What Is HO-5 Insurance? A Comprehensive Policy

An HO-5 insurance policy is a comprehensive form of homeowners insurance designed to offer broad protection for a residence and its contents.

Core Principles of HO-5 Coverage

An HO-5 policy is founded on the principle of “open perils” coverage, sometimes referred to as “all-risk” coverage. This means the policy covers any cause of loss to the dwelling, other structures, and personal property unless a specific peril is explicitly excluded in the policy document.

HO-5 insurance provides replacement cost coverage for personal belongings, meaning that if personal property is damaged or stolen, the policy will pay to replace the item with a new one of similar kind and quality, without deduction for depreciation. This differs from actual cash value, which would only reimburse the depreciated value of the item. For example, if a five-year-old laptop is stolen, replacement cost coverage would provide funds to buy a new laptop.

Covered Perils and Property

Under an HO-5 policy, the dwelling, which is the main structure of the home, receives open perils coverage. This includes components like the roof, walls, and foundation, as well as attached structures such as a porch or garage. Other structures on the property, like detached garages, sheds, fences, or gazebos, are also covered on an open perils basis. This broad coverage extends to protection against incidents like fire, lightning, windstorm, hail, and theft.

Personal property, encompassing belongings inside and sometimes outside the home, also benefits from open perils coverage. This includes items such as furniture, clothing, electronics, and appliances. The comprehensive nature of HO-5 means that these personal items are covered for any cause of loss not specifically listed as an exclusion. For instance, if a neighbor accidentally drives their car through a living room, an HO-5 policy may cover both the dwelling damage and the furniture inside.

Common Exclusions

Despite its comprehensive nature, an HO-5 policy is not without limitations. It contains specific exclusions for perils or situations that are not covered. Standard exclusions include damage from floods and earthquakes, which typically require separate insurance policies. Other common exclusions are war, nuclear hazard, and intentional loss caused by the policyholder.

Policies also exclude damage resulting from neglect, wear and tear, or deterioration over time. Certain types of mold, fungus, or rot are also commonly excluded unless they result directly from a covered peril. Damage from earth movement, power failure, governmental action, and infestations by birds, vermin, rodents, or insects are also not covered.

Distinguishing HO-5 from Other Policies

The HO-5 policy stands out from other common homeowners insurance forms, particularly the HO-3. Both HO-3 and HO-5 policies provide open perils coverage for the dwelling and other structures. This means the home’s physical structure is protected against all causes of loss unless specifically excluded.

The primary distinction lies in the coverage for personal property. An HO-3 policy typically covers personal belongings on a “named perils” basis, meaning it only provides coverage for a list of specific events explicitly named in the policy, such as fire, theft, or vandalism. In contrast, an HO-5 policy extends the broader “open perils” coverage to personal property as well. This means that with an HO-5, personal items are covered for any event unless it is specifically excluded, providing a wider scope of protection.