What Is Not Covered Under an HO3 Home Insurance Policy?
Floods, earthquakes, and routine wear and tear are excluded, along with maintenance issues and damage from poor upkeep.
Free to compare
Flood and earthquake
Your HO3 policy excludes both, no matter where the house sits. If the lender or your own research flags flood risk, you'll need a separate flood policy, often through the National Flood Insurance Program. Earthquake coverage is its own add-on too, priced and bought separately.
Wear and neglect
A roof that fails from age, a pipe that leaks for months unnoticed, mold that grows because something wasn't fixed. None of this is covered. Insurers expect the house to be maintained, and claims tied to deferred upkeep get denied.
What the inspection found
If your home inspection turned up an aging roof, old wiring, or a worn HVAC system, expect the insurer to ask about it or exclude related damage. Fixing flagged issues before binding coverage can avoid a denied claim or a higher rate later.
Rebuilding cost, not sale price
Dwelling coverage pays to rebuild the house, not what you paid for it. These numbers often differ. If the dwelling limit on your binder looks too low or too high next to construction costs in the area, ask before closing.
Before you bind, compare
Dwelling limits, exclusions, and deductibles vary by insurer. Comparing quotes before closing helps you catch a gap, like missing flood coverage or a low rebuild estimate, while there's still time to fix it.
What other exclusions should I know about before closing?
Flood, earthquake, and neglect are the big three, but an HO3 policy carves out other things worth knowing before you sign anything. Damage from sewer or drain backup usually isn't covered unless you add it back in as an endorsement. Same with service line coverage, which pays for the buried pipes and wires running from the street to your house. Neither costs much to add, and both cover problems that are common in older homes and easy to overlook during a walkthrough.
Business activity run out of the home has limits too. If you plan to see clients, store inventory, or run any kind of trade from the house, ask whether the policy covers that property and liability, because a standard HO3 usually caps business equipment coverage at a low amount and may not cover liability for customers on the property at all.
High-value items like jewelry, art, musical instruments, or a serious collection of anything are covered only up to a set limit under the base policy, often a few thousand dollars total regardless of what the items are worth. If you're bringing anything valuable into the house, you'll likely need a scheduled personal property endorsement that lists each item and its value separately. This is worth sorting out before closing rather than after something happens to it.
Ordinance or law coverage is another one people miss. If your house is damaged badly enough that it has to be rebuilt to current building code, a standard policy doesn't automatically pay the extra cost of meeting that code, things like upgraded electrical or foundation work that wasn't required when the house was originally built. This matters more in older homes, where code has changed a lot since construction. It's a short conversation to have now, and a much longer one to have after a loss.
What else won't an HO3 pay for?
A few more gaps are worth knowing before the binder gets signed, since they tend to surprise people after move-in rather than before. Damage from the ground itself, like earth movement, sinkholes, or a retaining wall giving way, isn't covered under a standard HO3. Some of this overlaps with earthquake exclusions. Some doesn't, and it varies enough by insurer that it's worth asking directly rather than assuming.
Mold is covered only in narrow situations, usually when it results from a covered water loss that happened suddenly, like a burst pipe, and was addressed quickly. Mold from a slow leak, high humidity, or anything that built up over time falls under the same wear-and-neglect exclusion already covered. If the house has had any moisture issues, even minor ones the seller mentioned in passing, it's worth asking how the insurer treats that history before closing.
Pest and animal damage is excluded too. Termites, rodents, and birds nesting in a chimney are not a covered peril, since insurers treat this as a maintenance issue rather than a sudden loss. If the inspection flagged any signs of pests, get that handled before closing rather than hoping it stays contained.
Power surge and appliance coverage also has limits. A surge from a lightning strike is typically covered, but gradual electrical damage or an appliance that fails on its own isn't, and older homes with outdated panels sometimes get flagged for this specifically. Living elsewhere while the house is rebuilt, called loss of use or additional living expenses, is included but capped, often as a percentage of the dwelling limit. If a full rebuild would take a long time in the area, it's worth checking that cap against realistic rent costs rather than assuming it covers however long repairs take.
Before you sign the binder
Check the dwelling limit against what it would actually cost to rebuild the house, not what you're paying for it. If that number looks off, ask the insurer before closing, not after.
