The standard coverage for personal property in an HO-3 policy is based on what?

The standard coverage for personal property in an HO-3 policy is based on actual cash value. The actual cash value method provides compensation that considers both the replacement cost of the property and depreciation. This means that if a policyholder experiences a loss, they will be reimbursed for the current value of the damaged or destroyed property, rather than the cost to replace it with a brand new item.

For instance, if a five-year-old television is damaged, the reimbursement would reflect its value after five years of depreciation, not the full replacement cost of a new television. This approach ensures that policyholders receive a fair assessment of their loss while accounting for wear and tear over time.

Other options, while relevant in different contexts, do not apply to standard personal property coverage in an HO-3 policy. Replacement cost, for example, refers to a coverage level that would pay for the full cost to replace property without depreciation, which is not what standard coverage entails. Market value takes into account what a buyer would pay for an item, which can also diverge significantly from both actual cash value and replacement cost. Open peril describes a type of coverage that encompasses all risks unless specifically excluded, whereas personal property coverage in an HO-3 policy is not solely under that classification