Homeowners and Dwelling Policies
Choosing the right form
The HO-3 insures the dwelling and other structures on an open-peril basis but personal property for named perils only; the HO-5 is open peril on both - a favorite exam contrast. HO-2 is broad named peril throughout; HO-4 (renters) covers contents, loss of use, and liability but no building; HO-6 covers condo unit interiors and improvements; HO-8 modifies replacement cost for older homes. Dwelling policies (DP-1/2/3) cover the building only and include no liability unless endorsed, which suits rentals and vacant homes.
Standard relationships: Coverage B (other structures) is 10% of A; Coverage C is 50% of A on the HO-3 (higher on some forms); Coverage D is 30% of A; Coverage E is liability with a separate Coverage F medical payments limit. Special limits - money, securities, jewelry and watches for theft, silverware, firearms for theft, business property, electronic data - apply per category per occurrence, not to the policy total.
Exclusions worth memorizing: earth movement, water damage from flood or surface water, sewer or drain backup (endorsement only), neglect, intentional loss, ordinance or law, and business pursuits. Mold is limited or excluded.
Traps: applying a special limit to the whole claim rather than to one category; forgetting that theft off premises or property of a boarder is limited; assuming a homeowners policy covers a home-based business.
Example: A $300,000 Coverage A HO-3 yields B = $30,000, C = $150,000, and D = $90,000. A $4,000 theft of a diamond ring is capped at the jewelry theft limit (commonly $1,500) unless the ring is scheduled.