Common Misconceptions of What is Covered under Your HO3 Homeowners Policy

Posted in: Personal Insurance

Have you ever been a victim of theft, or perhaps one of your favorite possessions mysteriously disappeared? Both can be financially and emotionally devastating experiences, especially theft, which can leave you with a feeling of having your privacy completely invaded.  

I found during my many years in the insurance industry that most people are not adequately familiar with the coverage and limitations of their homeowner’s insurance until something happens and they need to file a claim. I feel it is important to understand the terms and conditions when purchasing a new policy or changing an existing policy to ensure protection for various types of losses of your personal property.

In this blog, I will explain what you should know about your homeowner’s policy, as well as share a key takeaway to protect yourself from the most common types of loss including theft, mysterious disappearance and accidental breakage/damage of your valuable possessions.

To start, let’s review the basics of homeowner’s insurance:

Depending on your specific need, there are different levels of protection you can purchase, ranging from basic (HO3 insurance) to “all-risk” coverage (HO5 insurance) of your possessions.

Internal Limit Coverage

Most homeowners purchase an HO3 policy, which covers your personal property for physical loss or damage caused by 16 perils, such as fire, vandalism, and theft to name a few, with certain conditions and exclusions. Under this policy, there is also an internal limit of coverage on some valuables and collectibles, such as sterling silver, jewelry, fur, money, coins, firearms, and stamps, which means that if you lose or damage any of these types of possessions you would only be covered up to a predetermined limit.

No Coverage

Accidental breakage/damage and mysterious disappearance (lost, misplaced) of your valuables including fine art and antiques are not typically covered by an HO3 policy. To help demonstrate how these terms apply in real life, I’ve selected three scenarios** – theft of an item with internal limit coverage, accidental breakage/damage, and mysterious disappearance – depicting common situations I’ve seen during my career.

Theft – Martha inherited a nice set of sterling silverware from her grandmother, which was worth over $10,000. Shortly after receiving the silver, her house was burglarized and all of the silver was stolen. She assumed her HO3 policy would cover the loss fully; however, she was only reimbursed for $5,000, which was the policy’s internal maximum limit for sterling silver.

Mysterious Disappearance – Peter proposed to his fiancé Caroline with a $25,000 engagement ring during a romantic weekend at the beach. After they got home Caroline noticed that her ring was missing. Peter was not fully aware of the terms of his standard HO3 insurance coverage, so he did not schedule additional protection at the time of purchasing the ring. Although his internal limit of homeowner’s policy would have protected jewelry up to $1,500 for theft, since this was a mysterious disappearance case, he was not covered at all.

Accidental Breakage of Fine Art & Antiques – Keith and Mary purchased an expensive oil painting at an auction, which they hung over the fireplace mantel. One day while in the kitchen, Mary heard a loud noise and rushed into the living room to find the painting on the floor with broken glass everywhere and a tear in the canvas. Unfortunately, they did not realize that accidental breakage of contents was not covered by their standard (HO3 policy) homeowner’s policy.

PSA Pro Tip

Secrets of the Savvy Homeowners Buyer

Did you know there are incentives that could help you save money on your policy? 

Lesson Learned

The key take away in these scenarios is that misunderstanding or not being completely familiar with the terms of your HO3 homeowner’s policy can cost you more often than you would think. In order to ensure you are fully protected under this policy, I highly recommend adding additional insurance for these possessions (a.k.a scheduling the item or adding it as a rider to your homeowner’s policy), which will cover the items to their stated value and protect against theft, mysterious disappearance and accidental breakage/damage with certain exceptions, such as wear and tear, intentional damage and loss caused by insects.*

If you have any questions regarding your personal risk management needs including discussing other preventative tips, or would like to increase your protection, please email me at

*Please refer to your policy for specific terms, conditions and exclusions as each policy can be different depending on carrier and your circumstance.

**All personal information in the examples above has been changed to protect client confidentiality.