HO-3 vs HO-5: the difference between the two homeowners forms

The HO-3 covers the house on an open perils basis but covers your belongings only for named perils. The HO-5 covers both the house and your belongings on an open perils basis. That one difference in personal property coverage is the whole story. Everything else about the two forms is the same or follows from it.

Candidates mix these forms up because the numbers feel arbitrary and the names ("Special" and "Comprehensive") sound interchangeable. They are not. The Texas general knowledge section of the exam lists both forms under homeowners, and a question can turn on which of the two answers a given scenario. This guide gives you the rule, the table, and the Texas twist that national guides leave out.

What is the difference between an HO-3 and an HO-5?

Both forms are written for an owner who lives in the home. Both cover the dwelling, other structures, loss of use and personal liability. The difference is how the personal property section (Coverage C) decides what is covered.

• HO-3 (Special Form): the dwelling and other structures are covered for any cause of loss the policy does not exclude. Personal property is covered only for the perils the policy names.
• HO-5 (Comprehensive Form): the dwelling, other structures and personal property are all covered for any cause of loss the policy does not exclude.

The Texas Department of Insurance (TDI) explains the two ideas in plain language. All-risk policies cover any event the policy does not specifically exclude, and named perils policies cover only the events listed in the policy. "All risk" and "open perils" mean the same thing.

Why does the personal property difference matter?

Picture a contents claim for a cause nobody listed in advance. On an HO-3, the insurer asks whether the loss was caused by one of the named perils. If not, the contents claim fails. On an HO-5, the insurer asks whether the loss falls under an exclusion. If not, it is paid.

The burden shifts. Under named perils, the insured has to show the cause of loss is on the list. Under open perils, the insurer has to show an exclusion applies. That shift is the practical value of the HO-5, and it is why exam questions about "who bears the burden" usually point to open perils.

Do the HO-3 and HO-5 cover the same exclusions?

Mostly, yes. Open perils never means everything. TDI notes that all-risk policies usually do not cover damage from termites, wear and tear, sewer backups, floods, or earthquakes. Its homeowners handout adds mold, fungus and rot, other pests, and continuous or repeated seepage of water to the usual exclusions.

So an HO-5 does not cover a flood, and an HO-3 does not either. Flood needs its own policy. The same is true of earthquake. A common exam trap is an answer choice claiming the "most comprehensive" form includes flood. It does not.

Is the HO-5 paid on replacement cost?

Not automatically, and this is where candidates lose points. Open perils versus named perils is about which causes of loss are covered. Actual cash value versus replacement cost is about how a covered loss is paid. They are separate questions.

An HO-5 can pay a contents loss on either basis, depending on the policy wording and endorsements. An HO-3 can pay the dwelling on a replacement cost basis and the contents on actual cash value. When a question asks about the amount paid, look at the valuation clause. When it asks whether the loss is covered at all, look at the peril basis. The exam outline lists loss valuation as its own topic, which is a hint that the two are tested apart.

How do Texas homeowners forms map to the HO-3 and HO-5?

Texas has its own history, and this is the part most national articles skip. TDI's Texas homeowners policies handout says companies must write Texas homeowners insurance on policy forms that TDI has cleared for use. Before 2003, insurers had to use Texas promulgated forms or Insurance Services Office (ISO) forms. Since SB 14 in 2003, insurers have filed and used their own forms, although some still use the promulgated ones.

TDI's handout pairs the old Texas forms with the ISO forms like this:

So the Texas HO-B is the counterpart of the ISO HO-3, and the Texas HO-C is the counterpart of the ISO HO-5. The ISO forms themselves were approved for Texas by the Commissioner, and TDI's order lists form HO 00 03, the Homeowners 3-Special Form, and form HO 00 05, the Homeowners 5-Comprehensive Form, among others.

Today the forms you will meet in the field are usually company forms modeled on these structures. Names and wording vary, so always read the actual perils clause.

What about the other homeowners forms?

The HO-3 and HO-5 sit at the top of a ladder. The outline lists the whole homeowners family, and a question may ask you to place a scenario on the right rung.

The renter and condo forms (HO-4 and HO-6) trip people up because they have no full dwelling coverage. If the scenario describes someone who does not own the building, those are your answers. If it describes a historic home where replacement cost would exceed market value, think HO-8. The dwelling forms for non-owner-occupied property (DP-1, DP-2, DP-3) are a separate lesson. They mirror this ladder.

What does this mean for you as a candidate or new agent?

For the exam, memorize one sentence: HO-3 is open perils on the structure and named perils on the contents; HO-5 is open perils on both. Then add the three traps:

1. Open perils does not mean flood, earthquake or wear and tear.
2. Open perils is not the same as replacement cost.
3. HO-4 and HO-6 are not "smaller HO-3s". They cover different things.

For the job, the HO-5 is not automatically the right sale. It usually costs more, and a client with modest belongings may be well served by an HO-3. What matters is that the client understands what their form leaves out. TDI also warns that on the Texas coast a home policy might not cover wind damage, and a separate wind and hail policy may be needed. Spotting that gap is a core skill, and the Texas portion of the exam leans on it.

Ready to test yourself? Try the 10 free practice questions, or work through the free property insurance questions. If you want the full set of lessons on homeowners and dwelling forms, see the Texas P&C course.

Frequently asked questions

Is HO-5 better than HO-3?

The HO-5 offers broader cover because it insures your belongings on an open perils basis, and it usually costs more. It is better for someone with valuable contents who wants the insurer to carry the burden of proving an exclusion. For many homes the HO-3 is enough, so better depends on the contents and budget.

Does an HO-3 cover personal property?

Yes, but only for the perils the policy names, such as fire, lightning, theft and vandalism. The dwelling gets open perils cover, while contents get the narrower named perils cover. If a loss to your belongings comes from a cause that is not on the list, the HO-3 will not pay it.

What is the Texas equivalent of the HO-3 and HO-5?

TDI's homeowners handout pairs the Texas HO-B with the ISO HO-3 and the Texas HO-C with the ISO HO-5. Since 2003 insurers may file their own forms, so many policies you meet today are company forms that follow the same open perils and named perils structures under different names.

Do HO-3 and HO-5 policies cover flood?

No. Flood is a standard exclusion under both forms, along with earthquake, wear and tear, mold, and sewer backup. A homeowner who needs flood protection must buy a separate flood policy. On the Texas coast, wind and hail may also need their own policy, so always read the exclusions.

Are the HO-3 and HO-5 on the Texas P&C exam?

Yes. Both appear in the homeowners section of the Property and Casualty general knowledge outline, alongside the HO-2, HO-4, HO-6 and HO-8. Expect scenario questions that ask which form fits a person, or whether a particular loss is covered under named perils or open perils.