How Home Insurance Actually Works
Levi Kastner : Jan 22, 2020 1:15:31 PM
Find out how your homeowners insurance policy works so that you can make sure you have the right coverage.
From time to time, we get precise insurance questions such as "HO3 vs.HO5: What's better, and What's the difference?"
A common notion is that as long as the coverage limits match, a policy or quote comparison is "apples to apples."
Many agents to the determent of insured's everywhere compete on price!
Can you believe that?!?! Yeah me neither.
At the end of the day the choice is yours. However it's our job to help you make that choice.
One significant difference between homeowners policies is whether coverage on an HO3 or HO5 form.
The HO3 Policy Form
The HO3 is the most widely available policy form and is generally the minimum coverage requirement when obtaining a mortgage. It covers a broad range of property types, but offers more limited coverage for your personal belongings as detailed below:
HO3 HO5
| Dwelling Coverage Type | Open Perils | Open Perils |
| Contents Coverage Type | Named Perils | Open Perils |
Open Perils -
Insures against all causes of loss that are not specifically excluded on the policy form.
Named Perils -
Insures against a list of specified causes of loss Here is a list of the named perils that limit the personal property coverage on a HO3:
- 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.
The HO5 Difference
The HO5 adds open perils to policy contents. It also adds new coverage and expands existing coverages such as a higher limit for jewelry items and business personal property.
Many companies and carriers are now offering what they call deluxe, or premium HO3 policies where much of the same benefits that would be automatic that were available as an HO5.
Insert typical scary insurance example
While a family was away on vacation, a deer charged through a sliding glass door at their home. The injured animal proceeded to destroy everything in the living room and kitchen, including the furniture, television, and appliances.
The loss was covered under the homeowners HO5. An HO3 would have had this homeowner paying out of pocket to repair and replace these belongings.
While this isn't a likely scenario, it helps serve as proof that there are countless (almost unimaginable) ways your personal belongings could be damaged by things other than the sixteen named perils.
It's important to note, however, that because the HO5 provides different coverage, the underwriting guidelines can be more restrictive.
Generally, insurance providers limit HO5 coverage to new(er) and or well cared for homes that are in an area protected by a fire department.
Which should you choose?
Assuming that you qualify for both forms, the HO5 is the better form of choice initially.
The HO5 not only provides broader coverage but can also simplify the claims process.
I have my opinion. However, it's your choice! The clients, yes that's right it's up to you.
In summary
The HO3-HO5 difference is one of many differences you could find between seemingly identical quotes or policies. It's essential to know the basic differences on insurance policies.
However, please don't buy insurance policies based purely on price. 
ABOUT Thimmesch Kastner Insurance
Thimmesch Kastner Insurance is a full service insurance broker based in Lafayette, LA. We offer a variety of insurance products, and will work closely with you to explain all of your options, and coverage’s. We listen to your needs, and develop a customized portfolio for your lifestyle.We offer home, auto, liability (Umbrella), health, life, commercial (business), motorcycle, ATV, UTV, RV, and Boat Insurance.
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