What does homeowner insurance cover

Whether you’re a first-time homebuyer or have lived in your home for some time, knowing what homeowners insurance covers and doesn’t cover can help you secure the coverage you need, without paying for coverages you don’t. With this knowledge, you can make an informed decision on finding the right home insurance coverage with the best carrier to meet your needs.

Most standard homeowners insurance policies cover these four types of home insurance coverage:

Your home’s structure
Your personal belongings
Liability protection
Additional living expenses

There are additional types of coverage that are considered add-ons like medical payments, scheduled personal property and sewer backup.

Dwelling coverage

Your homeowner’s policy is designed to pay to rebuild or repair your home in the case of specified disasters like fire, hurricane, hail and lightning. Dwelling coverage includes the main structure of your home, but not any other detached structures on the same premises.

Other structures coverage

When you have detached structures on your property, other structures coverage is designed to protect them. These detached structures can include detached garages, sheds, barns, gazebos and fences.

Personal property coverage

Coverage for your personal belongings will pay the value of your damaged or lost possessions, including furniture, electronics, clothing and collectibles. Even trees, plants and shrubs are covered in some cases. Coverage for personal items also includes items that are stored off-premises.

If you are unsure about how much coverage you need, you can conduct a home inventory to determine the right home insurance coverage plan for you.

Liability protection

Liability insurance protects you from financial losses resulting from damage to others’ property and personal injury to others if you are found legally responsible. Unless they are excluded, this insurance also covers damage caused by your family members and even your pets. Liability protection covers court awards and expenses, depending on your policy.

If you think you need more liability protection than the average homeowner’s policy offers, consider an umbrella liability policy, which provides broader protection and higher liability limits.

Additional living expenses (ALE)

If damages make your home uninhabitable, this kind of coverage pays for the additional costs of living somewhere else until your home is repaired or rebuilt. It could include hotel and restaurant expenses and other costs you may incur during that time, like laundromat fees and even pet boarding. This coverage does have limits, and in some cases, a time limit.

What does homeowners insurance not cover?

There are some crucial exclusions to note under homeowners insurance that will help you decide whether additional coverage is necessary. Keep in mind that most policies offer extra, optional protection for things not covered under homeowners insurance.

Earthquake and flood damage

Generally, damage caused by earthquakes and floods is not covered by a standard homeowners policy, but can be purchased as a separate policy — or as an endorsement in some cases.

Water damage

Your policy covers some water damage, but some instances are excluded. Water damage issues involving your sewage systems, such as an overflow or backup, are typically not covered, but coverage can be purchased as an endorsement.

Homeowners neglect

Proper care and routine maintenance are crucial to keeping your property in tip-top shape. Staying current on cleanings, home systems repairs and inspections can save you from a lot of heartache down the road. Any damages caused by neglect or failure to properly maintain your home are not covered by homeowners insurance.

Those damages include but are not limited to:

Termites and insect damage
Mold
Rust
Bird or rodent damage
General wear and tear

To avoid costly repairs that your policy might not cover, maintain your home regularly.

Identity theft

Homeowners insurance typically does not cover expenses related to identity theft, such as someone using your credit card to purchase new furniture. This can usually be purchased for additional coverage under a separate identity theft plan or, in a few cases, as an endorsement on your homeowners policy. Some insurers automatically include this coverage on standard home insurance policies.

Choosing the right homeowners insurance coverage

When choosing the right homeowners insurance company, the cost of coverage is just one factor. Each person has different criteria they want their insurance company to meet, whether it’s 24/7 claims response, online and mobile accessibility or the ability to speak with a dedicated agent who recognizes their name each time they call.

If you have unique coverage needs or home characteristics, such as living in a historic home, consider a company that has special endorsements that fit your needs. Knowing how to choose the best home insurance company for you will ensure you’re financially protected if a loss occurs.

Learn more: Affordable home insurance companies

Frequently asked questions

- Yes, your personal belongings are covered through your homeowners insurance, but there could be coverage limits on valuable items. For instance, jewelry and fine arts have coverage caps under personal property coverage. If you have high-value items, it may be worth buying scheduled personal property coverage to ensure your items are fully covered against losses.
- While states do not make homeowners insurance coverage mandatory, it is usually a worthwhile expense. Home insurance helps financially protect you against covered perils. If you were to suffer a substantial loss without the ability to pay for it in full, homeowners insurance can bridge the gap, allowing you to pay a deductible rather than the full cost of repairs or replacement.
- Two things that are not covered in standard homeowners insurance policies are earthquakes and floods. Some companies offer an earthquake endorsement that you can add to your policy for an additional cost. You may also be able to buy a separate earthquake policy, like you can for flood insurance. Without an optional endorsement or separate policy, you would not have coverage if your home or belongings are damaged by an earthquake or flood.

Every standard homeowners insurance policy includes the same six coverages that protect your home and personal belongings from theft, vandalism, and damage by a covered peril like fire, lightning, wind, and hail.

Homeowners insurance also covers living expenses you incur if you need to live elsewhere while your home is being repaired. And the liability portion of your homeowners insurance policy protects all of your financial assets in the event someone is injured or their property is damaged while at your home and they sue you for damages.

Here’s a look at the six coverages included in every basic home insurance policy and how much of each you need, according to experts at the Insurance Information Institute: [1]

Coverage type	What it does	How much you need
Dwelling	Pays to repair or rebuild your house and structures attached to it	Enough to completely rebuild your home from the ground up at today’s construction prices (aka your home’s replacement cost)
Other structures	Pays to repair or rebuild your shed, guest house, fence, or other structures on your property not attached to your home	10% of your dwelling coverage limit
Personal property	Pays to replace furniture, electronics, kitchen appliances, and other stuff you own	50% to 70% of your dwelling coverage limit
Loss of use	Pays for hotel stays, rentals, restaurant bills, and other temporary expenses while your home is being rebuilt	20% of your dwelling coverage limit
Personal liability	Pays for guests' medical bills and legal expenses if you’re found legally responsible	$300,000 to $500,000
Medical payments to others	Pays for guests' medical bills from minor injuries — regardless of who’s at fault	$1,000 to $5,000

Dwelling coverage

The dwelling portion of your homeowners insurance covers the physical structure of your home from damage, including your home’s:

Walls, roof, windows, and foundation
Plumbing, electrical, and HVAC systems
Fireplace and chimney
Built-in fixtures — sinks, tubs, showers, and cabinets
Built-in appliances — furnace and water heater
Attached garage, deck, porch, and in-ground swimming pool

Other structures coverage

The other structures portion of your homeowners insurance covers structures on your property not attached to your home, including your:

Detached garage
Guest house
Gazebo
Fences
Mailbox
Sheds
Walkways

Personal property coverage

Homeowners insurance also covers your personal property — both in your home and away from it — including your:

Loss of use coverage

The loss of use portion of your home insurance policy (aka additional living expenses) pays for living expenses you incur when your home is severely damaged and it’s no longer safe to live in while it’s being repaired. Additional living expenses that are typically covered by your insurance company include a hotel or temporary rental, restaurant meals, pet boarding, dry cleaning, and transportation while your home is being rebuilt.

Personal liability coverage

Personal liability coverage protects your financial assets if someone is injured or their property is damaged while at your home and you’re found legally responsible and they sue you for damages. Bodily injury and property damage losses only accounted for 2% of home insurance claims in 2020, according to data from the Insurance Information Institute. [2]

Medical payments to others coverage

The medical payments to others portion of your home insurance policy covers you if a guest is injured on your property, whether you’re to blame or not. This is the least common type of claim — it only accounted for 0.3% of homeowners insurance losses in 2020, according to the Insurance Information Institute. [3]

→ Learn more about how homeowners insurance works

What does homeowners insurance NOT cover?

A standard home insurance policy excludes coverage for the following types of damage:

For an additional cost, some of the best home insurance companies will let you add flood or earthquake coverage to your homeowners insurance as an optional add-on. If your insurer doesn’t offer this, you’ll have to purchase separate flood or earthquake insurance to protect your home and belongings from those disasters.

→ Learn more about the 16 perils covered by homeowners insurance companies

Increase your home insurance coverage with endorsements

Most insurance companies offer a variety of optional coverages — called endorsements — that can add an extra layer of protection for your home and belongings.

Here's a look at some popular home insurance endorsements you can add on to your policy.

Home insurance endorsement	What it covers
Scheduled personal property coverage	High-value items like jewelry, fine art, antiques, firearms, sporting equipment, and more
Water backup coverage	Water damage caused by backed-up drains, septic tanks, sewage, systems, and sump pumps
Equipment breakdown coverage	Appliances and devices in your home that break down due to mechanical or electrical failure
Service line coverage	Backed-up or punctured utility lines, including cable lines, drain pipes, Internet lines, power lines, sewer lines, and more
Ordinance or law coverage	Increased cost of rebuilding your home according to local building codes after a covered loss

Levels of homeowners insurance coverage

Just about every type of homeowners insurance policy provides the same basic coverages, but the amount you’re paid out or reimbursed for property damage or theft will vary depending on which level of coverage you have.

While coverage availability varies by company and policy type, there are generally four different coverage levels most home insurance companies offer:

Coverage level	How it works	How much it costs	Available for …
Actual cash value	Subtracts depreciation from your claim payout	Cheapest level of coverage	Personal property coverage
Replacement cost value	Reimburses you for the cost of repairing your home and replacing your things to their original condition — regardless of depreciation	Slightly more expensive	Dwelling coverage, other structures coverage, and personal property coverage
Extended replacement cost	Increases your dwelling coverage limit by 25% to 50% if your home is damaged and your policy limit isn’t high enough	Even more expensive	Dwelling coverage and other structures coverage
Guaranteed replacement cost	Reimburses you for a full rebuild — regardless of the cost	Most expensive level of coverage	Dwelling coverage and other structures coverage

How claim payouts for different levels of coverage work

Let's take a look at how much money you'll receive when you file a claim based on different levels of coverage in your home insurance policy.

Imagine your house is insured for $300,000. One day, a tornado destroys both your home and others' in your community, and you discover it'll cost $500,000 to rebuild due to the increased demand for labor and construction.

Here’s how much you’d be reimbursed on a claim for each policy level:

Coverage level	Coverage limit	Claim payout	Out-of-pocket expenses after payout
Actual cash value	$300,000 minus depreciation (around $50,000)	$250,000	$250,000
Replacement cost value	$300,000	$300,000	$200,000
Extended replacement cost of 125%	$375,000	$375,000	$125,000
Extended replacement cost of 150%	$450,000	$450,000	$50,000
Guaranteed replacement cost	Full rebuild amount	$500,000	$0

→ Find out how to estimate your home’s replacement cost

How to find out how much coverage you need

With the rise in inflation and construction costs skyrocketing since the start of the COVID-19 pandemic, many homeowners don’t have enough coverage to fully rebuild their homes and replace their belongings should disaster strike.

Follow these steps to estimate how much coverage you need for each of the six different sections of your home insurance policy:

Type of coverage	Typical coverage limits	How to calculate needs
Dwelling coverage	$100,000 to $1 million	Multiply the square footage of your home by the average cost per square foot to build in your area
Other structures coverage	10% of your dwelling coverage limit	Multiply the square footage of the other structures on your property by the average cost per square foot to build in your area
Personal property coverage	50% to 70% of your dwelling coverage limit	Make a home inventory of all of your personal belongings
Loss of use coverage	20% of your dwelling coverage limit	Add up how much you spend on living expenses like food, rent, and gas in a typical month
Personal liability coverage	Up to $500,000	Add up all of your assets — including your home, belongings, cars, investments, retirement funds, and savings
Medical payments to others coverage	Up to $5,000	Increase limits if you own a pool, dog, or trampoline that put your guests at greater risk of injury

Most home insurance companies will help you estimate how much coverage you need for each by answering a few questions about yourself and your home. Our team of licensed insurance experts at Policygenius can also help you review your coverage limits to ensure everything you care about is fully protected.

→ Take a deeper dive into how much home insurance you need

What coverages are included in a standard home insurance policy?

A standard home insurance policy includes six core coverages: dwelling, other structures, personal property, additional living expenses, liability, and medical payments to others. Together, these coverages can help pay for damage to your home and personal belongings, unexpected temporary living expenses after a disaster, and legal and medical expenses.

What is the best home insurance company?

There is no one best home insurance company — it’s all going to depend on your coverage needs and priorities. For example, Acuity topped our list of the best home insurance companies thanks to its cheap rates, while Hippo is ideal for techie homeowners and Travelers is a great option for green homes. You can learn more by checking out our complete list of the best home insurance companies of 2022.

Does homeowners insurance cover foundation issues?

Most homeowners insurance companies will cover the cost to repair or replace your foundation if the cause of damage is covered by your policy. Unfortunately, damage from the settling and shrinking of your home’s foundation, as well as earthquakes and pests are not covered by most homeowners insurance companies. You’ll need to purchase additional coverage to protect your home and property from these hazards.

What type of water damage is covered by homeowners insurance?

Water damage from burst pipes and rain or snow are covered by most homeowners insurance companies. Water damage from outside flooding and sewer backups are not covered, but you can buy separate flood insurance or add water backup coverage as an endorsement to make sure you’re fully protected.

What is the 80% rule in homeowners insurance?

If you buy a home with a mortgage, your lender will likely require you to insure your home for at least 80% of its true replacement cost, or the amount it would cost to rebuild the home from the ground up. The 80% rule also applies to how you’re paid out on a claim. If your house is insured for less than 80% of its true replacement cost and you file a dwelling coverage claim, your insurer will only pay out for the actual cash value, or depreciated value of the home.

Does homeowners insurance cover windstorm damage?

Whether or not your home insurance policy covers windstorm damage depends on where you live. Some home insurance companies exclude coverage for wind and hail if you live in an area of the country at high risk for tornadoes, hurricanes, or other types of severe weather. In this case, you'll want to look into separate windstorm insurance or coastal home insurance.

Does homeowners insurance give you both property and liability protection?

Yes, a standard homeowners insurance policy includes protection for both property damage and personal liability. That means if your home or belongings are damaged by a covereed loss, home insurance can help cover the cost of repairs. And if you're found legally responsible for someone else's injury or damage to their property, your personal liability coverage can help cover the cost of medical expenses or legal fees if you're taken to court over the matter.

Does home insurance cover "acts of God"?

An "act of God" is a natural event that is out of human control, like a hail storm, hurricane, tornado, or wildfire. Only certain acts of God are covered under a standard homeowners insurance policy, specifically hurricanes, tornadoes, lightning storms, wildfires, windstorms, and volcanic eruptions. Flood and earthquake damage is not covered by homeowners insurance, so you’ll need to add seperate flood or earthquake insurance to be covered for those losses. You can learn more with our guide to home insurance and acts of God.