Homeowners Insurance: What’s the difference between HO-3 and HO-5?

Published: August 28, 2019
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Updated: October 7, 2025
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Homeowners Insurance

Not all homeowners insurance is created equal—especially when it comes to understanding the key types: HO-3 and HO-5. These two policy forms sound similar, but give very different levels of protection for what’s likely your biggest asset and your personal belongings. Here’s what every homeowner needs to know.

What Do HO-3 and HO-5 Cover?

Homeowners insurance combines coverage for your home (the dwelling), other structures (like a detached garage), your personal belongings, and liability protection if someone is injured on your property. Both HO-3 and HO-5 policies protect your home against many types of risks, but the scope of what is covered for your belongings and the claims process can be very different.

What is an HO-3 Policy?

The HO-3 is the most common homeowners policy in the United States. It covers:

  • Your home and other structures (like sheds or fences) with “open perils” coverage. This means damage is covered unless it’s caused by something specifically excluded in the policy (like flood or earthquake).

  • Your personal property (furniture, electronics, clothes) against a specific list of 16 “named perils” (such as fire, theft, vandalism, windstorm, and more). If the loss isn’t on the list, it’s not covered.

Most HO-3 policies also cover additional living expenses if you need to live elsewhere during repairs, and offer personal liability protection.

What is an HO-5 Policy?

An HO-5 policy takes coverage a step further:

  • Both your home and your personal property are covered on an “open perils” basis. This means unless damage is due to a peril that’s specifically excluded in the policy, you’re covered.

  • Personal property is reimbursed at replacement cost value by default—you’ll get the cost to replace the item new, rather than its depreciated (used) value. Many HO-3s only include this as an upgrade.

Exclusions for both policies typically include earth movement, ordinance or law, power failure, neglect, war, nuclear hazard, intentional loss, government action, mold, wear and tear, and certain animal and insect damage.

Key Differences at a Glance

Feature HO-3 Policy HO-5 Policy
Dwelling (House) Coverage Open perils (all risks except excluded) Open perils
Other Structures Open perils Open perils
Personal Property Coverage Named perils (16 listed risks) Open perils
Personal Property Valuation Usually Actual Cash Value (unless upgraded) Replacement Cost Value (standard)
Typical Availability Most homes qualify Newer, well-maintained homes
Average Annual Cost (2025) $1,569 $1,659
Claims Process Homeowner must prove a covered peril Insurer must prove an exclusion
Most Common Policy (US) Yes (80% of homeowners) Less common

Choosing the Right Policy

  • Choose HO-3 if: Budget is most important, or personal belongings don’t have high replacement value.

  • Choose HO-5 if: You want maximum protection for personal property, own high-value items, or live in an area where unique risks are a concern. HO-5 may also simplify and speed up claims.

Final Thoughts

No matter which type you select, review your policy limits carefully to ensure you have enough coverage to:

  • Rebuild your home at today’s construction costs if disaster strikes

  • Replace your belongings at full replacement value

  • Provide personal liability protection in the event of an accident

Making the right insurance choice has never been more important.

For more advice or a customized quote, contact The Ross Maghan Agency at (732) 566-0003 or request a quote online.