What does homeowners insurance cover?

Homeowners insurance coverage explained

Homeowners insurance provides coverage for your home and personal belongings in case of unexpected damage or loss. It also comes with liability protection that shields your assets from expensive legal judgements if you’re found negligent for an injury or property damage. Without home insurance, you’d need to cover these costs out of your own pocket.

A basic homeowners insurance policy comes with six main coverages: dwelling, other structures, personal property, loss of use, liability, and medical payments. Here’s how each one works 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
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	$100,000 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

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Dwelling coverage

Also known as Coverage A, dwelling coverage helps cover the cost of damage to your home's structure, including the walls, roof, windows, and foundation. This coverage also covers your home’s plumbing, electrical, HVAC systems, and built-in appliances like furnaces and water heaters. If your home has an attached garage, deck, or porch, that’s generally covered as well.

What type of damage is covered? 

Fire, smoke, wind, hail, weight of snow or ice, lightning, and many of the other most common causes of structural damage to your home are covered by the dwelling section of your policy.

However, the best way to find out if damage to your house is covered or not is by understanding what isn’t covered. That’s because in a standard HO-3 insurance policy, your home (dwelling) and standalone buildings on your property (other structures) are covered on an open perils basis. This means all causes of damage are covered except for the following policy exclusions: 

• Earthquakes, landslides, sinkholes

• Flooding

• Government action

• Intentional loss

• Neglect or wear and tear

• Nuclear hazard

• Water damage from sewer backups

• Pest infestations

• Power surges caused by the utility company

• War

If your house is damaged and you file a claim, the burden of proof is on your insurer to prove that the loss is not covered. Because the onus is on your insurance company, open perils is considered the most comprehensive type of home insurance protection.

How to use dwelling coverage

Say lightning strikes a tree and causes it to fall on your roof. Once you file a claim and pay your deductible, your insurance can help pay for repairs to your roof, walls, windows, or anything else that was damaged, up to the dwelling coverage limit in your policy. 

Learn more >> How does dwelling coverage work & how much do you need?

Other structures coverage

The other structures section of your homeowners insurance policy covers structures on your property not attached to your home, including a standalone garage, guest house, fences, gardening sheds, and mailboxes.

What type of damage is covered?

Other structures are also covered on an open perils basis, meaning fire, wind, theft, vandalism, and anything else that is not a specific policy exclusion is covered.

How to use other structures coverage

Say a tornado completely destroys your backyard gardening shed. Once you file a claim and after you pay your deductible, your home insurance can help cover the cost of having it rebuilt, up to the other structures coverage limit in your policy.

Learn more >> How does other structures coverage work?

Personal property coverage

The personal property section of your policy covers damage or theft of your belongings, such as furniture, electronics, clothing, washing machines, sports equipment, and basically anything that you can move into or out of your home. This coverage applies to belongings inside your house and anywhere else in the world.

What type of damage is covered?

Unlike the previous two sections of your policy, personal property is covered by named perils. This means the cause of damage or loss has to specifically listed in your policy in order for your insurance to pay out. In most cases, personal property insurance provides coverage for the following 16 perils:

With named perils personal property coverage, the burden of proof is on you (not your insurer) to prove the loss was caused by one or more of the named perils. While the onus is on you this time to prove the loss is covered, you’re still protected against up to 16 perils, making this one of the broadest forms of coverage.

How to use personal property coverage

Say your laptop, cell phone, and jewelry are stolen from your hotel room while you’re on vacation. Once you file a police report, file a claim, and pay your deductible, your insurance provider can pay to replace your items, up to your personal property coverage limit of liability.

Learn more >> What is personal property coverage?

Loss of use coverage

Also known as additional living expenses (ALE), loss of use coverage pays for your temporary living expenses if your house is damaged by a covered disaster — like a fire, hurricane, or tornado — and you need to live somewhere else during repairs. If you’re displaced from your home due to flooding, earthquake damage, or any other home insurance policy exclusion, your insurance won’t cover your additional living expenses.

What type of expenses are covered?

Most standard policies will cover any reasonable additional living expenses that exceed your normal monthly budget. Those expenses include, but are not limited to the following: 

• Hotel stays

• Temporary rentals

• Restaurant meals

• Groceries

• Relocation (fuel, rental cars, public transit) 

• Dry cleaning 

• Pet boarding

• Storage units

How to use loss of use coverage

Say your home is destroyed by a tornado and you need to live somewhere else for the time being. After filing a home insurance claim, your insurer will send you monthly ALE checks to help you pay for temporary lodging and any other additional living expenses while your home is being rebuilt, up to the loss of use coverage limits in your policy.

Learn more >> What is loss of use coverage in homeowners insurance?

Liability coverage

Liability coverage protects your finances and assets in case you’re found negligent for somebody else’s injury or property damage and sued. Common liability incidents include trampoline or pool-related injuries, slip and fall accidents, and dog bites.

What type of expenses are covered?

Here are a few common liability coverage claims that may be covered by homeowners insurance. Keep in mind that for any of these to be covered, it needs to be proven that you or a household relative’s negligence caused the incident to occur:

• Medical bills if a guest is injured on your property 

• Damage to someone else’s property

• Legal expenses, including lawyer fees, court fees, and judgements

How to use personal liability protection

Say a food delivery person slips on your icy sidewalk and breaks their arm. After filing a claim with your insurer, you would likely be found negligent for not salting the sidewalk. From there, your insurance would likely pay the injured party’s medical bills, along with any other expenses, up to the liability coverage limit in your policy. 

Learn more >> What is personal liability coverage?

Medical payments coverage

The medical payments portion of your policy covers minor injuries to guests if they’re injured on your property, whether you’re negligent for the injury 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. [2]

What type of expenses are covered?

Minor physical injuries that occur to a guest on your property — regardless of who is at fault. Covered expenses include:

• Health insurance deductibles and copays

• Doctor or hospital visits

• Medical, dental, or surgical procedures

Keep in mind this does not cover injuries to family or friends who are permanent residents of the home.

How to use medical payments protection

Say your child’s friend slips on your pool deck, causing them to slice open their foot. After filing a claim, your insurance would likely help cover the cost of stitches and other medical treatment, up to the medical payments coverage limits in your policy. 

Learn more >> What is medical payments coverage?

Overview of what is & isn’t covered by home insurance

Your homeowners insurance policy will list out which perils are covered and not covered. But there’s some gray area to consider here as well, as some policy exclusions (like water damage) may actually be covered under a certain set of circumstances. 

Here’s an example of perils that are usually covered, sometimes covered, and rarely covered under a standard home insurance policy.

Incident	Is it covered?	Explanation
Fire	Usually	Most homeowners insurance policies cover fire damage, though coverage may be limited in areas prone to wildfires.
Roof leaks	Sometimes	Whether or not home insurance will cover a roof leak depends on the source of the damage. Sudden damage from wind or hail would likely be covered, but a gradual leak due to normal wear and tear would likely not be covered.
Theft	Usually	Most home insurance policies cover theft of personal belongings in most scenarios, including theft from your home, car, or hotel room.
Plumbing	Sometimes	Standard home insurance covers plumbing damage if it's sudden and unexpected, but gradual water damage or pipe leaks generally won't be covered.
Water damage	Sometimes	While most policies won't cover damage caused by natural flooding (like storm surge or flash floods), home insurance may cover water damage that's sudden and accidental, like a burst pipe.
Mold	Sometimes	If the underlying cause is sudden and unexpected or hidden water damage, then home insurance may cover mold remediation and removal. Otherwise, it generally is not covered.
Termite infestation	Rarely	Home insurance generally won't cover damage caused by termites nor their removal except for a rare set of circumstances.
Dog bites	Sometimes	Your policy's liability protection will likely cover medical and legal expenses from a dog bite unless your dog's specific breed is excluded from coverage.
Foundation issues	Sometimes	Home insurance can cover everything from foundation issues to broken pipes under slab as long as the cause of the damage is covered. But the natural settling of your foundation or normal wear and tear is not covered.
Lost or misplaced items	Rarely	Unless you upgrade your personal property coverage to open perils or broaden coverage via a schedule personal property endorsement, lost or misplaced items are generally not covered.
HVAC system	Sometimes	If your HVAC is damaged by a covered peril like lightning, fire, or sudden water damage, you may be covered. But damage due to maintenance issues or normal wear and tear are not covered.

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Understanding coverage for earthquakes and floods

For an additional cost, some 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 insurance or earthquake insurance policies to protect your home and belongings from those disasters.

Increase your home insurance coverage with endorsements

Most insurance companies offer a variety of optional coverages that can add an extra layer of protection for the structure of your home, increase coverage limits on expensive items like jewelry, and expand coverage to protect against losses that aren’t normally covered by a standard policy. 

But few homeowners actually take advantage of these policy add-ons. According to our policycentral Home Insurance & Inflation Shopping Survey, 33% of homeowners don't know if they have any of these extra coverages. And just 17% have ordinance or law or inflation guard protection — two valuable endorsements that can protect you from rising rebuild costs after a natural disaster.

To ensure your home is fully protected, here's a look at popular endorsements you should consider adding to your home insurance policy:

• Ordinance or law: This covers the increased cost of construction if your house is damaged and needs to be rebuilt or repaired according to local building codes.

• Inflation guard: This automatically adjusts your coverage each year to compensate for increases in construction and labor costs in your area due to inflation.

• Scheduled personal property: This increases coverage limits on high-value items with lower sublimits in a standard policy, including jewelry, fine art, and firearms.

• Water backup: This covers water damage caused by backed up drains, septic tanks, sewer pipes, and sump pumps.

• Equipment breakdown: This covers the cost of appliance replacement or repairs in the event the appliance breaks down due to mechanical or electrical failure.

• Service line: This covers service line breaks on your property that need to be excavated or repaired. This coverage applies to cable lines, drain pipes, Internet lines, power lines, sewer lines, and more.

Learn more >> 13 home insurance policy endorsements 

How does homeowners insurance work?

To keep your homeowners insurance coverage active and ensure your house stays protected, you pay a premium to your insurance company. In the unfortunate event that you need to use this coverage, you’ll first have to report the claim to your insurer and provide evidence of the damage or loss, after which point your insurer will review the claim and reimburse you for it. 

Your claim payment amount will depend on your coverage limits, how much evidence you were able to provide for the loss, your out-of-pocket deductible amount, and the loss settlement provision (aka coverage level) that the insurer uses to calculate how much it pays out.

Here’s a look at how each coverage level works, which part of your policy it applies to, and how it factors in to the insurance claim process.

* Most standard home insurance policies come with actual cash value personal property coverage and replacement cost dwelling coverage. But depending on your insurer and what they offer, you may be able to upgrade to the next level of coverage for an additional fee.

Homeowners insurance deductibles

Your home insurance deductible is the amount you're responsible for paying out of pocket before your insurance kicks in to cover the rest of your claim. There are generally two types of deductibles:

• Dollar amount deductibles: This is a flat dollar amount that you’ll pay on most types of claims. While the standard dollar amount deductible is typically $500 or $1,000, some insurers also offer high deductible policy options.

• Percentage deductibles: This deductible represents a percentage (like 1% or 3%) of your home’s insured value (aka your dwelling coverage limit). These deductibles typically apply to wind damage claims, and are generally offered in states where tornado and hurricane disasters are common. 

Before sending you your claim reimbursement, your insurer will subtract the deductible amount from the loss or damage amount. For example, if your deductible is $1,000 and your house suffers $20,000 in damages, your insurer would subtract $1,000 from that amount before paying you the remaining $19,000 for repairs.

While choosing a high deductible can lower your homeowners insurance premium, you'll have to pay more out of pocket when you file a claim. If you have a low deductible, you’ll pay higher premiums but lower out of pocket costs when you make a claim.

How to find out how much coverage you need

In recent years, high inflation and increased construction costs have have left many homeowners without enough coverage to fully rebuild their homes and replace their belongings after a disaster.

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

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 policycentral can also help you review your coverage limits to ensure everything you care about is fully protected.

Learn more >> How much home insurance do I need?

Frequently asked questions

What is homeowners insurance?

Homeowners insurance is a type of financial protection that covers your home, possessions, and total assets from unexpected disasters or accidents. In addition to paying for damage or loss to your physical property, homeowners insurance can also cover the cost of medical bills and expensive lawsuits in the event you’re legally responsible for injuring someone or damaging their property.

Is homeowners insurance required?

Although homeowners insurance is not required by law, most lenders require proof of homeowners insurance before extending you a loan. To give yourself time to compare rates and coverage options, start shopping around for home insurance at least three weeks before your closing date.

Does home insurance cover mold removal?

Home insurance may cover mold removal if the underlying cause of the mold is sudden and unexpected, like if a pipe suddenly bursts or the mold growth was hidden away in your walls and not obvious. Otherwise, it likely won't be covered.

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 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.