What is an HO5 policy?
Sometimes called the comprehensive form, an HO5 policy is a type of home insurance written on an open-perils basis. This means your insurer covers damage to your home and personal property when it’s caused by an event, or peril, as long as it’s not listed as an exclusion in the policy.
Like other homeowner insurance policies, HO5 policies contain a number of different coverage parts. These include:
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Coverage A to insure your primary dwelling.
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Coverage B, which protects other structures on your property, such as detached garages.
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Coverage C to protect your personal property, even if it’s not in your home
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Coverage D for additional living expenses if you can’t stay in your home while it’s being repaired after a covered loss.
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Coverage E to help cover your personal liability if someone gets hurt on your property.
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Coverage F to help injured guests cover their medical payments so you can hopefully avoid liability lawsuits.
What homeowners need to know about HO5 coverage
If an HO1 form is considered a bare-bones policy, then HO-5 is a robust homeowners insurance policy with all the bells and whistles. HO5 policies are written on open-perils forms, which means it lists the perils that your insurance doesn’t cover. HO5 usually excludes losses caused by:
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Earth movement
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Ordinance or law
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Water damage from flood, sewer backup, or water seepage
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Power failure
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War
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Nuclear hazard
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Intentional loss
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Government action
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Collapse
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Theft to a dwelling under construction
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Vandalism or malicious mischief if vacant more than 60 days
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Mold, fungus, or wet rot
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Neglect, wear and tear, and deterioration
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Mechanical breakdown
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Smog, rust, and corrosion
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Smoke from agricultural smudging and industrial operations
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Discharge, dispersal, or seepage of pollutants
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Settling, shrinking, bulging, or expanding of your home’s foundation
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Infestation of birds, vermin, rodents, or insects
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Animals owned by insured
HO3 vs HO5: What’s the difference?
HO3 policies generally cover the same structures and liabilities as an HO5 policy. The big difference is in how each policy covers these items. Unlike HO3, which offers open-perils protection only for the home and other structures, HO5 is written as open-perils for your home, other structures, and your personal property.
Let’s say, for example, a neighbor drives their car through your living room. HO5 may pay for both the damage to your dwelling and the furniture inside. Other forms typically won’t cover that cause of damage to personal property. They cover more common incidents, like damage caused by windstorms, fire, and theft, etc.
Kin does not currently offer an HO5 policy. However, HO3 policies can be supplemented with endorsements to increase your personal property coverage.
Is HO3 or HO5 better?
The question of whether you should get an HO3 or HO5 depends on your circumstances. For instance, an HO5 policy may seem like a good idea if you have a lot of expensive personal property.
But you have to remember that extra coverage comes at higher costs. You want to weigh the value of your personal property against the cost of insuring it on an open-perils basis.
3 questions to ask about an HO5 policy
Before you buy your home insurance, ask your agent:
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Is this an all-risk or open-peril policy? The HO5 form is standardized across the industry, but insurance carriers may market it under different names. Make sure you understand whether your policy is written as an open-peril or named-peril policy.
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Are there any additional exemptions? HO5 may be called the comprehensive form, but that doesn’t mean it covers all property in all instances. Most policies have limited coverage for high-ticket items and may exclude others completely. That’s when scheduled personal property coverage comes in handy. It extends your limits on specific items to make sure they’re properly insured.
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Does this policy pay the full replacement costs? Most home insurance is written as actual-cash value policies, which offers you less financial protection and only pays out what the depreciated item is worth. That’s why Kin sells replacement-cost coverage – it actually helps you replace your lost items with new ones.
As a reminder, an HO5 policy is robust, but an HO3 policy is a good fit for those who want reliable, extensive coverage that’s also affordable. Ask your agent what is appropriate for your needs.
