What does homeowners insurance cover?

COVERAGE TYPEWHAT DOES IT COVER?WHAT’S THE COVERAGE LIMIT?DO YOU HAVE TO PAY A DEDUCTIBLE?
Dwelling coverageCovers the structure of your home and built-in appliancesShould be equal to your home’s replacement costYes
Other structures coverageCovers detached structures on your property10% of dwelling coverageYes
Personal property coverageCovers your personal belongings both inside and outside the home50% of dwelling coverageYes
Loss-of-use coveragePays for additional living expenses while your home is being repaired20% of dwelling coverageYes
Personal liability coveragePays for legal and medical bills if you’re held liable for injury or personal property damage to someone else$100,000 – $500,000No
Medical payments coverageIf a guest is injured in your home, it pays for their medical bills, regardless of who is at fault$1,000 – $5,000No

Coverage for the structure of your home and additional structures

Also referred to as your policy’s dwelling coverage, it provides coverage against physical damage to the structure of the home up to your dwelling coverage limit. With dwelling coverage, your home’s foundation, exterior walls, interior walls, floors, cabinetry, plumbing, water heaters, and basically anything that is built into the home is covered.

In a standard HO-3 homeowners policy, your home is typically covered at its replacement cost, meaning the amount you’re reimbursed for a loss is equal to what it would cost to rebuild the home at today’s prices. Your insurer may offer extended or guaranteed replacement cost coverage, which insures you for an amount beyond your home’s coverage limit in the event that rebuild costs suddenly increase.

Your policy also covers detached structures on your property such as your garage, work shed, fence, or gazebo. Your other structures coverage limit is typically 10% of your policy’s dwelling coverage limit.

Coverage for your personal property

Homeowners insurance also includes coverage for your personal belongings. If someone breaks into your home and steals your stuff, it’s covered. Personal property coverage also covers guests’ personal property from damage or theft as long as their property is on your property at the time of the loss. Your personal property by default is covered at its actual cash value, but most insurance companies will let you upgrade your personal property reimbursement terms to replacement cost coverage.

What perils are covered?

According to a standard Insurance Services Office (ISO) HO-3 policy (the template for most insurance policies), you’re insured against the following perils.

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism
  • Theft
  • Falling objects
  • Weight of snow, ice, or sleet
  • Accidental discharge or overflow of water or steam
  • Sudden and accidental tearing apart, cracking, burning or bulging
  • Freezing of plumbing
  • Sudden and accidental damage from an artificially generated electrical current
  • Volcanic eruption

What does homeowners insurance not cover?

The most common exclusions that not even the best homeowners insurance company will cover include the following.

  • Earth movement (earthquakes, landslides, mudslides, subsidence, sinkholes, and so on)
  • Water damage (when it’s from flooding, surface water, waves, tidal water, a sewer backup, or groundwater seeping up into the home)
  • Power failure
  • Neglect
  • Ordinance of law (meaning the government orders you to tear down, rebuild, or renovate your home to meet local ordinances)
  • War
  • Nuclear hazard
  • Intentional loss
  • Governmental action
  • Mischievous acts
  • Birds, vermin, rodents, or insects
  • Animals owned by an insured
  • Mold, fungus, or wet rot (unless it’s hidden within the walls or ceilings or beneath floors after an accidental discharge or overflow of water from plumbing or HVAC systems)