HO3 vs HO6 Home Insurance Policy: What’s The Difference?
If you are new to home shopping, you may be just getting a handle on the two above terms. You might be trying to decide which home type is best for you in your current situation. Are you a home with a picket fence type, or is your style more of a condominium community?
In each case, you will need home insurance to protect your investment, HO3 for your house, or HO6 for your condo. The question now is which homeowner insurance company provides the best protection. I hope to use my eight years of insurance experience to clear the cobwebs and provide the answers you seek.
Key Takeaways
HO3 offers protection to homes on a named perils and standard peril basis. This damage can come from wind, fire, and theft.
HO6 offers protection to condos. This is also on a named peril basis. It covers the unit you live in and your belongings. It is more of a belongings policy as the structure itself is covered under the landlord’s insurance policy.
HO6 is considered a “walls-in” coverage, meaning you are not responsible for the building’s exterior and common areas. However, if you caused the damage, the landlord could hold you personally responsible, but your insurance would not cover that damage.
HO3 vs. HO6 Homeowners Policy
The primary difference between an HO3 and an HO6 insurance is what is insured. When living in a single-family home, you purchase an HO3 policy because you need coverage for the house and its belongings.
When you live in a condominium or a townhouse, a more appropriate policy would be the HO6 policy because you only need your belongings insured.
| Category | HO3 | HO6 |
| Insured Property | Single-family dwellings | Condos and townhomes |
| Reimbursement | Actual Cash Value | ACV/Replacement Cost |
| Dwelling coverage | Open peril | Walls in coverage only |
| Personal property | Named peril | Named peril |
| Am I required to carry? | Yes | Yes |
| Cost | More costly | Less costly |
What is an HO-3 & HO-6 insurance policy?
When you envision a homeowner, one’s mind may paint a picture of a two-story home with a picket fence, garage, and a family standing outside.
While it is true that homes like this exist and need the protection of an HO3 policy, other dwellings need the same protection. Homes like condominiums and townhouses need insurance called HO6, or Condo Insurance.
What is An HO3 Homeowners Policy
First, let’s look at the house itself. When you buy a home, you need to protect it from the slab to the roof and everything in between. HO3 coverage covers six basic types of loss:
- Dwelling: The house itself. It will also include attached structures like a garage.
- Other Structures: Unattached structures such as detached garages, sheds, fences, and even doghouses.
- Personal Property: The items you own, up to a specific dollar limit. These can include furniture, appliances, clothing, and other personal items.
- Personal Liability: Should an accident occur to a visitor in your home, this protects you from lawsuits that should result.
- Loss of Use: If your home needs repairs due to an incident, your policy will reimburse your expenses for having to stay elsewhere.
- Medical Payments: Reimbursement for medical payments to those who are injured while inside your property.
HO3 insurance functions on an ‘open peril’ basis. This means that it will cover anything that will happen to the dwelling unless there is an exception outlined in the policy.
The second part of HO3 insurance is your personal property. This portion behaves on a ‘named peril’ basis. There is a specific schedule outlined in the policy. Under an HO3 policy, there are 16 named perils. These include:
- Fire and lightning
- Windstorm or hailstorm
- Weight of ice, snow
- Freezing
- Riot or Civil Commotion
- Smoke
- Volcanic Eruption
- Art. Electric Current
- Water or Stream
- Aircraft
- Falling Objects
- Cracking, Bulging
- Vandalism
- Explosion
- Vehicles
- Theft
In 2021, an III study showed wind and hail accounted for 39.4 percent of home insurance losses, fire and lightning 24.8 percent, and water damage and freezing caused 23.5 percent of losses.
If any of these events occur, your policy’s schedule will determine your payout. If it is not on this list, it will most likely be an exclusion. Read your policy outline of coverage carefully.
What is An HO6 Homeowners Policy
Next is HO6, or Condominium Insurance. When you live in a condo, you don’t own the building or the land it sits on. The property owner carries the insurance for your dwelling. All you need is to insure your belongings.
This is what an HO6 policy is designed to do. Basically, an HO6 policy is an HO3 policy minus the dwelling coverage.
HO3 coverages include:
- Physical Damage
- Personal Property
- Liability
- Loss of Use
- Medical Payments to others
Should I Get An HO-3 OR HO-6 Policy?
Who are HO-6 policies for?
An HO6 policy is also known as Condo Insurance. It helps those who do not need dwelling insurance but still need protection for their personal belongings.
When you live in a condominium or townhouse community, you will often not own the home you are living in. You will also live in a community with other condo owners and share common spaces, such as a community center with a pool.
The community insures the community complex, but an HO-6 policy will protect you once you enter the door to your property.
It is common for HO6 policies to be purchased by those in retirement. In 2022, 25 percent of condo/townhouse insurance policies were purchased by seniors.
Who are HO-3 policies for?
While 61% of home buyers in 2022 were married couples, an HO-3 policy is designed for those who want protection of their investments and belongings. It provides the most extensive coverage for families or single individuals who want insurance from the slab to the roof and surrounding structures.
Owning a home is a major responsibility. What would happen if you experienced a loss like a fire, vandalism, or theft? HO3 insurance gives you the peace of mind that you can make reparations should you suffer a loss.
HO-3 vs. HO-6: Which Costs More?
Since an HO-3 policy is more extensive, providing dwelling coverage, it will cost more than an HO-6 policy.
Rates will vary by state and the policy you choose. Cost can also change depending on the company you select. And just because you choose one provider for one level of coverage does not mean they will be the best across the board. Shopping around and asking questions is always best.
- According to Forbes Advisor, the national average for an HO3 policy for a 200K home is $1,117.
- For Condo Insurance, an HO5 policy with $100K in personal property coverage, $300K in liability, and a $1000 deductible, a monthly premium will be $445.
| Company | Stars | AM Best | Average Cost |
| USAA | 5 | A++ | $1284 |
| Nationwide | 5 | A+ | $1485 |
| American Family | 4.7 | A+ | $1510 |
| State Farm | 4.5 | A | $1421 |
| Allstate | 3.5 | A+ | $1537 |
According to the Bureau of Labor Statistics, a recent 33.9 percent boost in the cost of residential building materials can affect future HO3 and HO6 insurance rates.
Who Has the Best Home or Condo Insurance Policy?
We have reviewed five top home and condo insurance providers and rated them based on factors such as affordability, customer ratings, and policy features. These are our findings.
Best Overall
Key Statistics
Why We Like Them
⇅USAA ranks the best overall insurance company. However, they have one caveat: you must be, or related to, a member of the armed forces. If this applies to you, USAA will be your best option for both HO3 and HO6 insurance.
In addition to its affordable rates and coverage options, they offer honors such as waived deductibles for active-duty members whose uniforms and personal property are damaged due to war.
Replacement cost is also standard with their policies. USAA also has options called Home Sharing for when homeowners are deployed and don’t like the thought of their homes remaining empty.
Benefits & Drawbacks
⇅- Bundle options
- Earthquake and Flood insurance options
- Replacement cost standard ✓
- Only available to military members and families ✘
Best for HO-3
Key Statistics
Why We Like Them
⇅USAA ranks high with their homeowner insurance customers, as seen in this JD Power customer satisfaction survey. With their military-only availability, I will let them step aside as the best for HO3 and name up my second choice of State Farm, as they are the next on this list for their customer satisfaction.
The average cost for a State Farm Homeowners policy is about $118; a condo policy costs about $28 per month. This is the lowest rate of the insurance companies we rated.
Finding a company that provides savings is a customer’s dream. Bundling is the key. State Farm has one of the highest bundling options available at 23%.
With their already lowest prices, their customers save even more when they purchase their HO3 and auto insurance policies together.
Benefits & Drawbacks
⇅- Bundle options
- Earthquake and Flood insurance options
- You can save 23 percent bundled discount ✓
- No New policies offered in California ✘
Best for HO-6
Key Statistics
Why We Like Them
⇅Moving onto the Condo insurance side, Nationwide gets the nod ahead of USAA over their cost and availability. Nationwide also has other added features, which help it into the best condo insurance slot. They have increased protection for valuables such as jewelry and antiques.
Other companies have many of the same added features, but seeing the cost of USAA and the lower online reviews of State Farm helped make our decision here.
Condos are a bit different than houses. You primarily only worry about what you own vs. what you live in. In 2022, 22% of home buyers said their primary reason to purchase was the desire to own their own home. Condos can be a first step into owning a first home.
A good insurance company can protect both, as would Nationwide. As with our others, customer complaints regarding claims are the biggest steppingstone.
Benefits & Drawbacks
⇅- Bundle options
- Earthquake and Flood insurance options
- Does not have a banned dog list
- Better roof replacement add-on
- Valuables Plus coverage add-on ✓
- Only available in 44 states
- Does not provide insurance for manufactured homes
- Does not cover if you rent your property ✘
Final considerations
The uncertainty of tomorrow weighs upon us all, and events like the weather are unpredictable.
Major decisions can affect us in the future, as many of those leaving some of the negative comments we see. When you sign up for insurance, it is essential that:
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You read your policy carefully. Know your provisions and exclusions.
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Know your options. Understand what add-ons can help you receive the best coverage possible.
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Talk to your agent. Ask questions if you don’t understand. They are there to explain unfamiliar language or to help you add an upgrade or increase your coverage level.
In my eight years of providing families with insurance, I have found it painful when a family either fails to pick up the right provision or drops coverage and then has the unthinkable occur. Talk with an agent when you are confused about your coverage level. Your home or condo is worth it.
FAQs
What is the difference between HO6 and HO3 for townhouses?
The primary difference between HO6 and HO3 homeowners insurance is that HO3 covers your home and its belongings, HO6 insurance only provides insurance for your personal belongings and accidental injury while on your property. Since you do not own the property or land, there is no need to carry insurance on them.
Why is HO6 more expensive than HO3?
The opposite of this is actually true. HO6 is much less expensive than HO3 because you do not have to insure the dwelling or the land. However, the costs of an HO6 policy can be increased if you add-on scheduled property or other riders.
What does an HO6 policy cover?
An HO6 policy, also known as Condo Insurance, covers personal property and accidental injuries should something happen to a visitor. It has been called a ‘walls in’ policy, meaning that whatever happens inside the condo is covered: theft, fire, and loss of use should you temporarily relocate while a covered issue is fixed.
