From choosing the right paint colors to picking out the perfect light fixtures, you’ve dedicated a significant amount of time and money to making your house a home. And homeowners insurance helps protect it when the unexpected happens.
In general, homeowners insurance can help cover your home and belongings if they’re damaged by a covered event. It can help pay to repair or replace your items after theft or vandalism, cover certain costs if your home becomes temporarily unlivable, and help with expenses if someone is injured on your property or if you’re responsible for damage to someone else’s property, including medical bills or legal costs.
Here’s a closer look at what homeowners insurance covers, along with some common exclusions.
What does homeowners insurance cover?
Homeowners insurance is made up of a few key coverages, each designed to help cover different parts of your home, belongings, and financial responsibilities.
Here are the main types of coverage that are typically included:
Dwelling coverage
Dwelling coverage applies to the structure of your home, including the roof, walls, and foundation. For example, if lightning strikes your home and damages your roof, this coverage can help pay for repairs, up to your policy limits.
Other structures coverage
This coverage applies to structures on your property that aren’t attached to your home, such as a fence, deck, or detached garage. For example, if something like a fire damages your backyard shed, this coverage can help pay for repairs, up to your policy limits.
While limits can vary by insurer, this coverage is usually about 10% of your dwelling coverage. So, if your dwelling coverage is $300,000, you may have up to $30,000 in coverage for other structures.
Personal property coverage
This part of your policy covers the cost to repair or replace the contents of your home, such as furniture, appliances, clothing, and electronics, up to your policy limits. For example, if your home is broken into and a thief steals your TV and laptop, this coverage can help pay to replace those items. Most policies set personal property coverage as a percentage of your dwelling coverage, such as 50% or 75%.
Remember that certain valuables, like jewelry, antiques, and collectibles, may have sub-limits, which means these items are only covered up to a set dollar amount. For example, your policy could have a jewelry sub-limit of $1,000 or $1,500 per item. If your items are worth more than those limits, you may need to buy extra coverage.
Personal liability coverage
This type of insurance helps pay for damages if someone is injured on your property or if you accidentally damage someone else’s property. It can also help cover legal costs, like attorney fees and settlements, if you’re found responsible. Standard liability limits typically range between $100,000 and $500,000, but you may have the option to add more.
For example, if a guest trips and falls on your steps and gets injured, this coverage can help pay for their medical bills and any legal expenses if they sue you, up to your policy limits.
Medical payments coverage
Unlike liability coverage, this coverage can help pay for medical costs if someone is accidentally injured on your property, regardless of who is at fault. Coverage limits are usually fairly low, often ranging between $1,000 and $5,000.
For example, if a guest sustains a minor injury, such as a cut or a fall, this coverage may help pay their medical bills up to your policy limits.
Loss of use coverage
If your home is damaged and you can’t stay there, loss of use coverage can help pay for things like hotel rooms, rental homes, and restaurant meals. This coverage is also called additional living expense (ALE) coverage and is usually about 20% of your dwelling coverage limit.
For example, if a fire makes your home temporarily unlivable, this coverage may help pay for a place to stay and day-to-day expenses while your home is being repaired, up to your policy limits.
Keep in mind that each type of coverage listed above has limits, which is the maximum your policy will pay.
What types of damage are covered by homeowners insurance?
Now that you’re familiar with the main types of coverage in a homeowners insurance policy, it’s also important to understand what types of damage your policy covers.
Homeowners insurance only covers damage caused by certain events, often called covered perils. Some policies only cover the events listed, while others cover most types of damage unless it’s specifically excluded. What’s covered is usually based on the type of policy you have and can vary by insurer.
That said, here are some types of damage that are usually included:
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Fire
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Lightning
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Windstorms
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Hail
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Explosion
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Riot or civil commotion
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Aircraft or vehicle-related damage
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Smoke
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Vandalism
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Theft
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Volcanic eruption
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Falling objects
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Weight of ice, snow, or sleet
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Burst pipes or electrical damage
What types of damage are NOT covered by homeowners insurance?
Here are some common exclusions in homeowners insurance, including:
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Water damage, such as floods, storm surges, and heavy rain
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Earth movement, such as mudslides, landslides, or sinkholes
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Normal wear and maintenance
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Pest damage
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Sewer backup
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Ordinance or law
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Intentional damage
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War
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Neglect
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Power failure
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Mold (in certain situations)
Some of the exclusions listed above can catch homeowners off guard. The good news is that you may be able to add coverage or purchase a separate policy to help cover certain risks.
We break this down further in our guide to what homeowners insurance doesn’t cover, including when you may need extra coverage.
Optional homeowners insurance coverages and add-ons
While a standard homeowners policy doesn’t cover everything, you may be able to add extra coverage or purchase a separate policy to help fill in the gaps. These are often called riders or endorsements.
Coverage offerings can vary from one insurance company to the next, but here are some common add-ons:
Water backup coverage: Sewer or sump pump backups aren’t typically covered by a standard homeowners policy, but you may be able to add coverage through an endorsement.
Scheduled personal property: If you have expensive items like jewelry, watches, collectibles, or furs, you can purchase additional coverage for those items.
Sinkhole coverage: Sinkhole damage is not typically covered, but you may be able to purchase additional coverage through an endorsement.
Ordinance or law coverage: This type of coverage can help if building codes or laws have changed since your home was built, and rebuilding costs more to meet current standards.
Equipment breakdown coverage: This coverage may help pay for repairs if systems like your HVAC or appliances break down due to a sudden issue, such as an electrical surge. It doesn’t cover normal wear and tear or breakdowns due to age.
Identity theft coverage: Some insurance companies offer optional coverage that can help pay for costs like fraud services and fees after identity theft.
Inflation guard coverage: You may be able to add an inflation guard, which adjusts your dwelling coverage as building costs increase.
Extended replacement cost: This coverage increases your dwelling limit by a set amount if rebuilding costs are higher than expected.
Home business coverage: If you run a business from your home, you may need additional coverage for business equipment or liability.
Flood insurance: Since flood damage isn’t covered by a standard homeowners policy, you may need to purchase separate flood insurance if you live in a high-risk flood area. You can typically buy coverage through a private insurer or the National Flood Insurance Program (NFIP), a federal program that provides flood insurance and is often available through your insurance agent.
Earthquake insurance: Standard homeowners insurance typically doesn’t cover damage caused by earth movement, but you may be able to add coverage or purchase a separate earthquake insurance policy.
Umbrella insurance: This extends liability coverage beyond the limits of your homeowners and auto policies. It can help cover large claims or lawsuits if you’re found responsible for injury or property damage. Buying umbrella insurance may make sense if you have significant assets, want extra financial protection, or feel your current liability limits may not be enough.
Types of homeowners insurance policies (HO-1 to HO-8)
Home insurance policies are typically grouped into different types, each labeled with an “HO” number. In most states, coverage is fairly similar (with some differences in places like Texas), and not every option is available everywhere. The most common type of homeowners insurance policy is an HO-3.
Other types of policies include:
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HO-1: This is the most basic level of coverage and is not offered as often today.
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HO-2: Typically called a broad form policy, this option covers more than an HO-1. It usually includes 16 named events, but only those listed in the policy.
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HO-3: Most single-family homes are insured with this type of policy. It generally covers your home for most types of damage unless they are specifically excluded, such as floods or earthquakes. Your belongings are usually covered only for the events listed in the policy. This provides strong coverage for your home while keeping costs more manageable than other comprehensive policies.
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HO-4: This policy is designed for renters and is usually called renters insurance. It covers personal belongings against a set list of events, typically 16 named perils.
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HO-5: This policy offers more comprehensive coverage and is usually used for higher-value homes. It generally covers both your home and belongings for most types of damage unless something is specifically excluded.
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HO-6: This policy is for condo or co-op owners. It covers personal belongings and the parts of the unit you own, usually against a set list of events.
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HO-7: This policy is designed for mobile or manufactured homes and works similarly to a standard homeowners policy.
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HO-8: This option is designed for older homes where the cost to rebuild may be higher than the home’s market value. It’s sometimes referred to as modified coverage.
To better understand how each policy type works and which one may fit your situation, see our guide to types of homeowners insurance policies.
How homeowners insurance pays a claim
When you file a homeowners insurance claim, there are a few things that determine how much you’ll be paid. Most policies include a deductible, which is the amount you pay out of pocket before your insurance begins covering repair, rebuild, or replacement costs. Some policies have a set deductible amount, while others use a percentage of your coverage.
After you pay your deductible, the amount your policy pays depends on the type of coverage you have: actual cash value or replacement cost.
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Actual cash value: This type of coverage pays for your home or belongings based on their current value after factoring in depreciation (or wear and tear). Because items lose value over time, this may not fully cover the cost of rebuilding your home or replacing your belongings.
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Replacement cost: This type of coverage pays to repair or rebuild your home and replace your belongings at today’s prices, without accounting for depreciation. Replacement cost coverage typically results in a higher payout compared to actual cash value.
In some cases, you may be able to add extra coverage, often called extended or guaranteed replacement cost coverage, which helps account for rising construction costs. With construction and material costs continuing to increase over time, having this type of coverage in place can help ensure you have enough protection to rebuild your home if costs are higher than expected.
To get a step-by-step breakdown of how to file a claim, check out our guide on how to file a homeowners insurance claim.
How homeowners insurance coverage limits are calculated
Coverage limits are the maximum amount your insurance policy will pay for a covered loss. These limits are based on several factors, including the cost to rebuild your home, the value of your belongings, and the amount of liability coverage you choose.
In most cases, insurers calculate your dwelling coverage based on replacement cost, which is the estimated cost to rebuild your home at today’s prices, not what you paid for it or its market value.
Personal property coverage is usually set as a percentage of your dwelling coverage, typically between 50% and 75%, depending on your policy.
Many different factors can influence your coverage limits, such as:
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The size and age of your home
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Local construction and labor costs
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Upgrades or renovations
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Special features such as premium building materials or fireplaces
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The value of your belongings
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How much coverage you want
Because rebuilding costs can change over time, it’s important to review your coverage regularly to make sure it still fits your needs.
What does homeowners insurance cover? FAQs
Does home insurance cover mold?
In most cases, homeowners insurance doesn’t cover mold. But if it’s the result of something your policy covers, such as a burst pipe, you may have coverage. That said, coverage is usually still pretty limited.
Mold caused by ongoing issues, like leaks or poor maintenance, is typically not covered, so it’s important to address water damage quickly.
Does home insurance cover water damage?
The answer isn’t always straightforward. If the water damage is caused by flooding or rising water, your homeowners insurance usually won’t cover it. However, if you have a separate flood insurance policy through the National Flood Insurance Program (NFIP), coverage may apply.
On the other hand, if the water damage is caused by something sudden and accidental that’s listed in your policy, like a frozen or burst pipe, your policy may cover the damage, depending on your coverage and limits. However, damage caused by ongoing issues, such as leaks or lack of maintenance, is usually not covered.
Does home insurance cover the roof?
Yes, usually your roof is covered, but it ultimately comes down to how the damage occurred. If your roof is damaged by something your policy covers, such as a storm, fire, or a falling object, your insurance may help pay for repairs.
However, if the damage is due to typical wear and tear or aging, your policy usually won’t cover the cost to repair or replace your roof.
It’s also important to keep in mind that your roof coverage is subject to your policy limits and deductible. In some cases, insurers may apply a separate deductible if the damage was caused by wind or hail damage, especially in areas prone to storms.
Does homeowners insurance cover theft outside the home?
In many cases, yes. Homeowners insurance can cover your possessions even when they’re taken from outside your home, like if your laptop is stolen from your car or your bike is taken while you’re out.
That said, your coverage is subject to your policy limits, and there may be lower limits for items stolen away from your home. Also, high-value items, like jewelry or electronics, may have special limits unless you add extra coverage.
Read more: Does homeowners insurance cover theft?
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