HO-3 Home Insurance Policy: What You Need to Know

An HO-3, also called a special form policy, is the most widely written homeowners insurance policy in the U.S., according to the National Association of Insurance Commissioners. It covers your home's structure against almost any cause of damage and your personal belongings against a narrower list of 16 causes. That difference in standards is what matters most when you file a claim.

Your home's coverage works on an open-perils basis: every cause of damage is covered unless your policy lists it as an exclusion. For dwelling claims, your insurer carries the burden of proving a cause is excluded. Your belongings work on a named-perils basis: only the 16 causes listed in your policy are covered. For personal property claims, you carry the burden of proving the cause matches the list. If it doesn't, the claim won't pay.

An HO-3 policy has six coverages. Four of the six limits are set as a percentage of your dwelling amount, which means the dwelling figure you choose affects most of your coverage package.

Limits shown are illustrative examples based on common policy structures. Actual amounts depend on your insurer, policy terms, and state.

HO-3 coverage splits into two types. Your home and other structures get open perils protection; your personal property gets named perils protection. That split decides whether you pay out of pocket after a loss.

The named vs. open perils difference matters most in gray-area situations. A burst pipe from sudden freezing is a named peril and would be covered, but a slow leak that causes mold over six months may be classified as neglect or maintenance failure, which is excluded under open perils. A windstorm that tears off your roof is covered under open perils for the dwelling, but if rainwater then causes damage to your furniture, that furniture claim goes through named perils coverage, where wind is listed.

Your home's structure gets broad protection under an HO-3, but your belongings have gaps. Homeowners with expensive personal property should either add a scheduled personal property rider or consider upgrading to an HO-5 policy.

The average annual cost of an HO-3 policy depends on your coverage limits. For a policy with $250,000 in dwelling coverage, rates average $292 per month or $3,503 per year, based on MoneyGeek's analysis of rate filings from Quadrant Information Services.

When we compared costs across five coverage tiers, one pattern was clear: higher dwelling limits cost less per dollar of protection. At $100,000 in dwelling coverage, you pay $18.48 per $1,000 of coverage. At $1 million, that drops to $10.79 per $1,000. That's a 42% reduction in your per-dollar rate. Homeowners who need $500,000 or more in dwelling coverage get better value per dollar than those at the lower tiers.

Going from $100,000 to $250,000 in dwelling coverage adds $1,618 a year, a 90% cost increase for 150% more coverage. Moving from $250,000 to $500,000 adds $2,370 a year, a 70% cost increase that doubles dwelling coverage and raises liability from $200,000 to $300,000.

For homeowners whose replacement cost falls between tiers, the math favors rounding up: the marginal cost of each additional coverage increment decreases at every step.

The cost of an HO-3 policy varies widely by company. In our analysis, AIG is the cheapest HO-3 provider for $250,000 in dwelling coverage at an average of $91 per month ($1,093 per year). Nationwide averages $279 per month ($3,346 per year) for the same coverage level. Nationwide's rate is more than three times AIG's rate.

That $467 monthly gap between the cheapest and priciest providers totals $5,598 a year. The cheapest rate isn't always the best value, though. AIG writes policies primarily through independent agents in select states, and CSAA limits membership to certain regions, so both carry narrower geographic reach. Amica costs $117 a month, is available in most states, and has ranked among the highest insurers for claims satisfaction. That $26 monthly gap between AIG and Amica, $312 a year, buys broader availability and a better claims record.

AAA membership unlocks a $143 monthly rate with member-only discounts built in. American Modern, at $175 a month, specializes in non-standard properties like older homes, vacant properties and homes with unique construction. Other insurers may decline coverage on these properties entirely or charge more for them.

An HO-3 policy is the standard homeowners insurance required by most mortgage lenders, covering your home on an open perils basis and your belongings for named perils. The average cost is $3,503 per year for $250,000 in dwelling coverage, but rates range from $1,093 (AIG) to $6,691 (Travelers) for the same protection level.

Start by estimating your home's replacement cost (not its market value) and choose a dwelling limit that covers at least 80% of that figure. Compare quotes from at least three insurers, because our data shows the spread between the cheapest and most expensive providers is $2,256 per year. Ask about bundling, claims-free and protective device discounts by name. And review your policy's exclusions for flood, earthquake and high-value item sub-limits. These are the gaps that cost homeowners the most when a claim occurs.

MoneyGeek evaluated homeowners insurance companies using premium data and analysis from Quadrant Information Services. We based our insights on thousands of rate filings from insurers across the U.S., allowing us to provide accurate comparisons grounded in real-world pricing.

We used a sample homeowner profile with a good credit score (769 to 792), a wood-frame house built in 2000 and a composite shingle roof for consistency. Standard quotes reflected $250,000 in dwelling coverage, $125,000 in personal property, $200,000 in liability and a $1,000 deductible.

We also analyzed policies with $1 million in dwelling coverage, $500,000 in personal property and $1 million in liability to assess coverage options for higher-value homes. All rates reflect the annual premium divided by 12 for monthly figures, rounded to the nearest whole dollar per MoneyGeek's editorial standards.

Our analysis focused on comparing rates at identical coverage levels across insurers to give homeowners an apples-to-apples view of pricing. We calculated per-dollar coverage costs at each tier to identify where homeowners get the best value, and we reviewed the geographic availability and specialization of each insurer to flag limitations that affect who can access the cheapest rates.