HO 3 Special Form vs Other Policy Coverages

A big insurance secret…

modified homeowner forms.

These are policies that are not quite, well, what they used to be, they have been changed.

And we want to let you know some of the little nuances that really caused these policies to be different than what we’ve learned or expected in the past.

First, the original policies out there got the nomenclature of the HOs. So the HO 1, the HO 2, and the HO 3.

That came from the insurance service office or organization, depending on who you asked originally. And it used to be the standard.

So, these were companies that wrote forms, insurance companies adopted those forms, and then everybody basically bought insurance with essentially the same base contract.

In That form, it says, “We cover the dwelling on the residence premises, shown in the declarations, including structures attached to the dwellings, and the materials and supplies located on are next to the residence premises used to construct, alter, repair.”

That was the beginning section of the policy, and then basically, the HO series goes into a section of exclusions on the building.

  • And then a set of named pearls on the contents.
  • And they’ve recently started to really tweak this language to make it more restrictive and to allow for more changes.
  • And it’s a little bit scary if you’re a homeowner because you’re buying your policy based on what you’ve seen in the commercial.

We’ve all seen the dramatic commercials with the zombie apocalypse and the squirrels throwing things at the cars. And we assume that these policies are greater in the scope of coverage, when in fact, they’re far less.

But it is easy for an insurance company to make a statement that they would cover the zombie apocalypse because it will probably never happen. And we can’t imagine at the end of the year, there are all that many cars damaged by squirrels throwing acorns at them.

Do you get what I’m saying?

But if you eliminate roof leaks, you can save a lot of money. And that’s really what their focus has been.

So, let’s take a look at the Farmer’s policy, which, in our opinion, actually has the most troubling language in the policy whatsoever.

They’ve changed that language.

“We insure accidental direct physical loss or damage to that property described in Section 1. Or damage means theft of or distinct and demonstrable physical injury to the destruction of the property. Loss or damage to property in this policy does not include…” and it goes on and on and on.

But as you can see, you know, even their language is  like “We insure accidental direct physical loss or damage to that property described in Section 1.”

They’re just getting more and more specific so they can rely on recorded cases for denials. And if you understood matching, and as far as what we argue a lot with policies should pay for what we call continuous?

Well, they’re pretty much laying it out as it needs direct physical damage. And they’re getting rid of things that they say are not physical. And it’s getting more and more difficult. And this, in my opinion, and I’ve been doing this for a long time, 26 years might be one of the most restrictive policies out there today. And again, you see the commercials for them all the time.

State Farm doesn’t get a bad rap in the industry. All insurance companies do for some part of their business, but State Farm has always been the, we would say staple, right?

They’re going to be there.

They’re a solid company.

They go through some management changes up and down.

But even their policy, it’s called the HW Form, the old one was FP, and they’ve changed considerably as well. And what they’ve done is focused more on specific exclusions for larger losses. And one of their largest is access to the plumbing, where they’ve narrowed that down for some really big losses not to apply anymore. So, their policy is now more restrictive.

It has limitations that it didn’t have before. And total dollar limitations on losses that used to never be limited.

So again, we don’t think they’re one of the worst forms out there. But if you live in a property that has underground plumbing in the house, such as on a slab, you’re probably going to be greatly affected by a plumbing loss that occurs with this policy as it’s so much more restrictive.

They’ve added language for tunneling, and they’ve added language for matching.

They’ve added language for access, which never existed before, and it only reduces coverages.

Now, again, they may advertise in the market that they’ve added some increased coverage. And they do, they add a couple of $100 here and there to put the bells and whistles for the marketing piece. But overall, that policy has been reduced considerably.

It’s all in the details of the policy. So the commercials, the advertisements, the nomenclature that describes it, the fancy names, the Ultra Plus, the Super Duty, Deluxe, all of the words that go into making the policy sound specific, can get taken right back in the definition section of the policy.

If you have a Farmer’s policy, we implore you to read the definition section, it’s 10 times longer than any other policy.

Ambiguities in a policy tend to be found in undefined terms. Guess what, they’ve defined everything to get rid of those ambiguities, the ‘commas’ and the ‘ands’ in the policy, meaning it has to have more than one of these events or has to have both of these events become extremely complex in how the policy is determined to apply.

Reductions in coverage, like roofing schedules, mean your roof is only paid based on the schedule listed in the policy.

And some of these schedules allow for almost no payment for roofs over 20 years old.

So you’re going to find that in some of these forms, they don’t just define a roof as a property having a tarp over it, it’s no longer considered a structure.

Therefore, the interior is not covered if the tarp blows off.


And you’re going to find like in that State Farm policy that if your plumbing needs to be accessed, and you’ve got to dig up your living room and kitchen, you may not be entitled to that loss any longer.

So, these definitions that have now redefined what is a scratch, a dent, or a ding have become very restrictive.

And again, we think that Farmers might be one of the worst, as far as the way they’ve adopted their definitions. But the reduction in coverage is going across, basically nationwide with all companies.

Again, the roof schedules, percentages, deductibles, and all these things can really erode your payment. we recently went to a property where the roof schedule on the deductible, you would have had to have $35,000 in damage to the roof before you got $1 from your insurance company.

Not something most people can afford. So that ambiguity section is getting eroded by defining additional terms. And they’re putting the marketing aspect of the policy, front and center, so you buy it based on the fancy commercials.

We hope you got the good information. We would like to inform you that We also provide free annual property inspections, policy reviews, and any other kind of communication you’d like in the insurance segment. You can send an email to faq-info@majoradjusters.com or call 312-883-2064 to reach the National Claims Representative.


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