Home insurance requirement of an individual is definitely not the same as that of his neighbor. To fit the requirements of the individuals, the home insurance policies take different forms. HO3 and HO5 are two common home insurance policies which find use amongst the homeowners.
The basic difference between HO3 and HO5 policies
Standard homeowner's insurance offers coverage for the named perils only. The insured would only receive compensation if it is proved that the property damages or losses took place as a result of the named perils.- A HO-3 policy is a combination of an open peril and a named peril policy.
- A HO-5 policy is an open peril policy.
What is an open peril policy?
Insurance policy which offers coverage against almost all forms of risks that can cause damage to a property. Certain exclusions are however mentioned even in an open perils policy, which are not covered.
What is a named peril policy?
In a named peril policy, specific risks are mentioned against which the insurer provides coverage. If the property damages occur due to any other peril other than those mentioned in the policy, the insurers deny paying for the loss.
HO-3 - How it act likes a combination of open peril and named peril policy?
The HO3 policy acts like an open perils policy when it offers coverage against the property structure. This means the insurer will compensate for the damages to the structure of the insured building or residence, under any circumstances. However, if the damage is caused by any of the excluded peril, the insurers are not liable to pay for it.
The HO3 policy acts like a named peril policy when it offers coverage for the contents of the insured property. Loss or damages to the personal belongings of the homeowner and the home content will only be covered, if those have been caused by the specific perils as pointed out in the policy.Top
HO5 - How it acts like an open perils policy?
HO5 policy acts like an open perils policy, and doesn't discriminate between the home content and structure. Thus, no matter what kind of damage affects the insured property, this form of homeowner's insurance will offer protection. Coverage will only be denied if the cause behind the loss or damage is any one of the excluded perils, specifically mentioned in the policy.Top
Named perils for HO3 policy.
A standard HO3 policy offers coverage for 16 named perils as mentioned below:- 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.
Excluded perils for both HO3 and HO5 policy
The exclusions are more or less same for both HO3 and HO5 insurance policies as mentioned below:- Power failure
- Industrial pollution or smoke
- Earth movement (earthquake)
- Water damage due to flood
- Intentional loss
- War
- Nuclear Accidents
- Pets and other animals, insects and pests
- Settling, wear and tear
- Act of negligence
- Actions taken by government and other associations
- Legal action due to lack of proper permits, defective construction, design or maintenance
- Theft or Damage from vandalism in vacant dwellings or in dwellings under construction
- Deterioration due to weather conditions, that aggravates other excluded causes of loss
Which is better?
HO3 and HO5 policies can be compared on the basis of certain parameters as mentioned below:- Coverage - A HO5 policy is considered better than a HO3 insurance policy as far as coverage is concerned. It is so, since the former ensures wider coverage for both the structure and the contents of the insured home.
- Cost - A HO5 Policy is more expensive than a HO3 insurance policy. For those who are looking for an affordable coverage, HO3 policy seems to be the better choice.
- Popularity - HO3 insurance policies are apparently more popular with the homeowners. It is economical and offers coverage against most of the common perils.
The limitations of the HO3 can be overcome, if additional endorsements are added on to the basic coverage. However, that will raise the costs.
If you've to pick between a HO3 and a HO5 policy, the latter ensures the better coverage. An open perils policy is evidently a better choice than a named perils policy.
All said and done, your preference between the two forms of policy will essentially be influenced by your financial limits and the extent of coverage that you need. Top
Related discussions
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Posted: Thu Mar 29, 2012 03:01 pm Post Subject:
Is this a test? What do I win if I answer correctly?
Posted: Fri Oct 19, 2012 01:22 pm Post Subject:
Explain Act of negligence please.
Posted: Fri Oct 19, 2012 02:55 pm Post Subject:
Duty owed, duty breached = act of negligence
Posted: Thu Nov 22, 2012 04:20 pm Post Subject: Insurance Company Comparison
How do you compare american commerce home insurance versus state farm?
Posted: Tue Nov 27, 2012 03:08 pm Post Subject:
American Commerce is a part of MAPFRE Group
Using just CA Dept of Insurance data for 2011:
HOMEOWNERS
MAPFRE $2,396,363 in premiums . . . 0.0347% market share . . . 74.92% loss ratio. Not even in the list of 50 largest insurers (the smallest company on the list has 22,333 policies) to make it onto the complaint list.
STATE FARM $1,515,373,625 in premiums . . . 21.9721% market share . . . 40.52% loss ratio, #19 on the list of 50 largest insurers (based on complaints) with 1,905,183 policies, and 1.7 complaints per 100,000 policies in 2011 (compared to 1.4 in 2010, and 0.5 in 2009).
PRIVATE PASSENGER AUTO LIAB & PROP DAMAGE
MAPFRE $132,454,697 in premiums . . . 0.6999% market share . . . 68.93% loss ratio . . . #49 on the list of 50 largest insurers in CA (based on complaints), with 245,277 policies and 9 complaints per 100,000 policies (compared to 5.6 in 2010, and 1.6 in 2009).
STATE FARM $2,597,966,864 in premiums . . . 13.7279% market share . . . 65.09% loss ratio . . . #16 on the list of 50 largest insurers (based on complaints) with 3,370,436 policies, and 1.4 complaints per 100,000 policies (compared to 0.7 in 2010, and 0.6 in 2009).
What else would you like to know? State Farm is huge in comparison to American Commerce, with almost 700 and 20 times more (homeowners / auto) premiums collected, substantially larger market shares, and lower loss ratios (more profitability).
Doesn't mean American Commerce/MAPFRE isn't reputable, isn't profitable, isn't a company you shouldn't do business with. They are simply tiny by comparison. Maybe that makes them better -- being able to give more attention to fewer policyowners. But their complaint ratio is high, so maybe they can't handle claims all that well.
Posted: Mon Dec 03, 2012 06:48 am Post Subject: Theft of my guns in my cousin's truck
My Guns were stolen out of my cousin's Truck along with his. Are my guns covered under my cousins HO3 policy?
Posted: Mon Dec 03, 2012 01:24 pm Post Subject: Home insurance and Gun
What kind of Gun did you two have? hunting rifle, antique or a normal one?
Homeowners' insurance might cover guns as personal properties, though there might be limitations for that. Again, some insurance companies specifically mention that the firearms should be kept in safe or locked cabinet.
Yours was in a TRUCK !!
Why don't you read your policy thoroughly?
Posted: Tue Dec 04, 2012 06:01 am Post Subject:
Your guns are not your cousin's property, therefore his homeowner's insurance will not cover their theft from his truck. You need your own insurance to protect your property.
Or a mean dog willing to sit in the truck while you're doing something else and leaving your guns unattended.
Posted: Thu Mar 07, 2013 01:01 am Post Subject: wind blew a tree on my boat
Under the HO-3, am I covered if the wind blew the tree down and it fell on my boat? I think I should get $1500. for boat & trailer. By the way, it also fell on my neighbors truck-no auto collision coverage. I feel obligated to pay...it was my tree. No coverage at all!!!
Posted: Thu Mar 07, 2013 04:17 am Post Subject:
Under the HO-3, am I covered if the wind blew the tree down and it fell on my boat?
Do you have a boatowner's policy? If not, there is no coverage for your loss. This is not a homeowner's issue.By the way, it also fell on my neighbors truck-no auto collision coverage
Doesn't matter, it's not a collision loss. Your HO-3 policy might pay for the property damage to your neighbor's stuff.Add your comment