HO-2 vs HO-3

Two of the most common types of homeowners insurance policies are HO-2 and HO-3 and understanding how they compare can help you feel more confident about choosing the right coverage for your home. What’s the difference between HO-2 and HO-3 insurance? While both protect your home and personal belongings, they offer different levels of protection and come at different price points.

What is an HO-2 policy?

An HO-2 policy, also called a broad form policy, covers your home and personal property against a specific list of risks known as named perils. If the cause of damage isn’t listed in your policy, it’s not covered. That makes this option more limited than others but also typically more affordable.

What does an HO-2 policy cover?

HO-2 policies usually include protection for events that are sudden, accidental and specifically listed in your contract. These are called named perils and they form the backbone of this policy type. Here are some of the most common events that tend to be covered:

• Fire or lightning – This covers damage caused by flames or electrical storms.
• Windstorm or hail – This includes damage from tornadoes, strong wind gusts or hail.
• Explosion – This applies to explosions from gas leaks or other combustion sources.
• Theft – This covers stolen property or damage that happens during a break-in.
• Vandalism or malicious mischief – This includes intentional damage caused to your home or belongings.
• Damage from vehicles or aircraft – This applies when a vehicle or aircraft causes damage and it's not your fault.
• Falling objects – This includes damage from things like tree branches or debris.
• Sudden water damage – This applies to water damage caused by burst pipes or faulty plumbing.
• Weight of snow, ice or sleet – This covers structural damage caused by heavy winter precipitation.
• Freezing of household systems – This includes damage from frozen pipes or HVAC systems.
• Power surge damage – This covers sudden electrical spikes that damage your appliances.

If it’s not on the list, it’s not covered. That’s the key limitation of HO-2 coverage.

This type of policy is a good fit for homeowners looking for budget-friendly coverage and who live in areas with lower risk of unexpected events.

What is an HO-3 policy?

The HO-3 policy is the most popular type of homeowners insurance in the U.S. and for good reason. Known as a special form policy, it provides broader protection for your home thanks to its open perils approach. In simple terms, your home is covered for everything except what’s specifically excluded.

What does an HO-3 policy cover?

• Dwelling coverage – Covers nearly all types of sudden physical damage unless the policy specifically says otherwise.
• Personal property coverage – Like HO-2, your belongings are only covered for named perils.

Common exclusions in HO-3 policies include:

• Earthquake and flood damage
• General wear and tear or neglect
• Mold or fungus
• Pest infestations
• War or nuclear hazards
• Government actions (like seizure or demolition)
• Appliance breakdowns unrelated to a covered peril

Even with these exclusions, HO-3 offers more comprehensive protection than HO-2, especially when it comes to the structure of your home.

HO-2 vs HO-3: what’s the real difference?

Now that you know what each policy covers, it’s time to compare them side by side. These differences can impact how well you're protected and how much you’ll pay out of pocket if something goes wrong. Here’s a closer look at how they stack up:

Dwelling coverage

• HO-2 only protects against named perils. If it’s not listed, it’s not covered.
• HO-3 protects against all risks unless they’re excluded, giving broader protection.

Personal property

• Both policies cover belongings for named perils only. If your stuff is damaged by an unlisted event, it won’t be covered.

Flexibility and protection

• HO-2 is best for homeowners who want basic protection at a lower premium.
• HO-3 is ideal for those who want more peace of mind, especially in areas with unpredictable weather or higher-value homes.

Cost comparison

• HO-2 usually costs less but comes with fewer protections.
• HO-3 typically costs more but offers stronger, more flexible coverage.

Which one should you choose?

Still unsure which one is right for you? It ultimately comes down to how much protection you want and how much risk you’re comfortable taking on. By weighing your budget, your priorities and your level of risk aversion, you can choose the option that feels like the best fit for your situation.

Choose HO-2 if:

• You’re on a tight budget
• You live in a low-risk area
• You’re okay with only covering specific risks listed in your policy

Choose HO-3 if:

• You want stronger protection for your home
• You live somewhere prone to unexpected events
• You’re insuring a newer or higher-value home

Other types of homeowners policies

HO-2 and HO-3 aren’t your only options. In the U.S., homeowners policies come in several standard forms, each designed to cover different property types and levels of risk. Understanding these distinctions can help you choose the policy that best fits your needs and circumstances.

• HO-1 – Basic form (rarely offered today)
• HO-4 – Renters insurance
• HO-5 – More comprehensive homeowners policy
• HO-6 – Condo insurance
• HO-7 – Mobile home insurance

Knowing which form applies to your home helps you compare quotes and understand what you’re buying.

Other things to consider

Before picking a policy, here are a few smart questions to ask your insurance advisor. These questions can help you understand the details of your coverage, identify any gaps and compare your options more confidently. Taking the time to ask them helps you make a well-informed decision that protects both your home and your budget.

• What’s covered and what’s not?
• Will my mortgage lender accept HO-2 coverage?
• How much will I actually save by choosing HO-2?
• Can I add endorsements for more protection?

Many insurance companies let you customize either policy with endorsements for things like water backup, earthquake protection or valuable items.

 

Choosing between HO-2 and HO-3 homeowners insurance isn’t just about price, it’s about peace of mind. If you want basic, budget-friendly coverage and understand the limits, HO-2 may be enough. If you’d rather have broad protection and fewer worries, HO-3 could be well worth the extra cost.

At VIU by HUB, we’ll walk you through the differences and help you find coverage that fits your home, your needs and your budget.