The HO-3 Homeowners Policy: Complete Study Guide for the P&C Exam

The HO-3 Homeowners Policy: Complete Study Guide for the P&C Exam

The HO-3 (Special Form) is the most widely used homeowners policy in the country. It's also one of the most heavily tested topics on the P&C exam. This guide covers everything you need to know.

1. The Five Coverages (A Through E)

The HO-3 has five coverage parts. Know each one, what it covers, and how it's triggered.

Coverage A — Dwelling: Covers the dwelling itself and structures attached to it (attached garage, built-in appliances). Covered on an OPEN PERILS basis — all perils are covered except those specifically excluded. This is the most important distinction on the HO-3.

Coverage B — Other Structures: Covers structures on the premises that are not attached to the dwelling (detached garage, fence, shed, gazebo). Typically limited to 10% of Coverage A. Also covered on an open perils basis.

Coverage C — Personal Property: Covers the insured's personal belongings (furniture, electronics, clothing). Covered on a NAMED PERILS basis — only the perils specifically listed in the policy are covered. This is the second most important distinction: dwelling is open perils, personal property is named perils.

Coverage D — Loss of Use: Covers additional living expenses if the home is uninhabitable due to a covered loss. Also covers fair rental value if a portion of the home is rented. Typically limited to 30% of Coverage A.

Coverage E — Personal Liability: Provides liability coverage if the insured is legally responsible for bodily injury or property damage to others. No dollar limit on the declarations page — the limit shown is the maximum paid per occurrence. Typically $100,000 to $500,000.

Coverage F — Medical Payments to Others: Pays medical expenses for non-residents injured on the insured's property. No fault required. Typically $1,000 to $5,000. Does NOT cover the insured or resident family members.

2. Open Perils Exclusions (Coverages A and B)

Since Coverages A and B are open perils, the exclusions are critical. If a peril isn't excluded, it's covered. The exclusions include:

- Ordinance or law - Earth movement (earthquake, landslide, mine subsidence) - War and military action - Nuclear hazard - Intentional loss - Government action - Power failure (off the premises) - Neglect - Theft in or from a dwelling under construction - Vandalism if the dwelling is vacant for more than 60 days - Freezing, plumbing, or AC systems if the dwelling is vacant - Smog, rust, corrosion, fog, pollutants - Settling, cracking, shrinking, or expansion - Birds, vermin, rodents, insects - Wear and tear, deterioration - Sudden and accidental damage from artificially generated electrical current - Volcanic eruption

The Bottom Line

The HO-3 exam questions almost always test three things: which coverage uses open vs named perils, the specific exclusions under open perils, and the sublimits under Coverage C. Memorize the coverage structure (A through E), know the open perils exclusions cold, and drill practice scenarios until the answers come automatic.

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