures on your property, typically covering damage up to 10% of overall limits. This means that, to a certain extent, you’ll also be covered to structures outside your home but on your property, like fences and freestanding garages.

2: HO3 special form homeowners insurance Policies Cover Personal Property Damage: Although HO-3 policies cover your dwelling on an open perils basis, its personal property coverage is typically provided on a named perils basis. This means that your personal belongings like clothes, furniture, appliances and more are only covered by dangers specifically cited in your HO-3 policy.

A standard HO-3 policy will usually name many or all of the common perils cited above. Effectively, your personal belongings will also be covered for the most common types of dangers affecting a home. But named perils coverage is, by nature, not as exhaustive as open perils coverage. You should make sure to read all the named dangers before purchasing a policy to ensure you’re fully covered.

Homeowners should also note that some types of personal belongings—specifically high-value items—will only be covered by HO-3 insurance policies up to specified sub-limits. Items that are assigned sub-limits will only be covered for damage or theft at a lower limit than your overall limit.

For example, an HO-3 policy may have an overall personal property coverage limit of $50,000, but a $1,500 sub-limit for theft of jewelry. This means that if $5,000 worth of jewelry is stolen from your home, your insurer will only reimburse you for $1,500, minus your deductible, despite the fact that your overall coverage limit of $50,000 is more than enough to cover the value of the event. Homeowners looking for increased coverage for special items can often increase their sub-limits for an additional cost through an endorsement.

3: HO3 special form homeowners insurance Policies Cover Liability Expenses and Costs of Living Elsewhere HO3 homeowners insurance will also cover you for a variety of other expenses related to your home beyond your physical property. Common coverages include personal liability, loss of use and medical payments.

The most important of these remaining features is personal liability coverage. This will cover you for expenses related to bodily injury or property damages for which you are legally liable, including defense in court by a counsel of the insurer’s choice. A standard HO3 policy includes $100,000 in liability coverage, though homeowners can usually increase this number by hundreds of thousands of dollars—at a limited cost—if they choose to do so.

4: Loss of use coverage, also called additional living expenses coverage, will reimburse you for expenses above and beyond your normal expenses if your home is made uninhabitable by a covered peril. For example, loss of use would cover the costs of you staying in a hotel or Airbnb. Coverage is usually limited to a certain period of time or dollar amount; the latter usually set at 10% of your overall dwelling limit. Some insurers may allow policyholders to adjust the limit if you desire more coverage.

5: Finally, an HO-3 policy will cover a limited amount of medical payments. This will reimburse you for medical bills if people are hurt on your property or hurt by your pets. This coverage is unrelated to legal liability and provides limited reimbursement for basic medical expenses. Medical payments coverage limits are chosen by the policyholder and are generally no more than a few thousand dollars.

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