South Carolina Personal Lines Practice Exam

HO-3 covers contents on what type of peril basis?

1. Open peril

2. Named peril

3. All risk

4. Specific peril

The correct answer is: Named peril

The correct answer is that the HO-3 policy covers contents on a named peril basis. In an HO-3 homeowners insurance policy, the structure itself is typically covered on an open peril basis, meaning that it covers all perils except those that are specifically excluded in the policy. However, the personal property or contents housed within the structure is covered only for those specific perils that are listed in the policy documents. Named peril coverage means that only certain, explicitly stated risks—such as theft, fire, or vandalism—will be compensated in the event of a loss. This distinction is essential for homeowners as it informs them about the limitations in their coverage and helps manage expectations regarding claims for personal property. Understanding this difference is crucial for policyholders to ensure they have appropriate coverage for their personal belongings.