South Carolina Personal Lines Practice Exam

What type of peril coverage do contents have under a HO-3 policy?

1. Basic perils

2. Open perils

3. Named perils

4. Broad perils

The correct answer is: Broad perils

The contents under a HO-3 policy are covered for open perils, specifically known as special form coverage. This means that in terms of personal property, the policy covers all perils unless they are explicitly excluded. This provides a more comprehensive level of protection for the insured's personal belongings compared to named perils policies, which only cover specific risks. The special form coverage under the HO-3 policy includes a wide range of potential risks, giving the policyholder peace of mind that their personal property is secured against unforeseen incidents, provided those incidents are not listed as exclusions in the policy. This ensures a broader range of coverage for items within the home, making HO-3 policies particularly popular among homeowners. Because the coverage for contents is indeed broader than basic or named perils options, it emphasizes the flexibilities available for personal lines insurance under a HO-3 policy, focusing on the security it offers to homeowners against various unforeseen losses.