What Does Homeowners Insurance Cover? (2024 Guide)

Homeowners insurance provides comprehensive coverage for various types of dwellings, additional structures, liability, and personal property, protecting against a broad range of potential hazards. However, coverage limits and exclusions are crucial to understand, as well as options available to reduce your risk from non-standard types of losses.

Key Takeaways

• Most homeowners insurance policies offer standard coverage types and perils. 
• Many causes of loss are either excluded from homeowner's policies or only available by endorsement. 
• Replacement cost and actual cash value are two very different types of loss settlement. 
• Insurance agents can help determine the replacement cost of your home with specialized tools. 

Standard Coverages Included in a Homeowner’s Insurance Policy

Homeowners insurance policies contain many standard coverages, as listed below. Standard policies can be customized by adjusting coverage limits; additional coverages may be available through endorsement.

Dwelling Coverage

Dwelling coverage is the heart of your homeowner's insurance policy. Your dwelling consists of your main home structure, including porches and other attached structures. Detached structures, such as detached garages, sheds, and fences, are not considered part of your dwelling. 

Perils covered on a standard homeowners policy include the following:

• Fire
• Lightning
• Smoke
• Vandalism or malicious mischief
• Theft
• Falling objects
• Hail 
• Windstorms
• Weight or snow, ice, or sleet
• Freezing
• Accidental water discharge
• Explosion
• Damage from an aircraft, car, or vehicle

How these perils are covered by dwelling coverage and for what amounts depends on the coverage limits you choose and whether you have replacement cost or actual cash value coverage. Many causes of loss are explicitly excluded from dwelling coverage on a standard homeowners insurance policy but may be added by endorsement. Perils most often excluded include drain and sewer backup, earthquake, and hurricane damages.

Other Structures Coverage

Structures not permanently attached to your home are not covered under dwelling coverage on your homeowner's policy but may cover damage under other structures coverage. Other structure's coverage extends the same type of coverage to detached structures as dwelling coverage but with separate coverage limits. 

Other structures coverage includes the following:

• Fences
• Detached garages
• Sheds
• Swimming pools
• Gazebos
• Guest houses
• Greenhouses

Other structure coverage is usually 10% of your dwelling coverage limit. If your dwelling is insured for $300,000, your default other structures coverage would be $30,000. Other structure coverage limits can be increased if other structures exceed standard coverage limits. 

Personal Property Coverage

Your personal belongings are covered under personal property coverage on a standard homeowners insurance policy. Individual items are covered for the same perils as dwelling coverage but have their own coverage limit, usually 50%-70% of the dwelling coverage amount.

Also known as content coverage, personal property includes the following and much more.

• Furniture
• Clothing 
• Appliances
• Electronics
• Musical instruments
• Personal tools
• Art

Some limitations exist on high-value personal property items, such as jewelry, art, and collectibles. Exclusions may also apply. Completing a personal inventory assessment can help you and your agent determine gaps in personal property coverage and whether endorsements or a separate policy is needed to ensure the best reimbursement for personal property following a loss. 

Loss of Use (ALE) Coverage

Loss of use or additional living expenses (ALE) coverage can help when your home is uninhabitable due to a covered claim. This policy covers the added cost of living elsewhere while your home is being repaired. 

Loss of use coverage pays for essential additional expenses, such as:

• Hotel or rental homestays
• Food
• Utilities
• Storage units
• Pet Boarding
• Moving costs
• Restaurant meals

Major losses are difficult enough to endure without the added expense of alternate housing and related costs. Loss of use is an added value of homeowners insurance coverage that can only be appreciated when it has to be used.

Personal Liability Coverage

Legal liability related to your property is a significant financial risk for homeowners. Homeowners may incur costs for medical bills, legal defense fees, lost wages, pain and suffering, and even final expenses. Personal liability coverage protects homeowners from these expenses due to bodily injury or property damage to others.

The standard homeowner's coverage limit for personal liability is $100,000. However, expenses don’t necessarily stop at your coverage limit, and homeowners will be responsible for expenses that exceed coverage limits out-of-pocket. Homeowners can request increased limits and should carefully evaluate their financial assets at risk before deciding on an amount of personal liability protection.

Medical Payments Coverage

While medical payment coverage will not pay for medical expenses for family members or other household members, it will pay for injuries of non-residents that occur on your premises, regardless of fault. This may sound similar to personal liability coverage. However, you must be legally liable for personal liability coverage to apply. 

Medical payment coverage limits, from $1,000 to $5,000, are usually relatively low and apply per person. This coverage is intended for more minor injuries, though you may be able to raise your coverage beyond the standard policy limit. 

Examples of expenses that may be paid for by medical payments coverage up to the policy limits include:

• X-rays
• Emergency room visits
• Ambulance fees
• Physical therapy
• Hospital stays

What Does Homeowners Insurance NOT Cover?

A standard homeowners policy provides fairly broad coverage for many circumstances, yet it isn’t all-encompassing. Maintenance issues, damage from pests, wear and tear, mold and water damage, and warfare are some of the loss types not deemed to be covered losses by homeowners insurance. Know the perils, endorsement options, and exclusions on your homeowner's insurance policy so you can make informed decisions on your coverage choices.

Additional Homeowners Insurance Coverage Options

Many causes of loss are not covered under a standard homeowners insurance policy but may be covered by endorsement. Some of these include sewer backup, some home businesses, earthquakes, and sinkholes. 

Other coverages, such as scheduled personal property coverage for high-valued personal property, may offer additional coverage limits through riders. Other loss types, such as flood insurance, may be excluded under a standard homeowners policy but may be purchased by a separate policy.

What Events Are Typically Covered by Homeowners Insurance?

Knowing your standard policy coverages can prevent an uncovered claim. Discussing your coverages with your insurance agent allows you to discover areas where you may be vulnerable but can resolve with a rider, endorsement, or separate policy. 

How Home Insurance Works After a Covered Event

Most homeowners would agree that they would rather pay homeowners insurance and never use it than file a claim. Understanding how your home insurance works after an event involving a covered peril can make the claims process more manageable. 

1. Access the damage and determine if it will likely exceed your deductible.

2. Notify your insurance provider of your damages and initiate the claims process.

3. Document the damage through pictures and videos.

4. Make any urgent repairs to prevent further damage to your home.

5. Initiate contact with your adjust to determine the next steps.

6. Get estimates from several approved repair companies and submit them for approval.

7. Complete repairs and document finished work.

8. Submit final claims documents to your adjuster for payment. 

Payout: Replacement Cost vs Actual Cash Value Coverage

Your insurance company will pay for claims based on two payment methods: replacement cost or actual cash value. Most standard homeowners insurance policies pay based on replacement cost coverage. Still, even within a homeowners policy, some coverages could be paid based on replacement cost coverage and some with actual cash value. The two payouts are quite different, so knowing how your policy works is crucial before you have a claim. 

Replacement cost coverage pays based on the cost of repairing or replacing damage like new at today’s costs. Actual cash value pays an amount subject to replacement cost depreciation, usually based on age and wear and tear. Both types of claims payouts are subject to your deductible and coverage limits.  

FAQ: What Does Homeowners Insurance Cover?

What is usually covered in home insurance?

Home insurance usually covers your main home structure, detached structures, personal liability, medical payments, personal property, and additional living expenses for causes of loss listed in the policy, along with any coverages provided through riders or endorsements. All causes of loss not listed for a named peril policy are excluded from coverage. All-peril policies are less common and cover all causes of loss other than the ones explicitly excluded. 

How much home insurance do I need?

Your insurance agent can help you determine the replacement cost of your home. Your mortgage lender may also have a minimum amount of coverage that you are required to carry on your home. Personal liability, personal property, and other coverages should be discussed with your agent and financial advisor to determine what coverage limits best protect your assets. 

What is the most basic home insurance coverage?

Home insurance policies, known as HO-1 Basic Form Policies, are the simplest types of homeowners insurance. HO-1 policies are unavailable in all states and offer coverage for your home’s main structure for 11 named perils but offer no additional coverage options. This policy type is not recommended as it leaves homeowners vulnerable to many risks. 

An HO-5 policy is the most comprehensive homeowners policy type. It covers the replacement costs of both your home and personal property. This policy form also has higher coverage limits and optional add-on coverages. 

How do insurers determine the value of a house?

Insurers often use a replacement cost calculator tool to determine the replacement cost of your home. These tools use information about the location, age, size, features, structure, building material, and square footage of your home to determine the cost of rebuilding it. 

What is the 80% rule in homeowners insurance?

The 80% rule requires most homeowners insurance companies that homeowners insure their homes to at least 80% of the calculated replacement cost. If a homeowner chooses a coverage limit below 80% of their home’s replacement cost, insurers will proportionally reduce their payout for claims.

Article written by Shawnette Good. 

Shawnette is an insurance professional with 30 years of industry experience helping consumers understand complex insurance topics. Outside of writing, Shawnette enjoys long nature walks and volunteering in her community.