What Is an HO-3 Form?
The HO-3 form is one of six different forms used for homeowners policies. It applies to houses, not apartments, condominiums, or cooperatives. Although liability coverage offered through Form HO-3 (Coverages E and F) is similar to the liability coverage that appears in the other five forms, it's the property insurance coverage (specifically Coverages A, B, and C) that makes HO-3 different.
Tip: The form number of your particular policy will usually be shown on the bottom right corner of every page. Use this resource as a learning tool, but always read your policy carefully to familiarize yourself with the details of your coverage.
Dwelling and Other Structures
The HO-3 form is different from the other five forms. Rather than covering a number of listed or named perils, Form HO-3 covers you broadly "against risk of direct loss to property described in Coverages A [your dwelling] and B [other structures]." But before you jump to the conclusion that Form HO-3 covers you for every possible cause of damage, check out the following extensive exclusions from coverage.
The open perils coverage provided by Form HO-3 is more extensive than basic coverage Form HO-1 and named perils coverage Form HO-2, but it will likely cost you more than the other forms of coverage.
In the HO-3 form, personal property is covered on a named perils, not an open perils, basis. This means your personal property is covered only if damage is caused by any of the following 17 named perils:
- Fire or lightning
- Windstorm or hail
- Riot or civil disturbance
- Vandalism or malicious mischief
- Broken glass
- Volcanic eruption
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water
- Sudden and accidental tearing apart
- Artificially generated electrical damage
Tip: If you wish to insure your personal property for the more extensive open perils coverage, you may do so by purchasing a Special Personal Property Coverage endorsement to add to your policy.
If your homeowners policy is written on Form HO-3, you are not covered by property insurance for damage or destruction caused by:
- Enforcement of building codes and similar laws
- Power failures
- Neglect (meaning your failure to take reasonable steps to protect your property)
- Nuclear hazard
- Intentional acts
- Freezing pipes and systems in vacant dwellings
- Damage to foundations or pavements from ice and water weight
- Theft from a dwelling under construction
- Vandalism to vacant dwellings
- Latent defects, corrosion, industrial smoke, pollution
- Settling, wear, and tear
- Pets, other animals, and pests
- Weather conditions that aggravate other excluded causes of loss
- Government and association actions
- Defective construction, design, and maintenance
Form HO-3 has the most extensive list of exclusions of any of the six forms. Yet because Form HO-3 also has the broadest range of coverage, the net result is that Form HO-3 still provides you with the most extensive coverage of all the policy forms.
Caution: Not surprisingly, Form HO-3 is not only the most protective form, it's also the most expensive to purchase. If you're willing to trade away some protection in return for a smaller premium, consider purchasing Form HO-2.
One of the Conditions in Section I of Form HO-3 describes the amount you will receive for any loss covered by property insurance. Separate amounts are set for Coverages A (Dwelling) and B (Other Structures), and Coverage C (Personal Property), as follows:
- For your dwelling and other buildings, there are two possible scenarios. If your coverage amount is at least 80 percent of the replacement cost of the property, you are entitled to receive the full replacement cost or the amount spent to repair the property. If your coverage amount is less than 80 percent, you will receive only the actual cash value of the property or a percentage of its replacement cost.
- For your personal property (including appliances, carpeting, and structures other than buildings), you are entitled to receive the actual cash value of any damaged personal property, but no greater than the repair or replacement cost of the property.
Tip: Loss settlement is always subject to the coverage limits described on the Declarations Page of your policy. This means you are never entitled to receive more than the coverage limit, even in cases where the actual cash value or replacement cost is a greater amount, unless you have increased your coverage limit by endorsement.
Caution: To qualify for payment from your insurance company, you must meet the conditions that are spelled out in your homeowners policy. Some conditions dictate your responsibilities before a loss occurs, and some dictate the actions you must take after loss to remain eligible for coverage. Read your policy carefully to familiarize yourself with your responsibilities under the policy.
As previously noted, Form HO-3 is the only policy form that offers open perils coverage. Here's a few other features found in HO-3 that are not shared by all the other forms:
- Landlord's Furnishings. Form HO-3 covers you for your personal property located in an apartment in your home that you rent to others. These items include appliances, furniture, and carpets. Coverage has a limit of $2,500 for any one loss and is on a named perils basis. Of the remaining five policy forms, only Form HO-2 has a similar feature.
- Ensuing Loss. Although Form HO-3 does not insure against a long list of excluded events and situations, it does cover you for ensuing losses that result from excluded events (as long as the ensuing loss is not itself excluded from coverage). This means, for example, that if your fireplace is defectively designed so that flames are blown out into your living room, you're not covered for the fireplace, but you are covered for the fire that destroys your house after you use the fireplace. Of all the policy forms, only HO-3 has this feature.
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