Written by Irena Martincevic
Published on February 10th, 2026
What Does Homeowners Insurance Cover?
Homeowners insurance protects your home, belongings, and finances from unexpected losses. It typically covers damage to your house from events like fire, storms, hail, or vandalism, personal property inside your home, liability if someone is injured on your property, and additional living expenses if your home becomes uninhabitable.
Understanding your coverage ensures you have adequate protection, prevents surprises when filing claims, and helps you decide if extra coverage is needed for high-value items, natural disasters, or business property.
For a complete breakdown of how homeowners insurance works, what it typically includes, and how policies are structured, see our full homeowners insurance guide.
| Topic | Key Insight |
|---|---|
| What's Covered | Home, belongings, liability, and living expenses for covered events like fire, storms, theft, and vandalism. |
| Core Coverages | Six core coverages: dwelling, other structures, personal property, liability, loss of use, and medical payments. |
| Exclusions | Floods, earthquakes, wear and tear, pests, and business activities usually require separate policies or endorsements. |
| Policy Type | HO-3 is the most common policy; replacement cost coverage offers better protection than actual cash value. |
Ozzy's Takeaways
- Homeowners insurance covers your home, belongings, liability, and living expenses for covered events like fire, storms, theft, and vandalism.
- Standard policies include six core coverages: dwelling, other structures, personal property, liability, loss of use, and medical payments.
- Not all risks are covered. Floods, earthquakes, wear and tear, pests, and business activities usually require separate policies or endorsements.
- Coverage limits and policy type matter. HO-3 is the most common policy, and replacement cost coverage offers better protection than actual cash value.
How does homeowners insurance work?
When you purchase a policy, you pay a premium to keep coverage active. In exchange, your insurer pays for covered losses up to your policy limits. You'll pay a deductible out of pocket before coverage kicks in. For example, with a $1,000 deductible and $10,000 in damage, you'd pay $1,000, and your insurer pays $9,000.
Your homeowners policy is organized into coverage categories that define what events are insured, what property is protected, and how much the insurer will pay.
What does home insurance cover?
A standard homeowners insurance policy typically includes six major types of coverage.
What does homeowners insurance cover?
Standard policy coverage at a glance — always verify with your own policy documents
Dwelling coverage
Dwelling coverage protects the physical structure of your home: walls, roof, floors, built-in appliances, and permanent fixtures like cabinets. This includes attached structures like attached garages or decks.
This coverage applies when covered perils damage your home's structure, including fire, lightning, windstorms, hail, explosions, and vandalism.
Example: A severe thunderstorm damages your roof and causes water to leak into your home. Dwelling coverage would help pay for repairs to your roof, ceiling, and walls.
Other structures coverage
Other structures coverage protects buildings on your property not attached to your main home: detached garages, sheds, fences, workshops, gazebos, guest houses, and permanently installed pools or playground equipment.
This coverage typically equals 10% of your dwelling coverage amount, though you can increase this limit. The same perils that apply to dwelling coverage generally apply here.
Example: A tree falls during a storm and crushes your detached garage. Other structures coverage would help pay to repair or rebuild it.
Personal property coverage
Personal property coverage protects your belongings inside your home and items you take with you away from home: furniture, electronics, clothing, appliances, books, and sports equipment.
Coverage typically equals 50-70% of your dwelling coverage. However, special limits apply to high-value items like jewelry, art, and collectibles. Your policy might only cover up to $1,500 for all jewelry combined.
Example: A fire destroys your furniture, electronics, and clothing. Personal property coverage would help replace these items, up to your policy limits.
Personal liability coverage
Personal liability coverage protects you financially if you're held legally responsible for injuring someone or damaging their property. This pays for legal defense costs, court judgments, and settlements, typically $100,000 to $500,000 in coverage.
This protection extends beyond your property. It can cover incidents where your dog bites someone at the park, your child breaks a neighbor's window, or you accidentally damage someone else's property.
Example: A guest slips on ice on your porch and sues you for medical expenses. Personal liability coverage pays for your legal defense and any settlement.
Loss of use coverage
Loss of use coverage (also called "additional living expenses") pays for extra costs if your home becomes uninhabitable due to a covered loss: hotel bills, restaurant meals, laundry services, and storage costs while your home is repaired.
Coverage typically equals 20-30% of your dwelling coverage and applies while repairs are completed or for a specified time period, whichever comes first.
Example: A kitchen fire makes your home unlivable for three months. Loss of use coverage pays for your hotel, increased meal costs, and furniture storage.
Medical payments coverage
Medical payments coverage pays for minor medical expenses if a guest is accidentally injured on your property, regardless of whether you're legally liable. This is different from liability coverage, as it pays even if you weren't negligent.
Coverage limits are modest, typically $1,000 to $5,000 per person, for small injuries without requiring a lawsuit. This doesn't apply to injuries to you or household members.
Example: A friend trips on a loose step on your deck and sprains their ankle. Medical payments coverage could pay for their emergency room visit and X-rays.
What will homeowners insurance not cover?
Standard policies typically exclude:
Flood damage: Requires separate flood insurance.
Earthquake damage: Requires separate earthquake policy or endorsement.
Maintenance issues and wear-and-tear: Gradual deterioration, mold from neglect, or lack of maintenance.
Pest infestations: Termites, rodents, or other pest damage.
Sewer backup: May require additional endorsement.
Certain high-value items: Jewelry, art, and collectibles have limited protection without scheduled coverage.
Business property and liability: Requires separate business insurance.
Intentional damage: Deliberate damage isn't covered.
Types of homeowners insurance policies
Different policy types offer varying levels of protection. The most common are identified by "HO" numbers:
Homeowners insurance policy types
Compare the six standard policy forms — what they cover and who they're designed for.
Named perils policies (HO-1, HO-2) only cover damages from specific listed events like fire, theft, and certain weather events.
Open perils policies (HO-3, HO-5) cover all causes of loss except those specifically excluded—providing much broader protection.
The HO-3 policy is most popular for single-family homes, offering open perils coverage for your dwelling and named perils for personal property.
Other homeowners insurance considerations
Actual Cash Value vs. Replacement Cost Value
Your policy pays for damaged property in two ways:
Actual Cash Value (ACV) pays the depreciated value of damaged items. A 10-year-old roof would receive payment for what that used roof was worth, not replacement cost. Lower premiums, but less money when you file a claim.
Replacement Cost Value (RCV) pays to replace or repair damaged property with new items of similar quality, without deducting for depreciation. A 10-year-old roof would be replaced with a new one. Higher premiums, but better protection.
Most experts recommend replacement cost coverage for both dwelling and personal property.
Inflation guard
An inflation guard automatically increases your dwelling coverage to keep pace with inflation and rising construction costs, typically 2-4% annually. This optional feature helps ensure you don't become underinsured over time.
Homeowners insurance coverage FAQ
How long are home insurance policies in effect?
Most homeowners insurance policies have a one-year term and automatically renew annually. Your insurer sends a renewal notice 30-60 days before each policy period ends with any changes to premiums or coverage. Some insurance companies offer six-month terms, but annual policies are more common. Coverage remains active as long as you pay premiums on time.
Do I need homeowners insurance for a rental property?
No, standard homeowners insurance (HO-3) is for owner-occupied homes. If you rent out a property, you need a landlord insurance policy (or "dwelling fire policy"). This covers the building structure and your liability as a landlord, but not tenants' belongings, they need renters' insurance. Landlord policies are designed for rental property risks and typically cost more than standard homeowners insurance.
What is the most important part of homeowners insurance?
Dwelling coverage is critical because it protects your home, your largest asset. Without adequate coverage, you might not be able to rebuild after a total loss. However, personal liability coverage is equally important, protecting you from potentially devastating lawsuits. The "most important" coverage depends on your situation, but ensure you have sufficient dwelling and liability coverage.
Is homeowners insurance tax-deductible?
For most homeowners, premiums are not tax-deductible. The IRS considers it a personal expense. Exceptions exist: if you use part of your home exclusively for business, you may deduct a portion as a business expense. For rental properties, landlord insurance premiums are generally deductible as rental property expenses. Consult a tax professional for your specific situation.
Compare policies and rates from top insurers to ensure you're getting the protection you need at a price that fits your budget.
About the Author
Irena Martincevicirena@fixr.com