Homeowners 3 – Special Form

Homeowners 3 or HO-3 special form insurance is probably the most popular and widely used homeowner’s insurance form today. It insures the dwelling and other structures against direct physical property loss.

For real property, all direct physically losses are covered, except for those that are specifically excluded in the form itself. Losses are paid based on the replacement cost for the property, not the fair market value of the property. For personal property, only those perils listed in the form are covered.

The HO-3 form is often compared to the HO-2 form. The HO-2 form is different in that, for real estate, it covers only those specific perils listed in the form. All other perils are not covered.

The HO-3 policy has the following sections of coverage:

  • Section 1: Property Coverages:
  • Coverage A: Dwelling
    Coverage B: Other Structures
    Coverage C: Personal Property
    Coverage D: Loss of Use
    Additional Coverages

  • Section 2: Liability Coverages
  • Coverage E: Personal Liability
    Coverage F: Medical Payments to Others

  • Coverage A covers the dwelling on the residence premises and any structure attached to the dwelling
  • Materials intended for construction are included
    The coverage specifically excludes land

  • Coverage B insures other structures on the residence premises
  • Includes a detached garage, tool shed, etc
    Structures that are rented out or used for a business are excluded
    The amount of coverage is based on the amount of insurance on the dwelling (Coverage A)

  • Coverage C insures personal property owned or used by an insured
  • Personal property is covered anywhere in the world
    The amount of coverage is 50% of the insurance on the dwelling, but can be increased
    Coverage for personal property at another residence, such as a vacation home, is limited to 10% of Coverage C or $1000, whichever is greater
    Certain types of personal property have maximum dollar limits on the amount paid for any loss

  • Coverage C also excludes certain types of property:
  • Articles separately defined and specifically insured
    Animals, birds, and fish
    Motor vehicles
    Aircraft and parts
    Hovercraft and parts
    Property of roomers, boarders, and other tenants
    Property in a regularly rented apartment
    Property rented or held for rental to others off the residence premises
    Business records
    Credit cards, electronic transfer devices, or other access devices (some coverage in Additional Coverages)
    Water or steam

  • Coverage D – loss of use – provides protection when the residence premises cannot be used because of a covered loss
  • Coverage is 30% of the amount of insurance on the dwelling (Coverage A)
    Additional living expense is the increase in living expenses actually incurred by the insured to maintain the family’s normal standard of living
    For example, the cost of renting a furnished apartment
    The policy pays the fair rental value for that part of the residence that is rented to others, but is not fit to live in
    Coverage applies if the home is not damaged, but a civil authority prohibits the insured from using the premises

  • Additional coverages in Section 1 include:
  • Removal of debris following an insured peril
    Reasonable repairs to protect the property from further damage
    Trees, shrubs, and plants, for a limited set of perils
    Fire department service charge
    Removal of property that is endangered by an insured peril
    Unauthorized use of credit card, electronic funds transfer card or access device; forgery and counterfeit money
    Loss assessments charged by a corporation or association of property owners
    Collapse of a building, for certain perils
    Breakage of glass or safety glazing material
    Landlord’s furnishings
    Increased costs of construction or repair because of a law
    Grave markers

  • A deductible of $250 applies to any loss covered in Section 1
  • Premiums can be reduced by increasing the deductible
    In states that are vulnerable to natural catastrophes, insurers can use percentage deductibles
    Percentage deductibles for windstorm and hail losses vary from 1% to 15% of the limit of insurance on the dwelling