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Demystifying HO-3 Insurance: What You Need To Know (Part I)

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Our home gives us a feeling of safety, security, and protection. A well-structured homeowners insurance policy can also give us peace of mind. We’re unraveling the HO-3 policy, the homeowner policy the vast majority of us have protecting our residence. First a disclaimer: not all policies are the same; I am speaking in general terms about the unendorsed HO 0003 05/11. Your policy and claims may be different. 


The HO-3: A Versatile Policy


The HO 0003 05/11 policy, commonly known as the HO-3 or the Special Form policy, is one of the most popular and versatile home insurance policies available. It provides multiple layers of protection, making it suitable for a wide range of homeowners.


Structural Coverage: Protecting Your Residence and Other Structures


The HO-3 policy offers coverage to protect your residence. This policy typically covers damage to the home provided that the cause of the damage is not excluded. Settlement of the claim is offered at a replacement cost value, but when the claim is initially paid, the carrier generally pays the actual cash value first. The actual cash value is determined by the replacement cost less depreciation. 


The policy also has coverage for other structures such as a detached garage or shed. 


Personal Property Coverage: Safeguarding Your Belongings


Your personal belongings are precious. The HO-3 policy extends its protection to your personal property (also called contents), covering it against a broad spectrum of named perils, such as theft, vandalism, and wind. Unlike the dwelling which provides coverage as long as there is not an exclusion, the HO-3 policy only provides coverage for contents on a named-peril basis. This means that if the loss did not occur by the peril listed in the policy, then there would be no coverage. 


Additional Living Expenses: Ensuring Comfort in Times of Disruption


We find comfort in the warmth of our homes—or perhaps coolness since it’s summer! The HO-3 policy provides coverage for additional living expenses, which means it can help pay for temporary accommodations if your home becomes uninhabitable due to a covered loss, such as a fire or storm. This ensures you and your family can continue to enjoy the comforts of home, even when life throws unexpected challenges your way. 


But you will still be responsible for the current costs you have. This coverage is in addition to your normal expenses. For example, if you pay $500 in rent, you would still owe that $500 even if you can’t live at the residence. The carrier will pay the $750 for you and your family to stay at another location while your home is being repaired. 


Policy Limits and Deductibles: Setting Boundaries


Each section of the HO-3 policy has its own limits while there is usually one deductible. Further, there are additional coverages in the policy that provide more money for losses such as debris removal. In contrast, there are sublimits in the policy that state despite the limit listed in the specific section, the most the carrier will pay is $XX.XX.  


You must understand these coverages and sublimits to ensure you have adequate protection for your unique needs. Review your policy carefully to ensure it aligns with your expectations.


More to Come


This wraps up the property section of the HO-3, but there is another section for liability—or fault. We will go over these coverages next week.


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