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What’s the Difference between the HO-3 and the HE-7/21?


When it comes to homeowners insurance, it seems simple enough to call your insurance agent, answer a few questions, and get a quote. The reality is that there are several different types of homeowners insurance policies to choose from, mostly dictated by the type of residence you’re going to be living in – a home, apartment, condo, etc. When it comes to an actual house, your options are generally the HO-3 or the HE-7/21. So what’s the difference between the two?

Understanding the HO-3

The HO-3 was once the traditional standard when it came to homeowners insurance policies. Over the past decade or two, the way insurance companies view homeowners coverage has changed – mostly for the better.  In general, though, the HO-3 tends to include the following standard coverages:

  • Replacement cost coverage on the dwelling – optional for an additional charge, with a cap of 125 – 150%
  • Replacement cost coverage on contents – optional for an additional charge
  • Contents, covered perils – named perils (ie. you only get coverage if your property is damaged by something specifically listed on the policy)
  • Law & Ordinance coverage – caps at 10% of dwelling
  • Primary mortgage expense – not available
  • Watercraft coverage – $1500
  • Trailers – $1500
  • Money sublimit – $200 (cash in house destroyed by covered risk)
  • Securities sublimit – $1500
  • Business personal property on premises – $2500
  • Credt card/ fund transfer card forgery – $500
  • Jewelry sublimit – $1500 (only covers theft)

The list of traditional coverages is comprehensive and this is just a sampling, but you can see how it becomes limiting in what you can claim if there is an actual loss on your home.

Understanding the HE-7/21

Those “better” changes we talked about just a minute ago? They’ve been expressed in the creation of the HE-7/21 policy. As you can see, each of the above coverage options has been enhanced in a major way.  Let’s look at the same coverage items as we looked at for the HO-3:

  • Replacement cost coverage on the dwelling – guaranteed full replacement cost coverage
  • Replacement cost coverage on contents – included
  • Contents, covered perils – All risk (everything is covered unless it is specifically excluded)
  • Law & Ordinance – caps at amount of coverage on dwelling
  • Primary mortgage expense – This is included as part of the “Loss of Use coverage” and will pay your mortgage payments for up to 12 months while your home is unliveable after a covered loss.
  • Watercraft – $2500
  • Trailers – $3500
  • Money sublimit – $1000
  • Securities sublimit – $5500
  • Business personal property on premises – $5000
  • Credit card/ fund transfer card forgery – $5000
  • Jewelry sublimit – $5500 (theft, misplacing or losing, $1500 per item limit)

As you can see, the differences are significant.

When is the last time you reviewed your homeowners insurance policy? Have you been on a traditional HO-3 for years, automatically renewing? When’s the last time you surveyed the property in your home? Would you be able to replace it all if there were a loss?

Not sure? Call your agent today to discuss your options. It may be time to get some quotes and shop around. You may be surprised at how much more coverage you can get for the same or only a slightly different price. And it’ll do wonders for your peace of mind!