The short answer
The HO-3 is the policy about 8 in 10 American homeowners carry. It pays to repair or rebuild your house, replace your belongings, cover your living expenses while the home is uninhabitable, and defend you when someone claims you hurt them or their property.
- Covered: fire, lightning, windstorm, hail, explosion, theft, vandalism, falling objects, weight of ice and snow, sudden accidental water discharge, riot, aircraft and vehicle impact.
- Excluded: flood, earth movement, wear and tear, neglect, mold beyond a sublimit, insects and vermin, intentional acts, and normally war and nuclear hazard.
- Depends on your form: roof settlement basis, water backup, service line, ordinance or law upgrades, and named-storm deductibles.
Claim reality gives you a sense of proportion. NAIC data published by Triple-I show about 1 in 18 insured homes files a claim each year, average severity reached $20,062 in 2023, and in 2023 wind and hail drove 42.5% of claims, water damage and freezing 22.6%, fire and lightning 21.6% and theft only 0.6%.
Open perils on the house, named perils on your stuff
This asymmetry is the defining feature of an HO-3, and almost nobody is told about it at closing.
- Coverage A and B, the structure, are written on an open-perils basis. Anything that damages the house is covered unless the policy specifically excludes it. The burden effectively sits with the insurer to point at an exclusion.
- Coverage C, your personal property, is written on named perils. Only the causes listed in the policy are covered. If your laptop simply stops working, or a ring vanishes without evidence of theft, a named-perils form does not respond.
The upgrade is the HO-5, which puts contents on open perils as well and typically adds broader settlement terms. It costs modestly more and is usually worth asking about if your carrier offers it. Condo owners use an HO-6, and renters an HO-4. See condo insurance if you own a unit rather than a house.
The named perils on a standard form generally include fire and lightning, windstorm and hail, explosion, riot and civil commotion, aircraft, vehicles, smoke, vandalism and malicious mischief, theft, volcanic eruption, falling objects, weight of ice, snow or sleet, accidental discharge or overflow of water or steam, sudden and accidental tearing apart or cracking of a heating or air conditioning system, freezing, and sudden and accidental damage from artificially generated electrical current.
The standard exclusions
Triple-I is direct about the big three: a standard policy does not pay for damage caused by flood, earthquake or routine wear and tear. Here is the fuller list and what to do about each.
| Exclusion | What it means in practice | The fix |
|---|---|---|
| Flood | Rising surface water, storm surge, heavy-rain inundation, mudflow | NFIP policy or private flood, see our flood guide |
| Earth movement | Earthquake, landslide, sinkhole, subsidence, mine collapse | Earthquake endorsement or standalone policy, sinkhole coverage in some states |
| Wear, tear and deterioration | A 24-year-old roof failing, worn plumbing, settling | Maintenance, not insurance |
| Neglect | Failing to mitigate after a loss, or ignoring a known leak | Document mitigation immediately |
| Mold and fungus | Usually capped at $5,000 to $10,000, and only when tied to a covered water loss | Ask for a higher mold sublimit |
| Insects, rodents, birds | Termite damage, squirrel chewing, infestation | Pest control contract |
| Sewer or drain backup | Excluded unless you added the endorsement | Water backup endorsement, commonly $5,000 to $25,000 |
| Ordinance or law | Code upgrades required during rebuild are excluded or thinly covered | Ordinance or law endorsement, often 10% to 25% of Coverage A |
| Intentional loss and criminal acts | Damage you caused deliberately | None |
| Business and short-term rental activity | Guests, inventory and liability arising from business use | Home business endorsement or a commercial policy |
Two exclusions cause the most uninsured losses. Flood is the first: standard policies never cover it, and FEMA reports almost one-third of NFIP claims from 2014 to 2024 came from outside mapped high-risk areas. Sewer backup is the second: it is a cheap endorsement that most homeowners skip until a basement fills. Read do I need flood insurance next.
Water damage: the nuance that decides claims
Water is the second most common cause of loss, at 22.6% of claims in 2023, and it is also where policy language does the most work. The rule of thumb: water that arrives suddenly from inside the house is usually covered; water that arrives from outside the house, or slowly, usually is not.
| Scenario | Usual outcome | Why |
|---|---|---|
| Supply line to the washer bursts | Covered | Sudden and accidental discharge |
| Water heater ruptures and floods the utility room | Covered, though the heater itself may not be | Resulting damage is covered; the failed appliance often is not |
| Slow drip under a sink rots the cabinet over two years | Denied | Gradual damage, wear and tear, and often mold |
| Sewer backs up through a floor drain | Denied without the water backup endorsement | Backup is a named exclusion in most forms |
| Heavy rain enters through a wind-damaged roof | Usually covered | Wind created an opening first |
| Heavy rain seeps through the foundation | Denied | Surface water and seepage, a flood exposure |
| Pipes freeze while the house is vacant and unheated | Often denied | Most forms require reasonable care to maintain heat |
| Storm surge from a hurricane | Denied on the home policy | Flood, needs an NFIP or private flood policy |
Three practical moves: add the water backup endorsement, install an automatic shutoff or leak sensors, and photograph and mitigate immediately when something leaks. Insurers deny gradual-damage claims because the policy is designed to fund accidents, not deferred maintenance.
Sublimits on valuables
Your contents limit is not a single pool. Standard forms impose special limits on categories that are easy to steal and hard to verify, described in the policy as special limits of liability by the Texas A&M Real Estate Research Center. Triple-I likewise notes that jewelry, furs, art, collectibles and silverware are covered but usually capped when stolen, and that unauthorized credit card use is limited to about $500.
| Category | Typical HO-3 sublimit | Applies to | Real-world example |
|---|---|---|---|
| Cash, coins, bullion | $200 | All perils | A $2,000 coin collection is a $200 claim |
| Jewelry, watches, furs | $1,500 to $2,500 | Theft | A $9,000 ring returns $1,500 without a schedule |
| Firearms | $2,500 | Theft | Four rifles stolen, one rifle reimbursed |
| Silverware, goldware, pewterware | $2,500 | Theft | Inherited flatware sets are routinely underinsured |
| Securities, deeds, manuscripts, stamps | $1,500 | All perils | Card and stamp collections need scheduling |
| Electronics used for business at home | $2,500 on premises | All perils | A home-office setup can exceed this alone |
| Watercraft with trailers and motors | $1,500 | All perils | Boats need their own policy |
| Trees, shrubs and plants | About $500 per item | Named perils only | Not covered for disease or poor maintenance |
Exact caps vary by policy form, edition and carrier, so read the special limits section of your own policy. The fix is a scheduled personal property endorsement, which insures each listed item at an appraised value, usually with no deductible and broader perils including mysterious disappearance. Electronics have no dedicated sublimit in most forms unless they are business property, but they are still subject to the named-perils requirement and to actual cash value settlement if you did not buy replacement cost on contents.
Roof settlement and ACV schedules
Roofs are the single biggest reason two policies with identical limits pay very different claims. Many carriers now settle roof losses on actual cash value, or apply a roof payment schedule that pays a declining percentage of replacement cost as the roof ages.
The Texas Department of Insurance shows the mechanic on a $200,000 home with a 2% ($4,000) deductible and a $10,000 roof replacement:
| Settlement basis | Roof age | Value applied | You receive |
|---|---|---|---|
| Replacement cost | Any age | $10,000 | $6,000 |
| Actual cash value | 5 years | $8,500 | $4,500 |
| Actual cash value | 10 years | $7,000 | $3,000 |
| Actual cash value | 20 years | $4,000 | $0 |
A typical schedule endorsement might pay 100% of replacement cost for a roof under 10 years old, then step down by roughly 10 percentage points per year of age, reaching 20% to 30% at 15 or more years. Schedules and their availability are regulated differently in each state, and in some hail-prone markets an ACV roof is the only option offered.
Check three lines on your declarations page: the roof settlement basis (RCV, ACV or scheduled), the wind and hail deductible (flat or percentage), and whether a cosmetic damage exclusion applies to dents in metal roofing or siding. Those three lines can swing a hail claim by tens of thousands of dollars.
Common claims, and how they usually pay
Illustrative examples using a $450,000 dwelling limit, $315,000 contents, $500,000 liability and a $2,500 deductible:
- Kitchen fire, $86,000 in damage. Covered under Coverage A and C, less the deductible. Fire and lightning claims are rare, about 1 in 430 homes annually, but severe; Triple-I reports non-catastrophe fire severity of $173,111 in 2024. Loss of use pays the rental while work proceeds.
- Hail damages the roof and two skylights, $24,000. Covered, but the payout depends on settlement basis and deductible. With a 2% wind and hail deductible on $450,000, you absorb $9,000; on an ACV roof at 14 years, the depreciation reduces it again.
- Guest slips on your steps and needs surgery, $140,000 in bills plus a suit. Coverage E pays the settlement and the legal defense inside the limit. Liability claims average $37,174 across 2019 to 2023 but the tail is what you buy limits for.
- Laptop and jewelry stolen in a burglary, $14,000. Electronics paid under contents; the $9,000 of jewelry is capped near $1,500 unless scheduled.
- Basement floods after four inches of rain. Denied. That is flood, and it needs a separate policy.
- Tree falls on the detached garage. Covered under Coverage B, generally about 10% of Coverage A, with debris removal subject to its own limit.
Policy forms, endorsements, roof schedules and deductible structures vary by state and carrier, and only your own policy language controls a claim. Use this as a checklist for the conversation, then confirm your limits against how much homeowners insurance you need.
Sources & further reading
- Triple-I / NAIC — Facts + Statistics: Homeowners and renters insurance
- Triple-I — What is covered by a standard homeowners policy?
- Texas Department of Insurance — Replacement cost or actual cash value?
- Texas A&M Real Estate Research Center — What does homeowners insurance really cover?
- California Department of Insurance — Residential insurance: homeowners and renters guide
- FEMA / NFIP — Media toolkit brochure, July 2025