An HO3 homeowners' policy covers personal property loss and damage in the event of a named peril, while an HO5 policy provides coverage in any event except those specifically noted, according to Andrew G. Gordon with Gordon Insurance. An HO5 has fewer limitations and offers more coverage than the HO3.
Traditionally, insurance writers used the HO3 form for almost every homeowners' policy, and it continues to meet the insurance needs of most property buyers. HO5 policies haven't been in use as long and are only available to a select group of individuals. In most cases, HO5 policies insure well-maintained, high-value homes that were built within the past decade. Homeowners who qualify for an HO5 policy should take advantage of the additional benefits it offers, recommends Gordon.
Certain named perils limit the coverage of personal property in an HO3. The list is extensive, including the most common reasons for loss, such as fire, theft and freezing, as well as less likely situations, such as damage caused by an aircraft or a civil commotion, but the open perils coverage of an HO5 minimizes any limitations a policyholder may encounter, reports Clarke & Sampson Insurance Agency in Alexandria, Virginia. The HO5 also includes some coverage options that must be added to HO3 coverage, such as replacement cost coverage, according to Clarke & Sampson.