Open perils vs. named perils
The key difference comes down to two terms. Open perils, sometimes called all risks, means a loss is covered unless the policy specifically excludes it. Named perils means a loss is covered only if it's on the policy's list, such as fire, lightning, windstorm or theft.
Open perils is broader. With named perils, the burden is on showing the cause is on the list.
How an HO-3 works
An HO-3 covers your home's structure on an open-perils basis, so most damage to the house is covered unless it's excluded. Your personal belongings, like furniture, clothes and electronics, are covered only for named perils. That's why it's sometimes called a special form for the dwelling and a broad form for contents.
How an HO-5 works
An HO-5 covers both your home and your belongings on an open-perils basis. It may also come with higher limits or replacement cost on contents as standard, depending on the carrier. In short, it fills in many of the gaps an HO-3 leaves for your belongings.
A claim example
Say you accidentally spill paint on a new sofa. An HO-5 may cover it, because accidental damage isn't excluded. An HO-3 usually won't, since an accidental spill isn't on the list of named perils for personal property. Coverage depends on your policy, so review it or talk with your agent.
What neither one covers
- Flood, which needs its own policy
- Earthquake, usually added by endorsement or a separate policy
- Wear and tear, maintenance problems and pests
- Some high-value items above sub-limits, unless you schedule them
Which one fits
An HO-5 can make sense for newer homes, homes with valuable belongings or owners who want the broadest coverage. Carriers often limit HO-5 policies to newer, well-kept homes. An HO-3 may be enough if your belongings are modest, and some carriers offer an endorsement that adds open-perils coverage for contents.
HO-5 policies often cost somewhat more. CapCenter's in-house insurance agency has licensed agents who compare quotes from multiple carriers, so you can see both side by side. You don't need a CapCenter mortgage to get a quote.
Questions to ask when you compare
- Are my belongings covered for open perils or named perils?
- Is contents coverage replacement cost or actual cash value?
- What are the sub-limits for jewelry, electronics and collectibles?
- Are there separate wind, hail or hurricane deductibles?
- How much more would an HO-5 cost each year than an HO-3?
