The other day I had a very informative conversation with a public adjuster regarding homeowner’s insurance policies and what the typical homeowner knows about their policy. In that conversation, the public adjuster and I talked about the typical HO3 homeowner’s insurance policy and how most people have never even heard of the HO5 homeowner’s policy. I thought it would be important to note the advantages of an HO5 policy and suggest that if you are a homeowner seeking a policy, and your home is eligible, that you should consider the advantages that an HO5 policy offers.
In past blogs I’ve noted that the average homeowner doesn’t read his or her policy and doesn’t know what is covered under the homeowner’s insurance policy and what is not (exclusions)—until a loss to his property occurs. At that point, it’s too late to wonder if the loss is covered. It either is, or it isn’t under the policy—which is really a contract between a homeowner and the insurance company. A typical HO3 homeowner’s policy is the policy that most people are familiar with. The major difference between an HO3 policy and an HO5 policy is the coverage for contents of the home. When it comes to covering the contents of a home after a loss, the HO3 policy is a named peril policy, which means that it insures against a list of specified causes of loss such as theft, fire, or windstorm (as specifically listed in the policy).
The HO5 policy is classified as an open peril policy for coverage of contents for a homeowner after a loss. Specifically, the HO5 doesn’t impose named peril limitations regarding what causes the loss and damage to the contents after any type of loss. The HO5 gives added coverage and higher limits, covering what is sometimes in an HO3 policy is excluded or requires scheduling such as jewelry, art or business personal property contained in a home. The bottom line is the HO5 policy is all inclusive for contents and is a replacement cost coverage policy.
Here in LA, I can think of recent losses where an HO5 policy would come into play, offering coverage when an HO3 policy won’t for contents. Recently we’ve had rains and mudslides which may or may not be covered depending on the causation of the mudslides. If a homeowner has an HO3 policy, the insurer may question contents coverage while the HO5 policy would automatically afford it, regardless of causation. Looking into what kind of homeowner’s policy can be purchased and what is available to each homeowner is a best way for a homeowner to protect his or her assets and family valuables.