What Does Homeowners Insurance Cover?

Once you secure your dream home, it’s essential to protect it with a homeowners insurance policy. But what does homeowners insurance cover, exactly? And what type of homeowners insurance do you need for your specific house? 

While it’s tempting to go with the cheapest policy, having enough coverage to protect your home and assets is crucial. With that in mind, here’s a closer look at what homeowners insurance does and doesn’t cover, so you can avoid any unpleasant surprises if you file a claim. 

In this guide:

• How homeowners insurance coverage works
• 6 standard homeowners insurance coverage categories
• What will your homeowners insurance cover?
• What does homeowners insurance not cover?
• What do different types of homeowners insurance cover?
• How to expand your coverage
• How to file a homeowners insurance claim

How homeowners insurance coverage works

Homeowners insurance helps protect your home and its contents from damage or theft. It covers losses from fire, lightning strikes, windstorms, and other natural disasters. Depending on your policy, it may also cover personal liability if someone is injured on your property. 

When an event—called a peril—results in damage or loss to your property, you file a claim with your insurance company, and it pays to repair or replace the affected items up to your policy limit. 

Your policy outlines what is covered and how much coverage you have—read it carefully so you know any exclusions that apply. 

Deductibles

Homeowners insurance policies include a deductible, which is the amount you must pay out-of-pocket before your coverage kicks in and pays the rest. 

For instance, if your claim is for $10,000 and your policy has a $1,000 deductible, you’ll be responsible for the first $1,000, and your insurance company will cover the remaining $9,000. 

Choosing a higher deductible will lead to a lower monthly premium. But a higher deductible also means a larger out-of-pocket expense when you file a claim, so weigh the two carefully.

Payout structures

A payout structure describes how an insurance policy pays out claims. In other words, it determines how much and how quickly you get paid. You’ll generally receive two checks if your claim is for both your home’s structure and personal belongings. 

Insurance companies have different methods they use to calculate your payout. This structure can significantly impact the amount you receive for a covered loss—especially if you file an insurance claim for theft. Common payout structures include: 

• Actual cash value accounts for depreciation and reimburses you for the current market value of your lost or damaged items. 
• Replacement cost pays for what it would cost to buy a new item of similar quality today. 
• Extended replacement cost pays the cost to replace an item at current market prices—even if those costs exceed your policy limit. 

6 standard homeowners insurance coverage categories

In general, homeowners insurance covers six categories of losses. 

Coverage category	Coverage details	Typical coverage amount
Dwelling	Covers damage to the main home and attached structures like a garage or deck	Replacement cost, up to the policy limit
Other structures	Covers damage to structures not attached to the main home, such as sheds, fences, or pools	A percentage (typically 10%) of the dwelling coverage limit
Personal property	Covers damage or loss of personal belongings, including furniture, clothing, and electronics	A percentage (typically 70%) of the dwelling coverage limit
Personal liability	Covers legal fees or damages if someone is injured on your property	A set amount (typically $100,000 – $500,000)
Loss of use	Covers additional living expenses if your home is uninhabitable due to a covered loss (i.e. hotel or rental costs)	A percentage (typically 20 – 30%) of the dwelling coverage limit
Medical payments	Covers medical expenses when someone is injured on your property, no matter who’s at fault	A set amount (typically $1,000 – $5,000)

Dwelling

Dwelling coverage is the most basic coverage provided by homeowners insurance. It covers the cost of repairing or rebuilding your home if it’s damaged by a covered peril, such as fire, wind, or hail. It also covers any structures physically attached to your home, such as a porch or garage. 

What it covers: Damage to the physical structure of your home, such as walls and roof.

Example: If a tree falls on your roof and damages it, your dwelling coverage will pay to repair or replace the affected sections, minus your deductible. 

Other structures

This type of coverage pays for repair or replacement costs associated with damage to other structures on your property that are not attached to the home (such as fences, sheds, barns, and detached garages).

What it covers: Damage to structures on your property that are not attached to your home, such as a fence or shed. 

Example: If a windstorm knocks down your fence, other structures coverage will pay for repairing or replacing it. 

Personal property

>Personal property coverage protects your personal belongings, such as furniture, clothing, and electronics, if they’re damaged or destroyed by a covered peril. 

Beware that personal property coverage has limits and may not cover certain items, such as fine jewelry or artwork. If you have these items, you may want to purchase additional coverage.

What it covers: Damage, loss, or theft of your personal belongings, such as furniture, clothing, and electronics. 

Example: If a fire damages your laptop computer, personal property coverage will pay to repair or replace it up to your policy limit. 

Personal liability

Liability coverage pays for legal fees and medical expenses if someone is injured or their property is damaged due to the negligence of you or a family member living in your home. It also covers libel and slander claims and any other costs associated with defending these types of claims. 

What it covers: Legal expenses, medical bills, and other costs associated with defending liability claims. 

Example: If a neighbor slips and falls on your property, liability coverage will pay for their medical bills resulting from the injury. 

Loss of use

Additional living expense (ALE) coverage, also known as loss of use, pays for the cost of living in a temporary residence while your home is being repaired or rebuilt due to a covered peril. 

What it covers: The cost of additional housing, food, and other essential expenses if you need to stay in a temporary residence while repairs are made on your home. 

Example: If a fire damages your home, ALE coverage will pay for your hotel costs while repairs are made. 

Medical payments

Medical payments coverage pays for medical bills incurred by guests on your property due to an injury caused by a covered peril. 

What it covers: Medical bills and related expenses associated with injuries sustained by a guest on your property due to a covered peril. 

Example: If a guest trips and falls on your property, medical payments coverage will pay for the medical bills associated with the injury, no matter who is at fault. 

What will your homeowners insurance cover?

The best homeowners insurance typically covers these six categories, but the specifics will vary among policies. To help you better understand what’s covered and what isn’t, here’s an overview of the most common claims homeowners make and whether they’re usually, sometimes, or rarely covered:

	Usually	Sometimes	Rarely	What to know
AC/heating issues		✔		Not typically covered unless it’s due to a covered peril, such as a fallen tree damaging the unit after a storm
Dog bite	✔			Usually covered, but some breeds may be excluded from coverage or require additional liability coverage
Fence repair	✔			Usually covered if the damage is due to a covered peril, such as a storm or fallen tree
Fire	✔			Usually covered, but check policy for specific details on coverage limits
Foundation repair		✔		Rarely covered unless it’s due to a covered peril, such as a burst pipe or fallen tree damaging the foundation
Mold			✔	Rarely covered, but some policies may offer limited coverage for mold remediation if it’s due to a covered peril
Plumbing issue	✔			Usually covered if the damage is sudden and accidental, such as a burst pipe, but not covered for normal wear and tear
Roof leak	✔			Usually covered if the damage is due to a covered peril, such as a storm or fallen tree, but not covered for normal wear and tear or lack of maintenance
Roof replacement		✔		Usually covered if the damage is due to a covered peril, but not covered for normal wear and tear or lack of maintenance
Termite damage			✔	Rarely covered, as it’s typically considered a maintenance issue rather than sudden and accidental damage
Theft	✔			Usually covered, but check policy for details on coverage limits
Tree removal			✔	May be covered if the tree causes damage due to a covered peril, such as a storm, but not covered for preventative maintenance
Water damage		✔		Usually covered if the damage is due to burst pipes or rainfall; may need separate policies for damage due to floods or sewer and drain backups

What does homeowners insurance not cover?

Although homeowners insurance covers a wide range of perils, some damages are excluded from coverage. It’s important to understand these exclusions so you can purchase additional coverage or take other steps to protect yourself.

Floods and earthquakes

Flooding and earthquakes are two of the most common natural disasters, but they are not generally covered by homeowners insurance. Special flood or earthquake coverage is usually required if you live in an area prone to these disasters. 

Sewer backups

It may come as a shock, but water damage due to sewer backups aren’t typically covered under your homeowners insurance policy. 

Read your policy details carefully to see if it’s covered—and consider buying an add-on or endorsement if it’s not included.

Highly valuable items 

Homeowners insurance usually has a maximum dollar amount for coverage of highly valuable items, such as fine jewelry, artwork, and other collectibles. If an item is worth more than this amount, you may need to purchase extended coverage or a separate insurance policy for it. 

Business property

Business property is not generally covered by homeowners insurance, meaning that any items used for business purposes must be insured separately. 

Normal wear and tear

Homeowners insurance is designed to cover sudden and unexpected damages, not normal wear and tear. For example, your insurance company may not cover the repairs if your roof leaks due to old age. 

It’s important to keep up with regular maintenance and repairs to prevent issues from becoming more serious. Consider purchasing a home warranty for normal wear and tear.

Acts of war

Most homeowners insurance policies don’t cover damages caused by acts of war or terrorism. While these events are rare, they can cause extensive damage and loss. 

What do different types of homeowners insurance cover?

An HO-3 policy is the most common type of homeowners insurance. For your home’s structure, it covers all perils except those named as exclusions. For your personal belongings, the policy specifies which items are covered (i.e. furniture and electronics). If a belonging isn’t named, it’s not covered.

On the other hand, an HO-5 policy generally offers broader coverage and is often referred to as “open perils” or “all-risk” coverage. This means it covers all perils for your home and personal belongings—except those specifically named exclusions.

HO-1 and HO-2 policies offer more limited coverage and are less common. HO-1 policies only cover a few specific perils, such as fire and theft, while HO-2 policies cover additional perils, like hail, windstorms, and falling objects.

How to expand your coverage

If you need to expand your coverage beyond what’s provided by standard homeowners insurance, you can purchase additional coverage. Common options include:

• Personal umbrella policies for additional liability coverage
• Flood and earthquake insurance for natural disasters
• Scheduled personal property coverage for high-value items
• Sewer and water backup coverage for damage caused by a backups

Costs vary based on location and the level of coverage needed. Though it may be costly, additional coverage provides the peace of mind and protection required for unexpected events.

How to file a homeowners insurance claim

Filing a home insurance claim is relatively straightforward and typically involves these steps: 

1. Contact your homeowners insurance company to report the loss. Most companies have 24-hour claim lines so you can contact them anytime, day or night.
2. Fill out and submit a claim form. This form includes details about the loss, such as the date of the incident and any damages that were incurred.  
3. Write down your assigned claim number. You’ll need your claim number each time you follow up with your insurance company. 
4. Pay your deductible. You’ll usually pay a deductible before your claim is processed. Your insurance company will tell you the specific amount to pay. 

Wait for approval from your insurance company. Depending on the complexity, processing a claim can take a few days or weeks. Stay in touch with your insurance company and ask questions if something doesn’t make sense.