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If the title of this article surprised you, we don’t blame you. Many homeowners are often uninformed of the fact that home insurance is an actually an umbrella term that encompasses different types of home insurance policies. Though the basic idea is to protect your property and insure it against damage, each policy provides a different type of coverage and it requires some research to know which one is the right one for you!
Today, we discuss the HO-5 home insurance policy, second in popularity only to its cousin, the HO-3 policy.
Providing coverage for your home as well as your personal property (contents of your home), the HO-5 home insurance policy is deemed one of the best home insurance policies in the United States. This policy is an “open perils” policy, which means that it insures your home and personal property against all types of damage and danger unless it specifically excludes one in its purview. Thus, it specifies the perils that your house and property are not protected against. Due to this, the HO-5 policy provides the most extensive coverage there is, making it better than the HO-3.
As we mentioned earlier, the HO-5 policy is an “open perils” policy; therefore, it lists the perils or potential dangers to your house and personal property that it doesn’t cover, such as:
Though the HO-5 doesn’t cover water damage, earthquake damage, effects of the law, mold, fungus, wet rot and collapse, some of them can be “endorsed” or added into your policy, such as water damage, earthquake damage and the effects of the law. The effects of mold, fungus, wet rot and collapse may sometimes be included in your policy; if not, they can be endorsed as well.
The HO-5 is highly similar to the HO-3 policy, with the latter being the most commonly purchased policy in the United States. However, not all policies are created equal and therefore, there are differences between the two.
The main difference is the type of coverage that both provide. The HO-3 is a hybrid policy and is thus, a combination of both “open perils” and “named perils” policies. Your house is covered on an “open perils” basis, whereas your personal property is covered on a “named perils” basis (where only the perils specified by the policy are provided coverage for). The HO-5 policy, on the other hand, covers both your house and personal property on an “open perils” basis, with only a few exclusions. This makes it a more extensively covering policy with fewer endorsements.
Another advantage with the HO-5 policy is that you don’t have to prove that damage to your property was due to a named peril; instead, the onus lies on the insurance company. It also includes a much simpler claims process than the HO-3. Thus, this is a less stressful policy!
However, due to the extensive nature of the HO-5 policy, some of its rules and guidelines may be stricter than the HO-3, such as HO-5 policy coverage being granted to newer or well-maintained homes that are in close proximity to the fire department.
Nothing is perfect; a fact that holds true for the HO-5 policy as well. Though it may be a better policy than the HO-3, it falls short on the following counts:
The HO-5 is perfect for any standard homeowner. If you’ve got great credit and don’t mind paying extra for better and more extensive coverage that lasts you longer, this policy is your best bet!
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We know we’ve said it already but it’s simply because it bears repeating; the HO-5 is the best home insurance policy there is! However, if for some reason you find that it doesn’t meet your needs, the HOC policy is something you might want to consider, as it also provides slightly better insurance against water damage. However, any water damage the HOC protects against can be endorsed into your HO-5.