Hurricane Irma: Understanding Your HO3 Homeowner’s Insurance Policy

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

What is an HO3 Insurance Policy?

In the aftermath of a natural disaster like Hurricane Irma, you may feel as if you are protected because you carry homeowner’s insurance. Yet, this precaution may lead many into a false sense of security because many Americans do not fully understand the extent of their insurance coverage. Many of the things you believe you are protected against may not be included as part of your standard coverage, and unless you specifically bargained for their inclusion you may be surprised to find out that you are not covered against that type of hazard. This article will explain the standard coverage available under the most common form of homeowner’s insurance: the HO3 insurance policy.

Whether you have “open perils” coverage or “named perils” coverage is very important. Open perils (also known as an “all risk” policy) refers to an insurance policy that will cover you from every possible disaster unless such coverage is specifically excluded in your policy. On the other hand, a named perils policy is the complete opposite. As the name suggests, under a named perils policy, you will be covered only if your policy specifically includes the type of peril you have suffered. Thus, if you have an open perils policy and your home has suffered damage from a cause not specifically excluded in your policy, then you are covered. In contrast, if you have a named perils policy and your home is damaged by a cause that is not specifically included in your policy, then your insurance will not cover you. Both the HO1 and the HO2 standard policies are named perils policies.

The standard HO3 policy is commonly referred to as a hybrid policy because of its “open perils” and “named perils” characteristics. A standard form HO3 has an open perils feature when it comes to your home, but a named perils feature when it comes to the contents of your home. Because of its open perils feature, the HO3 is a favorite among American homeowners. However, just because you have an HO3 policy doesn’t mean that you will be covered against the specific type of loss you have suffered.

To what extent is your home covered?

As stated, under an HO3 your home will generally be covered against all hazards unless they are specifically excluded in your policy. Thus, to determine the scope of your coverage it is necessary to examine your specific policy. Generally, there will be a list of about 18-20 specifically excluded causes of damage. After a natural disaster like Hurricane Irma you may be surprised to hear that a standard HO3 policy typically excludes from coverage the following perils: Earthquakes, Flooding, Power Failures, Weather Conditions that Aggravate other Excluded Causes of Loss (such as Neglect), Mold/Fungus/Wet Rot, etc. Unless you specifically bargained for these items you may not be covered.

After a devastating hurricane like Irma, many people find themselves with damaged homes and an insurance company that refuses to pay despite the fact that you have been paying your premiums all along. Your home may have been flooded, your windows broken, you may have a damaged electrical infrastructure, and yet you may have to foot this bill on your own. Additionally, if your insurance company believes that you could have taken more steps to protect your home but failed to do so, they may simply disavow your coverage under a claim that it was your neglect (an excluded peril) in conjunction with the weather conditions that caused your damage.

How are the damaged contents of your home covered? Are additional structures on your property covered?

On the other hand, the contents of your home will be covered on a named perils basis. A typical HO3 policy will include, and thus protect you against, about 16-18 named perils. Conspicuously missing from the list may be perils caused by water damage, wind, debris, and other storm related hazards. Again, you may have expected that your policy would cover you against these types of hazards, only to find out that your policy covers much less than expected. Additionally, even if you have specifically bargained for the inclusion of certain types of storm-related perils, your insurance company may deny your claim if they believe that you could have done more to prevent the damage.

In addition to your home and the contents of your home, a standard HO3 policy will also cover any additional structures on your property. Thus, if you have added a garage, a guest house, a patio deck, or anything of the sort, your coverage would extend to these structures in the same manner and to the same extent that it covers your home. Thus, if your home is not covered for a specific type of peril, then the additional structure would also not be covered under your policy.

What about Additional Living Expenses?

Moreover, a typical HO3 will also provide you with additional living expenses if the damage to your home is such that your home is uninhabitable. If your policy covers the type of damage that you have incurred, then Additional Living Expenses coverage operates by reimbursing you for costs associated with maintaining a similar standard of living that exceeds what you would normally spend prior to the loss. Of course, this is all assuming that your loss is covered to begin with. So for example, if you happen to have windstorm insurance, and your home becomes uninhabitable as a result of windstorm damage, then your insurance would reimburse you a certain amount of your extra expenses as a result of the windstorm damage.

How much you are entitled to will depend on how much your living expenses were before the damage. So let’s say that you spent two thousand dollars a month in living expenses prior to the damage, and as a result of the damage you now have to spend three thousand dollars a month to meet a comparable standard of living while the damage is repaired, then in theory your insurance company would reimburse you the extra thousand dollars a month that you had to go out of pocket as a result of the damage incurred. As is usually the case with insurance companies, they will look for reasons to deny your coverage. They may say that your home is in fact habitable (even if they wouldn’t inhabit the home themselves), or they may say that your claimed expense exceeds your standard of living prior to your loss, etc. Whatever the case may be, if you are met with friction from your insurance company it is best that you consult with an experienced insurance claims attorney.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].