What is the Difference between HO-2 – “Named Peril” and HO-3- “All Risk” homeowner insurance policies?

Now for more “insurance lingo” explanations

FirstCallNowadays, the typical Homeowner’s policy comes in two basic forms, an HO-2 and an HO-3. For better or worse, an HO-3 policy is referred to in the business as an “All Risk” policy. This is really a misnomer because it does not cover everything that can happen to your house. And it’s a little misleading, since floods are not covered. In contrast, an HO-2 policy is a “Named Peril” policy. Stay with me here, because it gets confusing. I think they do it on purpose.

HO-2 or “Named Peril” policy says that if any of the following perils happen, they will consider it a claim:

  • Fire
  • Lightning
  • Wind
  • Hail
  • Explosion
  • Riot/civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Theft
  • Vandalism/Malicious Mischief
  • Glass Breakage
  • Pipe Freezing
  • Volcanic Eruption
  • Falling Objects
  • Weight of Ice, Sleet, Snow Collapse
  • Electric Current

This seems like it covers just about everything that could possibly happen to a home. It isn’t. Flood, earthquake and ice dams are just a couple of perils that the HO-2 policy does not cover. The important concept here is that the events are named. Hence, it is a “Named Perils” policy.

The HO-3 “All risk”policy, on the other hand, focuses on “exceptions.”

It should have been called the “Named Exclusion” policy instead of “All Risk,” because it causes consumer confusion. An HO-3 policy covers you for all risk of physical loss except for the following:

  • Ordinance of law
  • Earth movement
  • Governmental action
  • Nuclear hazard
  • Power failure
  • War / military action
  • Water (Flood)
  • Inherent defects
  • Vermin

Not sure what type of policy you have? Call your agent and ask them whether you have an HO-2 or HO-3 policy. The best policy is an HO-3 because it is an all-risk policy. It is my professional opinion that many homeowners already have an HO-3 policy. If you have an HO-2, simply request a policy change to an HO-3 or find another company that will do this for you.

 Need a suggestion on a good insurance company? Call our office at 215 641-6000 for recommendations. Or see my “best and worst” insurance companies list based on 30 years of experience working with insurance companies.

I am an advocate for my clients. Call if you have:

  • Any questions about your insurance policy and want an unbiased view
  • Any questions about a claim (whether settled or not)
  • Advice for reporting a claim (call me first)

Warm regards for a “hassle free” winter,

Mike Bruckner, Independent Insurance Adjuster for over 30 years
Email: Mike@ proadjust.com