How many of you sell “HO3” homeowners policies? When I hear “HO3,” I think ISO HO 00 03 mm yy, the latest edition of an ISO form. But just because we refer to a policy designed for owner-occupied dwellings that covers the dwelling on a replacement cost basis and personal property on an ACV basis as an “HO3,” doesn’t mean that it’s an ISO form.

A few months ago, someone assisting an upset agent sent me a regional insurer’s “HO3” policy. Not only did the agent refer to it as an “HO3,” but the insurer’s own web site referred to it as an “HO3.” So, that means it’s an ISO HO3, right? Wrong. I finally got around to reviewing the policy and found MANY and MAJOR differences between it and the ISO HO3.

For example, both ISO’s and this insurer’s “HO3” provide Coverage A – Dwelling coverage. However, the insurer’s Coverage A says, “This coverage does not apply to any dwelling used in whole or in part for “business.” None of ISO’s HO policies exclude damage to dwellings used for “business.”

Do you have any idea how many homeowners use their dwellings “in whole OR in part” for business? Keep in mind that we’re not talking about pure in-home businesses. Read literally, if you EVER engage in any business practice, you are using your home for business. A number of surveys suggest that close to 50% of workers at least occasionally work remotely from home. I suspect that’s increasingly a low estimate. Do half of this insurer’s customers know that they might not have coverage if their home is destroyed?

Another example comes from Coverage C – Personal Property. The ISO HO3 covers personal property anywhere in the world. This insurer’s “HO3” policy says it covers personal property “while it is IN” the “residence premises.” If you read this entire section of the policy, coverage for personal property has other restrictive limitations not found in the ISO form.

Would the average consumer know this? Of course not. But this agent did. All homeowners policies are not the same. All auto policies are not the same. A lawyer that represents himself in court is said to have a fool for a client. It can also be said that a consumer who buys insurance directly has a fool for an agent.


Update:  My sources tell me that this insurer has abandoned their onerous “HO3” and is now using a policy more akin to the 2011 ISO HO3. Perhaps agent indignation paid off. Read the policies you sell. If they are injurious to consumers compared to competing forms, voice your objection. A couple of years ago, a well-known auto insurer introduced revisions to their policy then withdrew them following an agent outcry. Always remember that the purpose of insurance is to insure, not to generate cash flow by selling an exclusion-riddled piece of paper that exposes American families to financial ruin.

Photo by Jimee, Jackie, Tom & Asha

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Bill Wilson

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One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information