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What does an HO-5 Policy Cover?

what does an HO-5 policy cover

For most homeowners who want adequate insurance protection, an HO-3 homeowner’s insurance policy is the typical choice. HO-3 policies offer a good range of coverage for your home and possessions. However, for those who want more protection, there are HO-5 policy plans. HO-5 plans are truly comprehensive and cover both your home and possessions under a wide range of circumstances.

Make sure to use a reputable home insurance company when choosing your HO-5 policy.

 

What Is an HO-5 Plan?

 

An HO-5 plan is a type of homeowner’s insurance. HO-5 policies are sometimes called “comprehensive” policies as they give you house and possessions a very high level of coverage. HO-5 plans cover both your dwelling and personal property on an open-peril basis. That means that damage to your dwelling and possessions are covered for every peril except those that are explicitly excluded in the insurance policy agreement.

HO-5 plans cover the most damage, and so they are usually the most expensive plans. HO-5 plans also include a substantial amount of liability coverage, medical expense payments, and additional living expense coverage.

 

What Does an HO-5 Plan Cover?

 

If you consider an HO-1 policy that has absolute bare minimum protection, then an HO-5 policy is the other end of the spectrum, a comprehensive plan with a lot of protections and neat features. HO-5 policies cover both damages to your house and personal property.


Replacement Cost vs. Actual Cash Value Policies

Keep in mind that most HO-5 plans work on a replacement cost basis. That means that any damaged items or materials will be replaced with brand new materials at today’s cost. For instance, if an explosion takes out your deck,  then your insurance will pay to replace it with identical brand new wood at its current market cost.

Some HO-5 plans are actual cash value policies. That means that they will reimburse you for the current value of the lost or damaged item. Actual cash value policies factor depreciation into account when calculating how much to pay you. So you potentially could get reimbursed for less than what you originally paid for. If you bought a $2,000 laptop and its value had depreciated to $1,000 then was destroyed in a house explosion, your insurance would only pay you the $1,000 current value.


Dwelling Damages

First and foremost, an HO-5 plan covers damages to the physical structure of your dwelling. HO-5 plans cover your house on an open-peril basis. That means damage from any kind of peril will be covered, except for those that are specifically excluded from coverage.

HO-5 plans usually exclude the following perils from coverage:

  • Earthquakes
  • Hurricanes
  • Power failure
  • War
  • Intentional destruction
  • Government actions
  • Vandalism of a vacant property
  • Mold, fungus, or rot
  • Neglect, wear and tear
  • Damage from pests and rodents
  • Pet damage
  • Damage from pollutants
  • Smoke from industrial operations

 

HO-5 plans are open peril, which means that if a peril is not on this list, then it will be covered. Consequently, if your dwelling is damaged from a peril on this list, then it won’t be covered. The difference between named-peril and open-peril policies is a subtle one but extremely important.


Personal Property

HO-5 plans also offer substantial protection for your personal property. HO-3 plans also offer property protection, but they only do so on a named-peril basis. HO-5 policies, in contrast, cover your personal property on an open-peril basis. That means HO-5 plans cover your personal property for any damages, aside from those explicitly excluded in your agreement. Usually, the excluded events are exactly the same as those that exclude you from dwelling coverage.


Liability Coverage

HO-5 plans also give you a substantial amount of liability coverage. If you are involved in a legal proceeding due to events that occur in your home, then your insurance will cover some or all of the legal fees. For example, if your plan has a $100,000 liability limit, then you can get up to $100,000 coverage, minus the deductible amount.


Medical expenses for others

HO-5 coverage will also cover any medical expenses incurred by others as a result of an injury on your property. Medical expense limits are set by the policyholder and usually amount to a few thousand dollars, depending on the type of injury. Medical expenses covered by your insurance would be:

  • Surgical costs
  • Diagnostic tests (x-ray, MRI, etc.)
  • Lab work
  • Hospital care
  • Administrative fees

Keep in mind that coverage for medical costs is separate from coverage or liability issues. Limits for medical expenses and liability can differ, and you can’t use one for the other. For instance, you can’t use your $100,000 liability limit to cover $5,000 in medical costs.


Additional Living expenses

HO-5 policies usually have coverage for additional living expenses that you might incur due to a catastrophic event. If you are put out of your home by a disastrous event, then your insurance will reimburse you for a portion of the additional living expenses you pick up, such as hotel or Airbnb fees. Additional living expense coverage usually has a limit based on duration and total amount.

 

What Is Not Covered by an HO-5 Policy?

 

HO-5 plans offer the most coverage out of traditional homeowner’s insurance plans and have relatively few gaps in coverage. That being said, HO-5 policies usually do not offer protection for earthquakes and hurricanes, two perils that could be relatively common depending on where you live. In those cases, you can usually buy supplemental insurance covering things originally excluded from the list.

 

 

Should I Get an HO-5 Policy?

 

HO-5 policies offer the most coverage, but that also means they tend to be the most expensive policies. That being said, they are better suited for different kinds of property. If you own a new home in a low-risk area that is worth more than the average home value in your state, then it might be a good idea to opt for comprehensive HO-5 coverage instead of HO-3 coverage. HO-5 gives more protection for a wider range of events for both property and dwellings.

One benefit of HO-5 policies is how they shift the burden of proof. With named-peril policies, the burden of proof falls on you to demonstrate that your things were damaged by some perils that are on the list. With open-peril policies, the burden of proof is on the insurance company to show that the item was damaged by something on the excluded list. So there is less pressure on you to keep rigid documents on everything. Your stuff will be covered unless the insurance company does the work in showing your claims are not covered.

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In Conclusion

An HO-5 policy offers the most protection out of traditional homeowner’s policies. Both your dwelling and possessions are covered on an open-peril basis, which offers much more protection than a named-peril plan. HO-5 plans are typically more expensive but have high limits and relatively lower deductibles. While most homeowners get by just fine with an HO-3 policy, an HO-5 policy can offer peace of mind and security; other plans cannot.

If you are shopping around for homeowner’s insurance, consider using our insurance lookup tool. You can compare and contrast quotes from a number of reputable providers so you can pick the plan that works best for you.

 

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For more information about HO-5 homeowner’s insurance and to see if it will work best for you, please contact us through our website or call 800-712-8519 during normal business hours.

 

 

 

Frequently Asked Questions

What is an HO-5 policy?

An HO-5 plan is a type of homeowner’s insurance. HO-5 policies are sometimes called “comprehensive” policies as they give you house and possessions a very high level of coverage. HO-5 plans cover both your dwelling and personal property on an open-peril basis. That means that damage to your dwelling and possessions are covered for every peril except those that are explicitly excluded in the insurance policy agreement.

Will an HO-5 policy cover my personal property?

HO-5 policies cover your personal property on an open-peril basis. That means HO-5 plans cover your personal property for any damages, aside from those explicitly excluded in your agreement. Usually, the excluded events are exactly the same as those that exclude you from dwelling coverage.

What is NOT covered by an HO-5 policy?

HO-5 plans offer the most coverage out of traditional homeowner’s insurance plans and have relatively few gaps in coverage. That being said, HO-5 policies usually do not offer protection for earthquakes and hurricanes, two perils that could be relatively common depending on where you live. In those cases, you can usually buy supplemental insurance covering things originally excluded from the list.

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