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HO5 Premier Policy Offers Comprehensive Protection

By Mike Heuer

While the HO3 insurance policy is the most popular type of homeowners insurance sold, the HO5 homeowners insurance plan offers more comprehensive protection. An HO3 policy will protect against all cited risks, but the HO5 homeowners insurance policy is an open-perils insurance plan that protects against all but excluded perils. The HO3 form only insured against those perils cited.

An HO5 policy costs more than an HO3 plan and is more exclusive in that homes must be newer and qualify for coverage. Because many homeowners do not need the additional protection provided by HO5 plans, they often choose the more affordable HO3 policies.

Like an HO3 plan, and HO5 policy will protect a home against all risks. Specifically, both policies will protect the structure against losses caused by theft, fire, lightning, explosion, smoke damage and freezing. Both homeowners insurance policies also protect against losses caused by vehicles, falling objects, volcanic eruption, windstorm, hail, riot or other civil commotion and vandalism or malicious mischief. Also protected are losses caused by aircraft, the weight of ice, sleet or snow, sudden and accidental tearing apart cracking, bulging or burning, a power surge or an accidental overflow or discharge of water from air conditioning, water heaters, plumbing or other internal source.

Both policy types provide a great deal of protection for a home’s structure, which is why most homeowners settle for the more affordable HO3 policy. But when qualifying for an HO5 insurance plan and able to afford one, many insurance experts agree it is the better option, particularly for new homes that cost a great deal and might contain high-dollar items, such as antiques, artwork and other valuables. The primary difference between an HO3 and an HO5 insurance plan is the HO5 policy provides open perils risk not only for the structure but also its contents and the personal belongings of those living in it.

When choosing between an HO3 and an HO5 policy, it is best to assess the value of personal belongings and household contents to determine which plan is the best option. When the contents and personal belongings cost a great deal and might be rare or otherwise difficult to replace, the additional cost of an HO5 insurance policy makes it a wise choice for homeowners. Options are available for replacement cost coverage or actual cash value with the actual cash value option being more affordable but possibly leaving some items more at risk. And adjusting the deductible amount can make the HO5 policies more affordable.

Another way to make HO5 policies more affordable is to make the deductible higher. Deductibles help insurers by reducing the need to handle claims for small losses while also limiting the potential for lawsuits arising from small claims. And the higher the deductible amount, the more affordable a homeowners insurance plan will be.

An HO5 form of homeowners insurance will provide many coverages that must be added through endorsements on HO3 policies, such as replacement cost coverage. While the policyholder can opt for the lesser coverage provided by actual cash value, the comprehensive insurance provided by an HO5 plan makes it more expensive but well worth the additional cost for many homeowners.