Q

What does homeowners insurance cover?

A

Homeowners insurance pays for damage to your home and personal belongings so that you don’t have to.

Pat Howard 1600

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Pat Howard

Pat Howard

Property and Casualty Insurance Expert

Pat Howard is a senior editor at Policygenius specializing in property and casualty insurance. His work has been featured on Property Casualty 360, Fatherly, MarketWatch, and more.

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Fabio Faschi, PLCS, SBCS, CLCS

Fabio Faschi, PLCS, SBCS, CLCS

Property & Casualty Insurance Expert

Fabio Faschi is a former property and casualty team lead at Policygenius in New York City. He's worked in the insurance and real estate industry for more than six years as an independent agent and broker representing more than 40 carriers in property and casualty products, and previously worked in real estate settlements and title insurance negotiating insurance requirements with banks, realtors, and new home buyers. Fabio's expertise on home & auto insurance has been featured on Forbes, Consumer Affairs, Realtor.com, Apartment Therapy, The Simple Dollar, SFGATE, Bankrate, and Lifehacker.

Updated October 7, 2021|4 min read

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Homeowners insurance is financial protection for anyone who owns a house. If your home is damaged or destroyed in an unexpected incident, like a fire or tornado, homeowners insurance can pay to repair or rebuild it. But that’s just one example of how your policy protects you. In this guide, we’ll explain all of the ways you’re covered by homeowners insurance.

Key Takeaways

  • Homeowners insurance helps cover the costs if something unexpectedly damages or destroys your home, like a bad storm or burst pipe

  • Your insurance company will only accept a claim if the cause of property damage or loss is a peril covered by your policy 

  • Examples of covered perils include fire, lightning, wind, hail, and theft

  • Earthquakes and flooding are usually not covered by homeowners insurance and require additional insurance coverage

While no two homeowners insurance policies are created equal, every basic policy has the same six coverages that cover your home, belongings, and assets — here’s a look at what each one does.

Coverage typeWhat it doesWhen you can use it
DwellingPays to repair or rebuild your house and structures attached to itIf your house is damaged by fire, wind, or any other covered disaster
Other structuresPays to repair or rebuild your shed, guest house, fence, or other structuresIf a structure not attached to your house is damaged by a covered disaster
Personal propertyPays to repair or replace furniture, electronics, kitchen appliances, and other stuff you ownIf your belongings are stolen or damaged by a covered loss
Additional living expensesPays for hotel stays, rentals, restaurant bills, and other temporary expensesIf your home is damaged in a disaster and you're not able to live there
Personal liabilityPays for guests' medical bills and legal expensesIf you're legally responsible for someone's injury or property damage
Medical paymentsPays for guests' medical bills from minor injuriesIf a guest sustains a minor injury at your home, regardless of fault
Coverage typeWhat it doesWhen you can use it
DwellingPays to repair or rebuild your house and structures attached to itIf your house is damaged by fire, wind, or any other covered disaster
Other structuresPays to repair or rebuild your shed, guest house, fence, or other structuresIf a structure not attached to your house is damaged by a covered disaster
Personal propertyPays to repair or replace furniture, electronics, kitchen appliances, and other stuff you ownIf your belongings are stolen or damaged by a covered loss
Additional living expensesPays for hotel stays, rentals, restaurant bills, and other temporary expensesIf your home is damaged in a disaster and you're not able to live there
Personal liabilityPays for guests' medical bills and legal expensesIf you're legally responsible for someone's injury or property damage
Medical paymentsPays for guests' medical bills from minor injuriesIf a guest sustains a minor injury at your home, regardless of fault

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Homeowners insurance coverages explained

Homeowners insurance is more than just coverage for your home — in fact, it’s often referred to as a “package policy” since it covers damage to your property and your liability (meaning your legal responsibility) for any injuries that you’re responsible for. Your homeowners insurance protects you in four important ways.

It pays to rebuild or repair your house or other structures on your property

Homeowners insurance covers the cost of repairs or a full rebuild of your home through your policy's dwelling coverage if it’s damaged or destroyed by a fire, storm, or any other disaster listed on your policy. Your policy also covers damage or loss to structures that are technically separate from your home, like a detached garage, shed, or fence.

It pays to replace your belongings if they’re damaged or stolen

Homeowners insurance also covers your personal property, meaning your clothing, furniture, appliances, and other personal items if they’re stolen or damaged by any covered perils listed in your policy. This coverage also applies to damage or theft away from home, so if someone breaks into your hotel room or storage unit and steals your belongings, your insurer may pay to replace it. 

Expensive valuables like jewelry, watches, and electronics, often come with special limits of liability — meaning lower reimbursement limits — if they’re stolen. In a basic home insurance policy, claim payouts for jewelry theft are usually capped at $1,500. 

Genius tip

Most insurance companies offer a variety of optional coverages that can add an extra layer of coverage for the structure of your home, increase coverage limits on expensive items, and expand coverage to protect against losses that aren’t normally covered by a standard policy, including plumbing backups, appliance breakdown, and service line damage.

It pays for temporary living expenses while your house is being repaired

If your house is severely damaged or destroyed in a disaster and you have to stay somewhere else, loss of use coverage can pay for a hotel or temporary rental. It can also reimburse you for other extra living expenses while you’re not able to stay at home, like restaurant meals, dry cleaning, and added transportation costs while your home is being rebuilt or repaired.  

It pays for expensive lawsuits if you’re responsible for damage or injury

Along with covering your property and living expenses, homeowners insurance also covers your personal liability if you’re personally responsible for an accidental injury or property damage and sued. In other words, if your dog bites someone and it’s determined that your negligence led to the incident, your policy’s personal liability coverage can kick in to pay for medical bills, lost wages, attorney fees, and any other damages. 

→ Learn more about how homeowners insurance works

Genius tip

In order to use any of these coverages, you’ll have to file a claim with your insurance company, which is how you submit for reimbursement after a loss. Policies vary, so prior filing a claim, be sure to check the fine print of your policy or talk to your insurance agent to see if the damage or loss is covered.

What type of damage is and isn’t covered?

Your home insurance policy outlines exactly which perils are and aren’t covered. If the incident is covered and you file a claim, your insurance company will reimburse you up to the amount specified in your policy. If the incident isn’t covered, your claim will be denied and you’ll have to pay for the damage or loss out of pocket. 

Here’s an example of perils that are covered, never covered, and sometimes covered under a standard home insurance policy.

Covered

  • Fire

  • Lightning

  • Smoke

  • Wind

  • Hail

  • Theft

  • Explosion

  • Weight of snow or ice

  • Power surges

  • Vandalism

Sometimes covered

  • Mold

  • Internal water damage

  • Tree removal

  • Roof leaks

  • Foundation issues

  • Dog liability

Never covered

  • Earthquakes

  • Flooding

  • Pests

  • Routine wear and tear or age

  • Intentional acts

Covered

  • Fire

  • Lightning

  • Smoke

  • Wind

  • Hail

  • Theft

  • Explosion

  • Weight of snow or ice

  • Power surges

  • Vandalism

Sometimes covered

  • Mold

  • Internal water damage

  • Tree removal

  • Roof leaks

  • Foundation issues

  • Dog liability

Never covered

  • Earthquakes

  • Flooding

  • Pests

  • Routine wear and tear or age

  • Intentional acts

For an additional cost, some insurers will let you add flood and earthquake coverage to your homeowners insurance as an optional endorsement, meaning your policy is essentially modified to cover flood and earthquake damage. If your insurer doesn’t offer this, you’ll have to purchase separate flood and earthquake insurance to protect your home and belongings from those disasters.

→ Learn more about which perils are and aren’t covered by homeowners insurance

Genius tip

If you file a claim and the loss is covered by your policy, your insurer will pay out for the claim as long as you meet your policy deductible. This is the amount you’re responsible for paying on each claim before your insurance kicks in. If the damage or loss amount is less than your policy deductible, you won’t be able to file a claim.

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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 in homeowners insurance:

  • Actual cash value: This is the cheapest level of coverage but it subtracts depreciation (like the property’s age or condition) from your claim payout, leaving you paying more out of pocket on a claim if your home is damaged.

  • Replacement cost value: This is more expensive than actual cash value, but you’re reimbursed for the cost of repairing or rebuilding your home to its original condition before it was damaged.

  • Extended replacement cost: A more costly level of coverage than replacement cost, but it increases your coverage by a capped amount (like 25% or 50%) if your home is damaged and your policy limit isn’t high enough.

  • Guaranteed replacement cost: The most expensive level of coverage, but it reimburses you for a full rebuild regardless of the cost. 

Imagine your house is insured for $300,000. One day, a natural disaster 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 levelCoverage limitClaim payoutOut of pocket expenses after payout
Actual cash value$300,000 minus depreciation (like $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 costFull rebuild amount$500,000$0

→ Learn about how to estimate your home’s replacement cost

Frequently Asked Questions

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. 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.

Does homeowners insurance cover foundation issues?

Homeowners insurance 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 and other common causes of foundation issues, earthquakes and pests, are not covered by homeowners insurance.

What type of water damage is covered by homeowners insurance?

Water damage from burst pipes and rain or snow are covered by homeowners insurance. 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.

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What’s included on a homeowners insurance policy?

Your homeowners policy includes different sections that explain what is and isn’t covered by your policy. It also thoroughly explains your policy limits, deductibles, and premiums.

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What is dwelling coverage?

Dwelling coverage is the portion of your homeowners insurance policy that helps pay to rebuild or repair the physical structure of your home in the event of a covered loss.

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