The Limits of the HO3 Insurance Policy: When Should You Consider a Personal Articles Floater?

How often have you come across clients that did not have a basic understanding of their HO3 insurance policy they bought? According to a survey by, 400 out of 1000 respondents admitted that they didn’t know how the property insurance works. 

How many of your insureds have expected the HO3 to cover their stolen valuables? Only to find out that the coverage felt short.  

So, as their agent, you need to explain how much are the coverages and the prices? And what the advantages are that come with their plans 

The topic we will cover today will affect most of your clients: the special limits of liability in the HO3 insurance policy and why you should consider encouraging clients to add a Personal Articles Floater to their insurance plan.    

HO3 Insurance Policy Concerns  

The opportunities for unendorsed HO3 insurance policy are vast. And often confuse young insurance agents. We understand that you want to give the best to your clients. And for that, you should be careful.   

After all, if you fail to give your clients the best solutions, in the event of loss, coverages might fall short.  When they file for an insurance claim, only then will they realize their coverage is not enough.  

You might even lose your client.    

More importantly, you could be applying for an E&O insurance. 

According to the IIABAhomeowners’ insurance alone drives 12% out of 29% of personal lines E&O claims against independent agents. These data indicate that offering better protection for your client’s valuables will avoid accusations of advice omission.   

misconception most clients have is that their HO3 insurance policy adequately covers their personal property.   

HO3 insurance does provide content coverage under coverage C. However; there are certain sub-limitations detailed in the plan (in fine print).   

The HO3 insurance policy explicitly limits theft coverage for personal belongings like jewelry, computers, and money.   

Typically, the HO3 policy restricts the loss of jewelry, watches, and furs for theft anywhere from $1000 to $2500 depending on the carrier or state. Additionally, there is no coverage for jewelry if it gets lost on vacation.    

If you do not help clients understand this sub-limit, their personal belongings might practically be uninsured when compared to its value.    

Similarly, the standard HO3 insurance policy provides a broad form of coverage for personal property, i.e., the provision for coverage is on named perils. It shows that the HO3 does not cover all risks.   

Quick fixes      

For a quick fix, add endorsements! In the first case, you could add a scheduled personal property endorsement to the HO3 insurance policy. However, it always costs extra premium for add-ons.    

On the other hand, when your clients want full protection for their contents, you could opt for adding an endorsement. Specifically, the one that provides coverage on an “all-risk basis” instead of named perils.   

These fixes sound smooth and substantial. Most of the time, they are adept at covering clients’ valuables.

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A named-perils policy only covers the risks explicitly noted in it. If vandalism is not in the plan and your insured’s place gets vandalized, then, the carrier will not be liable for any coverage.   

But it’s the opposite in an all-risk or open peril policy. Only the exclusions mentioned in the plan are not covered. Otherwise, all risks have coverage.   

HO3 Policy Solutions

Have you been tackling your client’s concerns properly?

Now, adding an endorsement to increase the HO3 insurance policy limits might seem like a job well done. Considering the coverage for jewelry, watches, watercraft, banknotes, grow slightly. But this does not mean that the plan is entirely foolproof.   

You need to help your client understand the limits on the HO3 insurance policy you are proposing and address these carefully.        

You can see that the limits will vary when you sort through each item.    

For instance, the coverage limit provided by carriers for money, banknotes are $200 to $2500. Subsequently, the ceiling for theft of watches, furs, and jewelry is from $1500 to $10000.        

You can see that these ranges are too wide not to take note. It will result in unfavorable outcomes in case of an event of loss or theft.  

Often clients think that their HO3 insurance covers for their pet as well. Since the pet stays at home, it should cover them, right? Well no, they need pet insurance. Make sure to clear their doubts.  

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Restrictions on the HO3

Remember, it’s not just about the money! Personal articles have sentimental value. 

Besides, some carriers do not have provisions for increasing the limit. You will need to consider these options when you discuss them with clients.      

True, it might be dull work to review all the possible limitations of the HO3 insurance policy with your clients.   

However, creating a detailed sales presentation that includes particular limits will make it easier for both you and your prospects.    

A sales presentation reminds you to mention the limits of coverage in the case of theft. Additionally, it provides a visual representation of the different restrictions on various items for every cause of loss. It makes it easier to ask questions to engage your prospects as well.   

For instance, if you were to have a total loss, could you replace all of your computers and their peripheral equipment for $3,000?   

Would $5,000 be enough? Ok, let’s increase that to $10,000.    

No, your daughter’s laptop at school needs its own policy/endorsement – so it will have coverage away from your home for more causes of loss.   

Here’s another scenario: Suppose your clients have people over for dinner. The guests’ toddler knock over the expensive vase your clients imported from Italy. The HO3 coverage is not enough to cover for it. Moreover, your clients cannot sue their friends. It is complicated!  

Ask your clients if they feel like any of the limits are inadequate and address the issues accordingly.   

Personal Articles Floater

Is it worth it to buy a separate policy?

Let’s assume you have a new prospect for the homeowner’s insurance policy you have proposed. However, they have some concerns about the personal items coverage, especially the jewelry limitation.     

According to Valuepenguinclients mention jewelry 18% more than any other item during homeowner claims.    

How do you address this concern?    

First, offer to schedule an endorsement. Most insurance carriers allow you to increase the limits for these items. With additional premium, of course.   

Cross-check with your insurance carriers to be familiar with the solutions they might be able to offer. Independent agents have an advantage they have many carriers to choose from.    

Don’t rely entirely on the HO3 insurance policy because they might not always be adequate.   

When in doubt, schedule the jewelry items on a Personal Articles Floater.   

What is Personal Articles Floater?

The Personal Articles Floater is an all-risk insurance policy. It takes its name from the fact it “floats” with the property owned wherever it goes.   

It doesn’t matter if your insured’s ring gets lost in their bedroom or a hotel room in Alaska, the personal  floater will cover it.    

Whereas if your client has only an HO3 policy and their ring falls down the drain while doing the dishes, they would not be eligible for any claim.   

However, if they had had a separate personal articles floater policy for the ring, the ring would be fully covered. The client could then contact you for a claim settlement.   

Also called an Inland Marine Policy, the personal articles floater provides more coverage for belongings than a standard HO3.  

Limits of the HO3 Policy 

Recently, a fire burned down a house in New York, resulting in a substantial claim for $2.55 million.   

The HO3 policy covered the loss of their house. But was that enough? The insureds lost most of their belongings in the fire. Now, if they had a personal articles floater for their valuables, they could have made a claim. But, sadly, they did not.  

Additonally, according to research conducted by Javelin Strategy and Research in 2018, more than 14.4 million adults became victims of identity theft in the US.   

Now, your standard HO3 insurance policy would not incorporate these losses. However, if you add an insurance rider like the personal articles floater to the limited HO3 policy, it will leave your clients protected and covered.   

It is your job as an agent to walk your clients through this process. You need to figure out the right coverage and carrier for the clients’ needs.   

To make the procedure even more straightforward, have your clients bring a comprehensive list of valuables. This could include things like photos/videos, receipts of the items.   

Encourage them to keep the list detailed and up to date.   

Among all perils, the personal articles floater covers fire, cyclone, explosion, vandalism, theft, mysterious disappearance, and breakage.   

However, do note that the personal articles floater has two exclusions:  

i. When a loss occurs due to wear and tear inherent vice, or deterioration,  

ii. When damage occurs due to vermin or insects.     

In any of these instances the insured will not be eligible to make any claims.

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Read up about the division of property in a Personal Articles Floater.   

Additionally, a standard procedure in the Personal Articles Floater is to divide the property into scheduled and unscheduled features.    

Unscheduled items are the general things that don’t need to have a set value attached to them. For instance, you can group silverware, pots, clothing, and other materials together.    

For specific and valuable objects like a painting or family heirloom, scheduling is the best option. Instead of being clustered into one category, personal articles will specifically cover them.

So next time you have a client looking for an HO3 policy, suggest a Personal Articles Floater for their valuables, if necessary, instead of relying on luck.     

Do you agree with our suggestions? Did we leave something out? Comment below and let us know!

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