Types of Home Insurance Policies in 2026

HO-3 deep dive: the default US policy

HO-3 covers your dwelling on an open-perils basis (every cause of loss except those specifically excluded) and your personal property on a named-perils basis (only 16 listed causes including fire, theft, wind, hail). If a tree falls on your kitchen, the dwelling damage is covered outright. If your television fails from a power surge and power surge is not a named peril on your policy, the TV is not covered. For most owners this difference never matters, which is why HO-3 remains dominant.

Standard HO-3 exclusions include flood, earthquake, normal wear-and-tear, termite damage, mould from chronic neglect, sewer backup (unless added), war, nuclear hazard, intentional damage, and losses during vacancy over 60 days.

HO-5 deep dive: the open-perils upgrade

HO-5 extends open-perils coverage to your personal property. Practically, this matters for items without clear named-peril triggers: a piece of expensive art damaged by "unknown cause," electronics damaged by power events, a laptop mysteriously stopped working after a rough trip. HO-5 also typically comes with higher sub-limits for jewellery and electronics.

HO-5 usually costs 10 to 15 per cent more than HO-3 and is generally offered on newer homes (usually under 30 years), in good condition, with good credit, and with a claim-free history. If offered, it is a reasonable upgrade for high-content-value households.

Replacement Cost vs Actual Cash Value

This is the single most important settlement-basis choice in your policy. It applies separately to Coverage A (dwelling) and Coverage C (personal property) and may even apply separately to the roof.

Carrier trends since 2020 have tightened RCV on roofs. Many carriers now automatically apply an ACV roof schedule for roofs over 15 to 20 years. Some states (Texas, Oklahoma, Kansas, Colorado) permit carriers to apply a separate percentage roof deductible alongside ACV. Always ask: for my roof specifically, is the settlement basis RCV or ACV, and does it have its own deductible?

The six standard coverages

Every HO-3 and HO-5 has six named coverages with default limits that relate to each other:

• Coverage A (Dwelling): the structure itself. Set to replacement cost. This is your primary limit.
• Coverage B (Other Structures): detached garage, shed, fence, driveway. Default 10% of A. Raisable to 70% via endorsement.
• Coverage C (Personal Property): contents. Default 50 to 70% of A. RCV or ACV; schedule high-value items separately.
• Coverage D (Loss of Use): additional living expense when your home is uninhabitable. Default 20 to 30% of A.
• Coverage E (Personal Liability): legal defence and damages for third-party injury. Default $100k or $300k. Raise to $500k for under $50/yr.
• Coverage F (Medical Payments): no-fault payments for guest injuries on your property. Default $1,000 to $5,000 per person.

What standard home insurance does NOT cover

The following eight exclusions are consistent across every standard HO-3 and HO-5 policy.

1. Flood. Rising surface water, storm surge, river overflow. Needs NFIP or private flood policy. See flood insurance cost.
2. Earthquake. Including earth movement, sinkhole, landslide. Needs CEA or private earthquake policy. See earthquake insurance cost.
3. Normal wear, tear, and maintenance. A 25-year-old roof that finally fails from age is not a claim.
4. Termites, rodents, and pest damage. Preventable via maintenance; not insurable.
5. Mould from chronic neglect. Mould from a sudden covered water loss (pipe burst) is usually covered; mould from years of ignored leaks is not.
6. Sewer and drain backup. Available via endorsement ($50 to $150/yr).
7. Business property over sub-limits. Home office equipment is usually capped at $2,500. Needs business-pursuits rider or separate business policy.
8. Intentional damage. You cannot insure your own deliberate acts.

Endorsements worth considering

• Water backup / sump pump ($50 to $150/yr) - closes the sewer backup gap.
• Service-line coverage ($30 to $50/yr) - underground pipe and conduit failures on your property.
• Equipment breakdown ($30 to $75/yr) - HVAC, electrical, and appliance component failures.
• Scheduled personal articles (1 to 2% of item value) - removes sub-limits for jewellery, silverware, firearms.
• Extended replacement cost (5 to 10% premium increase) - extends Coverage A by 25 to 50% if reconstruction exceeds the limit.
• Ordinance or law (small percent) - covers code-upgrade costs during rebuild (crucial for homes built before current code).