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What does homeowners insurance cover?

Homeowners insurance covers the cost to repair your home or replace your personal belongings when they’re damaged by fire, lightning, wind, and other covered perils.

Pat Howard 1600Jennifer Gimbel

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Pat Howard

Pat Howard

Senior Editor & Licensed Home Insurance Expert

Pat Howard is a senior editor and licensed home insurance agent at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

&Jennifer Gimbel

Jennifer Gimbel

Managing Editor & Home Insurance Expert

Jennifer Gimbel is a managing editor and home insurance expert at Policygenius, where she oversees our homeowners insurance coverage. Previously, she was the managing editor at Finder.com and a content strategist at Babble.com.

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Expert reviewed

This article has been reviewed by a licensed Policygenius expert to ensure that sources, statistics, and claims meet our standard for accurate and unbiased advice.

Learn more about oureditorial review process.

By

Fabio Faschi, PLCS, SBCS, CLCS

Fabio Faschi, PLCS, SBCS, CLCS

Licensed Property & Casualty Insurance Expert

Fabio Faschi is a licensed property and casualty insurance agent. His expertise on home and auto insurance has been featured on Forbes, Consumer Affairs, Realtor.com, Apartment Therapy, SFGATE, Bankrate, and Lifehacker.

Updated|3 min read

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What does homeowners insurance cover?

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.

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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 typeWhat it doesHow much you need
DwellingPays to repair or rebuild your house and structures attached to itEnough to completely rebuild your home from the ground up at today’s construction prices (aka your home’s replacement cost)
Other structuresPays to repair or rebuild your shed, guest house, fence, or other structures on your property not attached to your home10% of your dwelling coverage limit
Personal propertyPays to replace furniture, electronics, kitchen appliances, and other stuff you own50% to 70% of your dwelling coverage limit
Loss of usePays for hotel stays, rentals, restaurant bills, and other temporary expenses while your home is being rebuilt20% of your dwelling coverage limit
Personal liabilityPays for guests' medical bills and legal expenses if you’re found legally responsible$300,000 to $500,000
Medical payments to othersPays 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: 

Home

Disasters covered

Fire and smoke, lightning, wind, hail, weight of snow, water damage from burst pipes or appliance overflow, frozen plumbing and HVAC systems, vandalism, theft, and more covered perils listed in your policy.

Policy

Most common causes of claims

Wind and hail (46%), fire and lightning (24%), and water damage and freezing (20%), according to 2020 home insurance losses by cause data from the Insurance Information Institute.

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Example of how it works

Say lightning strikes a tree in your yard, causing it to fall on your roof. After filing your claim for roof damage, your insurance company will pay for the repair costs — minus your deductible.

If the damage is less than your deductible, you can’t file a claim

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 out of your own pocket 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.

Other structures coverage

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

Home

Disasters covered

Fire, smoke, lightning, wind, hail, weight of snow, water damage from burst pipes or appliance overflow, frozen plumbing and HVAC systems, vandalism, theft, and more covered perils listed in your policy.

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Example of how it works

Say wind from a hurricane causes your backyard fence to blow away. You can file a claim with your home insurance company to replace your fencing — minus your deductible.

Personal property coverage

Homeowners insurance also covers your personal property, including your:

Home

Disasters covered

Fire, smoke, lightning, wind, hail, weight of snow, water damage from burst pipes or appliance overflow, frozen plumbing and HVAC systems, vandalism, theft, and more covered perils listed in your policy.

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Example of how it works

Say your laptop, cell phone, and jewelry are stolen from your hotel room while you’re on vacation. You can file a claim with your home insurance company to have your items replaced — after meeting your deductible. While homeowners insurance protects your belongings from theft both on and off your property if they’re stolen, less than 1% of home insurance losses in 2020 were theft-related, according to the Insurance Information Institute.

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.

Home

Disasters covered

If your home is being rebuilt due to a covered disaster — like a fire, hurricane, or tornado — then you’re likely eligible for loss of use payments. But if your home is damaged by a disaster that isn’t covered by home insurance — like a flood or earthquake — you wouldn’t be able to tap into your loss of use coverage.

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Example of how it works

Say your home is destroyed by a tornado and you need to live somewhere else for the time being. Your home insurance will pay for you to live in a rental home of similar value, along with any other additional living expenses 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]

Home

Disasters covered

Here are a few circumstances where your personal liability insurance will kick in to cover legal, medical, and repair bills you’re responsible for:

  • Guest is injured using your pool or trampoline

  • Your firearm goes off while cleaning it — injuring your neighbor

  • A food delivery person slips on your icy sidewalk

  • A dead tree in your yard falls on your neighbor’s house

  • Your cat destroys your guest’s expensive fur coat

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Example of how it works

Say a food delivery driver slips on your icy sidewalk and breaks their arm. Since it’s easy to prove you were negligent in not salting your sidewalk, your home insurance company would likely cover the driver’s medical bills and any legal bills that arise if they sue you for damages.

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]

Home

Disasters covered

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

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Example of how it works

Say your child’s friend slips on your pool deck, causing them to slice open their foot. Your insurance company will cover the medical payments for the child to get stitches — up to the coverage limits in your policy. If the medical expenses are any more than that, you’ll have to pay the difference out of pocket.

→ Learn more about how homeowners insurance works

What type of damage is NOT covered by homeowners insurance?

A standard home insurance policy doesn’t include 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

You can add even more coverages to your home insurance policy

Most insurance companies offer a variety of optional coverages — called endorsements — 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, including plumbing backups, equipment breakdown, and service line damage.

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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 most home insurance companies offer:

Coverage levelHow it worksHow much it costsAvailable for …
Actual cash valueSubtracts depreciation from your claim payoutCheapest level of coveragePersonal property coverage
Replacement cost valueReimburses you for the cost of repairing your home and replacing your things to their original condition — regardless of depreciationSlightly more expensiveDwelling coverage, other structures coverage, and personal property coverage
Extended replacement costIncreases your dwelling coverage limit by 25% to 50% if your home is damaged and your policy limit isn’t high enoughEven more expensiveDwelling coverage and other structures coverage
Guaranteed replacement costReimburses you for a full rebuild — regardless of the costMost expensive level of coverageDwelling coverage and other structures coverage

Let's take a look at an example.

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 levelCoverage limitClaim payoutOut-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 costFull 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 coverageTypical coverage limitsHow to calculate needs
Dwelling coverage$100,000 to $1 millionMultiply the square footage of your home by the average cost per square foot to build in your area
Other structures coverage10% of your dwelling coverage limitMultiply the square footage of the other structures on your property by the average cost per square foot to build in your area
Personal property coverage50% to 70% of your dwelling coverage limitMake a home inventory of all of your personal belongings
Loss of use coverage20% of your dwelling coverage limitAdd up how much you spend on living expenses like food, rent, and gas in a typical month
Personal liability coverageUp to $500,000Add up all of your assets — including your home, belongings, cars, investments, retirement funds, and savings
Medical payments to others coverageUp to $5,000Increase 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

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 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.