What basis does the HO-3 policy cover personal property?

The correct response highlights that the HO-3 policy covers personal property on a named perils basis. This means that the policy explicitly lists the specific risks or perils that are covered. If a peril is not listed in the policy, then coverage does not apply to damage or loss caused by that peril. Named perils policies are typically more restrictive than all perils policies, which cover any risk except those specifically excluded.

In contrast, an all perils basis would provide broader coverage, but this is not how the HO-3 policy functions for personal belongings. Regarding the other options, actual cash value basis means settling claims based on the original cost minus depreciation, and replacement cost basis refers to covering the cost to replace an item without deducting for depreciation. While these methods relate to how claims might be evaluated, they do not reflect the basis of coverage for personal property specifically under the HO-3 policy.