Updated: May 21, 2025
Advertising & Editorial Disclosure
HO-3 is best for standard homeowners seeking solid coverage at a lower cost, while HO-5 is ideal for those wanting broader protection for valuable belongings.
Both policies offer open peril coverage for your home’s structure, meaning damage is covered unless specifically excluded.
HO-3 reimburses personal property at actual cash value (ACV), accounting for depreciation, while HO-5 reimburses at replacement cost (RCV).
HO-3 and HO-5 are two common types of home insurance, but they differ mainly in how they cover personal property. HO-3 policies cover your belongings for named perils only, while HO-5 offers broader open peril coverage for both your home and possessions.
HO-5 also typically includes replacement cost reimbursement, making it more comprehensive — but also more expensive. The right policy depends on the value of your belongings, your risk tolerance, and how much coverage you truly need.
Although both HO-3 and HO-5 policies offer strong protection for your home, they differ in how they cover personal property.
HO-3 provides named peril coverage and reimburses items based on actual cash value (ACV), which accounts for depreciation. HO-5 offers broader open peril coverage and reimburses at replacement cost value (RCV), replacing items without deducting for depreciation.
Review the table below to see the key differences between HO-3 and HO-5 coverage.
Criteria | HO-3 Policy | HO-5 Policy |
|---|---|---|
Dwelling & Property Coverage | Includes dwelling coverage at replacement cost and personal property coverage at actual cash value. Personal property coverage can be upgraded to replacement cost at an extra cost. | Covers both dwelling and personal property coverage at replacement cost. |
Coverage Type | Open-peril for dwelling, named-peril for personal belongings. | Open-peril for home and personal belongings. |
Valuable Items Limit | Standard limits on items like jewelry and electronics. | Higher thresholds for items like jewelry, though with set boundaries. |
Recommended for | Those who want tailored coverage options for their personal items. | Those with luxury homes and a need for all-inclusive protection. |
A peril is an event that causes damage to your home or belongings. The differences between named and open perils are as follows:
Named Peril | Open Peril | |
|---|---|---|
Description | Covers specific perils that are listed in the policy. | Covers all perils, except those specifically excluded. |
Ideal For | Homeowners seeking cost-effective coverage. | Homeowners desiring extensive protection for their home and possessions. |
Named perils typically include the following events:
Both HO-3 and HO-5 have certain limitations and common exclusions, and understanding these can help you prepare accordingly. Some types of damage that neither HO-3 nor HO-5 policies typically cover include:
Some exclusions can be covered if you purchase additional coverage. For instance, you can get hazard, flood and earthquake insurance to protect against natural calamities you might be prone to where you live. However, keep in mind that while insurance coverage is a significant first step to protecting your home from potential damage, you should also be sure to develop an emergency preparedness plan in case of natural disasters or other hazards.
While both policies protect your home and belongings, they differ in how coverage is applied. Here’s how HO-3 and HO-5 compare across key features.
Both HO-3 and HO-5 home insurance policies have open peril dwelling coverage — any damage to your home’s structure and foundation is covered unless it’s specifically excluded from your policy. For instance, home insurance can pay for new windows if it’s damaged due to a fire or vandalism. However, if the damage is intentionally caused or by something that your policy excludes, you won’t be able to file a claim.
Personal property coverage is an essential component of homeowner's insurance, designed to safeguard your belongings against potential financial setbacks. Under an HO-3 home insurance policy, personal property is protected against specific, named perils detailed in the policy.
By contrast, an HO-5 home insurance policy offers a more comprehensive protection approach. It covers open perils, meaning your personal property is protected against all threats unless explicitly excluded in the policy.
For instance, imagine having a prized art collection at home. Under an HO-3 policy, damages might be covered if you can prove that they were a result of a fire (a named peril on your policy). But with an HO-5 policy, the art would be covered unless the insurance company can specifically show that it was damaged due to an excluded peril, providing broader coverage.
Your home insurance policy can reimburse you for damaged personal property in two ways: actual cash value (ACV) or replacement cost value (RCV). HO-3 policies reimburse you based on the property’s ACV, while HO-5 policies pay you based on its RCV.
For instance, if you need to make a claim for a five-year-old laptop that you bought for $1,000, HO-3 insurance would consider the depreciated cost after five years, which could be around $500 or less. By contrast, an HO-5 policy would reimburse you to completely replace your laptop at today’s value, meaning that you could get $1,000 to buy a brand new laptop.
Because HO-3 homeowners insurance is less comprehensive, you’ll only be eligible to file a successful claim if a named peril has damaged your personal property. When you file your claim, you’ll need to provide specific evidence about how your property was damaged.
HO-5 homeowners insurance is more comprehensive, so you’ll most likely receive automatic reimbursement for your personal property damage.
HO-3 policies are typically less expensive than HO-5 policies because they offer less comprehensive coverage. But HO-5 policies might not be that much more costly, depending on your circumstances. And due to HO-5 policies providing broader coverage, they may save you money in the long run because they cover more claims.
But generally, the average annual homeowners insurance policy in the United States costs $2,520 annually or $210 per month, according to our study of policies across the country. And whether you choose HO-3 or HO-5 insurance, costs can also vary widely depending on a number of factors, including where you live and your home’s value.
If you’re looking for homeowners insurance coverage for your home, we’ve ranked the best homeowners insurance companies to help you decide. And when shopping for insurance products always compare home insurance quotes to ensure you’re getting the best deal possible.
Choosing between HO-3 and HO-5 insurance policies largely depends on your particular circumstances, including where you live, the value of your personal property and whether or not HO-5 coverage is available in your area.
Choose an HO-3 policy if… | Choose an HO-5 policy if… |
|---|---|
You don’t have much valuable personal property. Although HO-3 policies aren’t quite as comprehensive as HO-5 policies, they still provide adequate coverage in many cases. If an HO-5 policy isn’t available where you live, you can also opt to include extra coverage with your HO-3 policy for an additional cost. | You have a lot of valuable personal property and live in an area where coverage is available. They’re often not that much more expensive than typical HO-3 policies and can help protect your property in a wide variety of situations. Although the cost of an HO-5 insurance premium may be slightly higher, it can help save you money in the long run. |
Choosing between HO-3 and HO-5 depends on your coverage needs and budget. HO-3 offers solid protection at a lower cost, while HO-5 provides broader, more comprehensive coverage for your home and belongings. Compare both policies carefully and consider the value of your personal property to decide which option offers the right level of protection.
Understanding the difference between HO-3 and HO-5 policies can help you make a smarter coverage decision. We answered common questions about both types of policies.
It depends on your needs. HO-5 offers more comprehensive coverage, while HO-3 is more affordable and still provides solid protection.
HO-3 policies usually reimburse personal property at actual cash value, but you can sometimes upgrade to replacement cost coverage for an added premium.
If you have valuable personal property or want broader protection with fewer claim restrictions, the extra cost of HO-5 may be worth it.
Yes, both policies offer open peril coverage for the dwelling, meaning you’re covered unless a peril is specifically excluded.
Yes, if HO-5 is available through your insurer, you can upgrade at any time. Just be sure to review the cost and coverage differences first.
MoneyGeek analyzed quotes from multiple insurance providers across the U.S. using a profile that reflects the average homeowner. By considering different locations and companies, we aim to give a reliable estimate of what homeowners can expect to pay — showing why it’s important to compare rates.
Homeowner Profile
For our analysis, we created a sample homeowner profile with the following characteristics:
Homeowners Insurance Coverage Details
Unless otherwise specified, we used the following coverage limits to collect quotes for our comparison:
We also compiled data for policies with broader coverage to determine the best companies for insuring expensive homes, upping limits to $1 million in dwelling coverage, $500,000 in personal property coverage and $1 million in liability coverage.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
