South Carolina Personal Lines Practice Exam

What type of coverage does an HO-3 policy primarily offer?

1. Broad form coverage

2. Special form coverage

3. Basic form coverage

4. Comprehensive coverage

The correct answer is: Special form coverage

An HO-3 policy primarily offers special form coverage. This type of homeowners insurance is significant because it provides extensive protection for the structure of the home and personal belongings. Under an HO-3 policy, the dwelling is typically insured on a special form basis, which means it covers all perils except those specifically excluded in the policy. This approach offers a higher level of protection compared to basic form policies, which only cover specific named perils. In addition to protecting the home itself, an HO-3 policy usually also includes coverage for personal property, but this is generally provided on a broad form basis, which means personal belongings are covered only for specific risks named in the policy. Therefore, the combination of special form coverage for the house and broad form coverage for personal property creates a comprehensive safety net for homeowners. This structure makes the HO-3 one of the most commonly purchased homeowner insurance policies, as it balances protection with affordability.