What does homeowners insurance cover?

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Homeowners insurance covers your home, any structures attached or detached on the property, the contents of the home, and you from personal liability claims. It also includes coverage for loss of use, providing help with a place to stay if a covered loss leaves your home uninhabitable during repairs.

Understanding what homeowners insurance covers can help you identify the gaps that you might need to fill with another policy or an endorsement and ensure you’re prepared if you have to file a claim.

Learn how each portion of your home insurance works and what it covers before you need to use it.

Key Takeaways

Home insurance covers your home, other structures on your property and your personal property.
A standard home insurance policy also includes liability coverage and loss of use coverage to pay for additional living expenses during repairs.
Major exclusions on a homeowners policy include floods and earthquakes.

What is covered by homeowners insurance?

Homeowners insurance has six major coverages. These are listed using letters in your policy.

Coverage A: Dwelling
Coverage B: Other structures
Coverage C: Personal property
Coverage D: Loss of use
Coverage E: Personal liability
Coverage F: Medical payments

Each of these coverage provides a different sort of protection for your home, your property and other assets, and even visitors to your home.

Types of homeowners insurance coverage

Let’s take a look at these different types of homeowners insurance coverage.

Dwelling coverage

Dwelling coverage covers your residence and any structures attached to it up to the policy’s limits, which is the replacement cost of your home. That means the dwelling coverage is calculated at the amount required to rebuild your home based on today’s costs.

You can add extended replacement cost coverage or even guaranteed replacement cost coverage to protect yourself against inflation and other changes that affect your home’s replacement cost. Extended replacement cost increases the limits of the policy by 25% or 50% while guaranteed replacement coverage extends the policy limits without any cap.

Dwelling coverage on a standard policy works on an all perils or open perils basis. That means that all perils (source of damage) to your home are covered unless the policy specifically excludes it.

Other structures coverage

Other structures coverage covers detached structures on your property, including things like a detached garage, shed or fence.

Coverage is usually limited to 10% of the dwelling coverage limit but can be adjusted.

Personal property coverage

Personal property covers the contents of the home, such as furniture, jewelry and appliances. The limits of personal property coverage are usually 50% to 70% of the dwelling coverage limit.

Most homeowners insurance policies limit coverage for jewelry, fine art, electronics, firearms and silverware to $2,500 or less. Animals, motor vehicles, aircraft, property of tenants or held in a rental property off the residence premises aren’t covered. Personal property is also covered off of the premises, but at a reduced amount, generally 10% of the dwelling limit.

The coverage for personal property is generally the actual cash value unless upgraded to replacement value. The details of your coverage can be found in the loss settlement section of the policy.

Loss of use coverage

Loss of use coverage covers living expenses if you must temporarily relocate, such as meals and lodging or the cost of a rental. This coverage only applies when the repairs are part of a covered claim; in other words, you can’t use it when you’re remodeling by choice.

Loss of use coverage is also called additional living expenses coverage.

Personal liability coverage

Personal liability coverage pays out for claims of injury or property damage caused by you or a household member. It only pays out up to the policy limits. Standard home insurance policies include $100,000, but you can increase this coverage.

For example, if a tree on your property that you knew was dead falls on your neighbor’s house or your dog bites the mail carrier, your personal liability coverage would pay for the damages. Liability coverage excludes motor vehicle accidents, watercraft and aircraft.

Medical payments coverage

If someone is injured on your property, medical payments coverage pays for the medical bills. This coverage is meant for small medical bills, usually capped at $5,000, and pays out regardless of fault. For example, if a friend is at your house and trips on a step, spraining an ankle, medical payments coverage would pay for their trip to urgent care.

What doesn’t home insurance cover?

Homeowners insurance doesn’t cover everything. Here are some common home insurance exclusions, which are the perils not covered by a standard home insurance policy.

Flood: You can buy a separate flood insurance policy through a private insurance company or the National Flood Insurance Program.
Earthquake: You can get a separate earthquake insurance policy; in California, the California Earthquake Authority offers policies.
Mold. Some policies have limited coverage for mold caused by a covered peril, others exclude it entirely. You may be able to add an endorsement.
Water and sewer backup. You can add this coverage as an endorsement on most policies.
War and terrorism.
Intentional damage.
Wear and tear.
Pollution and corrosion.
Power outages. Some coverage may be included depending on the source of the outage.

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How much home insurance do you need?

Kelly Richards, a State Farm agent from Naples, Florida, advises her clients to focus on the amount needed to replace the home in case it’s destroyed.

“If the customer has a recent, professionally prepared estimate of the replacement cost, we can use that to discuss the amount of insurance purchased for the home, or we can use a tool State Farm provides to estimate the replacement cost of the home.

We advise customers to consider how much it would cost to put the house back if it is destroyed, not the amount of their mortgage or the market value of the home, which can be different from the estimated replacement cost.”