Alabama home insurance: What is an HO-3 Policy?

Alabama home insurance is something that you know you need, but it also comes with a lot of words and fun facts that are handy to know. It seems convoluted. One home insurance term you might have heard when getting home insurance is HO-3. What exactly is an HO-3 insurance policy? We’ll explain what an HO-3 policy is and how it works.

What is an HO-3 policy?

There are many different types of home insurance policies, and each one offers different levels of coverage. The HO-3 is one of the most common home insurance policies in the US. It’s a blend of open perils coverage and named perils coverage – don’t worry, we’ll explain what those are in a second. Most likely your home and other structures will have open perils coverage and your personal property will have named perils coverage.

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Open perils coverage:

Open perils coverage means that you would be covered for basically any loss – but you would NOT be covered for losses specifically listed as exclusions in the policy. (For example, flooding, sewer backup, earth movement, etc.) The coverage will tell you what losses are not covered, and so long as the loss you’re experiencing isn’t on the list, you should be fine.

Named perils coverage:

Named perils coverage lists the losses that you are protected against rather than providing you with a list of exclusions. If the loss that you are facing is NOT on the list, you will not be covered. Like we said, with an HO-3 policy your personal belongings could be covered under a named perils coverage.

These are the 16 named perils for an HO-3 policy:

  • Fire/Lightning
  • Theft
  • Explosion
  • Smoke
  • Falling objects (i.e. falling trees)
  • Vehicles
  • Volcanoes
  • Damage due to ice/sleet/snow
  • Sudden or accidental burning, tearing, or bulging
  • Sudden or accidental damage due to electrical current
  • Freezing
  • Windstorm damage/Hail
  • Riots
  • Accidental discharge or overflow from plumbing or air-conditioning
  • Aircraft damage
  • Vandalism

Now, it’s always a good idea to read through your policy carefully so that you can familiarize yourself with what’s covered and not covered – and to find out what’s meant by these perils. You also need to know any conditions that apply to your coverage. Make sure to ask any questions you have – questions are great! If you feel confused about any parts of your policy or if you have a ponder about your coverage, reach out and get an answer. It’s better to be prepared.

What is covered by an HO-3 policy?

HO-3 policies have several sections that protect your home, belongings, and so on. It protects:

Your house.

Your home insurance, of course, protects your house (meaning the dwelling.) Losses like fire, lightning, wind damage, and so on are typically covered. If a covered loss damages your home, your home insurance can help you rebuild or repair your house so that it’s back to normal again.

Your home and your other structures (we’ll explain about that in a second) are probably covered for their replacement cost. That means they’re covered for the cost of completely rebuilding your home from the ground up, like you would have to do if a fire destroyed your house. (Note that your home’s market value is not the same as its replacement cost.)

Personal property.

Home insurance will also cover your belongings and your possessions (a.k.a. personal property.) So, if your belongings are ever destroyed by a covered loss, your home insurance can help you out. (Keep in mind that if you have valuables like jewelry or collections you may need to get extra coverage for them. Your home insurance may only have limited coverage for valuables.)

Usually HO-3 policies will protect your belongings with Actual Cash Value coverage. That means that your insurance would reimburse you for the value of your belongings when they were destroyed (and that means that you would only get their depreciated value, which might not be enough to replace your possessions at today’s prices.) However, you can choose replacement cost coverage. RCV coverage can allow you to replace your belongings at today’s prices.

Other structures coverage.

The other structures coverage part of your home insurance will cover structures on your property that are not connected to your house. It can cover things like a detached garage, a pool, your fence, your tool shed, and so on.

Loss of use.

Your home insurance can also have a section called loss of use coverage (a.k.a. additional living expense coverage.) If you face a covered loss to your home, your house could be uninhabitable. And that means you’d have to move out temporarily while your home is being repaired. Loss of use coverage can help you cover costs that go above your normal living expenses that you accrue because you can’t live in your house.  


If you’re responsible for causing someone bodily injury or property damage, you could face a liability claim or lawsuit. If someone sues you, liability insurance could help protect you by helping cover legal expenses and the costs you’re obligated to pay to the injured party.

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And that’s the HO-3 policy in a nutshell. If you’re looking for Alabama home insurance and you’d like to get quotes, we can help. Our agents can help you get multiple quotes, and we also enjoy making insurance easy. Get started with your quotes by filling out our online quote form or giving us a call today.

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