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Choncé was a licensed life insurance agent before becoming a freelance personal finance writer. She’s passionate about helping people learn to protect themselves with insurance.
Chris Schafer Senior EditorChris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
Updated January 23, 2023
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Most people need home insurance to cover any potential damages to their home or personal property. Many types of home insurance policies exist, but the special form, or HO-3, is the most common.
HO-3 policies provide more comprehensive protection by covering a broader range of perils. Mortgage lenders require homeowners insurance since coverage can also include the cost of materials and labor to rebuild your home in the event of a total loss.
An HO-3 policy doesn’t cover every peril, so it’s important to know what’s typically included in a policy and how it compares to other homeowners insurance options.
HO-3 Key Takeaways:Many homeowners choose HO-3 insurance because it provides dwelling and personal property coverage for several perils, such as fire, windstorms, and vandalism. [1] This insurance also covers other structures that are part of your residence but aren’t physically attached to your home, as well as liability coverage for the homeowner.
Liability coverage will help if a bodily injury or property damage claim or lawsuit is brought against you. If you’re unable to live in your home due to a covered incident, HO-3 also provides loss-of-use coverage to help you pay for temporary housing.
Your coverage limits can vary depending on the cost and location of your home and how much coverage you need. Once unexpected damage to your home or personal property strikes, you’ll need to file a claim with your home insurance company and pay your deductible. Upon approval of your claim, the insurer will cover the damage up to your coverage limit.
HO-3 insurance costs around $871 per year on average, but premiums vary depending on factors that affect the cost of homeowners insurance, such as geographic area, construction costs, and the degree of exposure to certain catastrophic events. [2]
At least one in 20 insured homeowners files a claim each year, so HO-3 insurance could be helpful to have when you need coverage for damage due to a severe storm or a fire. [3]
“Insurance should be used to protect against possible catastrophic loss,” says Evan Walker, a plaintiff attorney at Evan Walker Law who regularly handles first- and third-party insurance claims. “If you don’t have insurance and your home is significantly damaged or you’re seriously exposed to liability, you’re possibly faced with a catastrophic loss.”
Storms, natural disasters, and theft can happen at any time, so it’s important to have enough coverage in place to protect one of your biggest assets — your home.
If your home is damaged by a fire or needs to be completely rebuilt, HO-3 insurance will pay to repair or rebuild it based on the cost to repair your home. [4] You may also need HO-3 coverage if you live in an area where severe thunderstorms or windstorms are common.
