What’s included on a homeowners insurance policy?

What’s covered and what’s not is thoroughly explained in the policy that the homeowners insurance company has you sign before coverage goes into effect.

Pat Howard 1600

Pat Howard

Published September 13, 2018

Homeowners insurance covers the risk that your house or personal belongings will be damaged or destroyed or that you’ll be sued for your entire net-worth if someone is injured in your home. What is covered and what isn’t covered is clearly explained in your policy before it goes into effect. Your homeowners insurance company will reimburse you if it’s determined that the loss or damage was covered by an eligible condition.

A basic HO3 open peril policy – the most common type of homeowners insurance policy and the subject of this policy guide – has six core coverage parts that will be itemized on your policy’s declarations page:

  • Dwelling, which covers your home’s structure and also covers your roof.

  • Other structures, which covers your garage, shed, or Medieval guard tower.

  • Personal property, which covers your personal property.

  • Loss-of-use, which covers alternate living accomodations if you can no longer live in your home.

  • Personal liability, which covers your legal expenses if someone is injured in your home and they sue.

  • Medical payments, which covers your guest’s hospital bills if they get injured and require medical treatment.

Your homeowners insurance policy will also give you the option to add additional coverage that covers what your basic policy doesn’t, like scheduled property coverage to protect your fine furs and watches or flood insurance to reimburse you for damage caused by floods.

We provided a handy guide that will walk you through what you should expect to see on a policy, including the different coverages, the perils or conditions under which you’re covered, and the amounts of each coverage you typically need.

Homeowners insurance declarations page

Every homeowners insurance policy comes with a declarations page, which is a cover sheet that itemizes your homeowners insurance deductibles, premiums and any added costs.

You’ll find your name, address, the agent who manages your policy, their address, and then information like the type of homeowners policy (HO1, HO2, or HO3), the policy term (12 or 24 months), and the date the bill was prepared.

You'll also see every component of coverage in your policy, the amount you pay in premiums for each component as well as the components’ limits of liability, which is the maximum amount the company will pay out for a given claim under that part of the policy. It will also list the policy’s deductible, which is the amount you pay out of pocket on a loss before the insurer covers the rest.

There’s also a discounts portion of the declarations page that lists any discounts applied to your monthly premiums. Some terms you’ll potentially see on your policy are:

  • loss free discounts, which rewards you for not filing excessive claims.
  • deductible discounts, because high deductibles lower your rates.
  • protective devices, a discount that takes your security system and storm-proof windowing into consideration.

Lastly, the declarations page will indicate how you receive payouts for a covered loss. One option is for the actual cash value of an item, meaning its value minus depreciation. You may also choose the replacement (or reimbursement) provision, which lets you receive a payout equal to the current market value of the same or a similar item.

Homeowners insurance coverage components

Your typical home insurance policy consists of six main coverage parts. The first four of these coverages deal with the property and damages that may impact it directly (dwelling, other structures, personal property, loss-of-use).

The last two are liability coverages that will pay damages for which you are held liable (personal liability, medical payments).

Dwelling coverage

Dwelling coverage is the foundation of your homeowners insurance policy, as all other property values are calculated in proportion to that amount. The amount is determined on an individual basis by each insurance carrier for the replacement value of the building in question. The carrier underwriters determine this value based on a number of factors that reflect the total cost to rebuild the structure in case of a total loss.

Something to note, there isn’t a correlation between the dwelling value of a property and its market-value or purchase-price. Perils that are deemed “excluded” or not covered by your policy are:

  • Earth Movement (earthquake coverage can be endorsed on)
  • Ordinance or Law (some coverage may be provided in your policy)
  • Water Damage (Sudden & Accidental Water Damage is automatically included; others can be endorsed onto the policy)
  • Power failure
  • Neglect
  • War
  • Nuclear hazard
  • Intentional loss
  • Government action
  • Collapse (some coverage may be provided in your policy)
  • Theft to a dwelling under construction
  • Vandalism or malicious mischief (only if vacant more than 60 days)
  • Mold, fungus, or wet rot (some coverage may be provided in your policy)
  • Wear & tear or deterioration
  • Mechanical breakdown
  • Smog, rust & corrosion
  • Smoke from agricultural smudging & industrial operations
  • Discharge, dispersal, seepage of pollutants
  • Settling, shrinking, bulging, or expanding
  • Birds, vermin, rodents, insects
  • Animals owned by insured

Other structures coverage

This coverage is typically 10% of your total dwelling coverage and covers additional structures built around your home, including fences, gazebos, decks and sheds.

Personal property coverage

Personal property coverage reimburses you for stuff in your home when it’s damaged or destroyed, like clothes, furniture, appliances and toys. Personal property coverage is anywhere between 50% – 75% of your dwelling coverage limit.

Some items – like jewelry, money, expensive electronics, and silverware – have limited coverage amounts on most home insurance policies. Here’s a rundown of limits imposed on certain items:

  • $200 for money, bank notes, coins, precious metals, stored value cards and smart cards.

  • $1,500 for securities, accounts, deeds, evidences of debt, letters of credit, notes, manuscripts, personal records, passports, tickets and stamps (limit includes cost to research, replace, or restore the information from the lost or damaged material).

  • $1,500 on watercraft of all types, including trailers, furnishings, equipment and outboard engines or motors.

  • $1,500 on trailers or semi-trailers not used with watercraft of all types.

  • $1,500 for loss by theft of jewelry, watches, furs, precious and semiprecious stones.

  • $2,500 for loss by theft of silverware, silver-plated ware, goldware, gold-plated ware, platinum ware, platinum-plated water and pewterware.

  • $2,500 for loss by theft of firearms and related equipment.

  • $2,500 on property on the residence premises, used primarily for business or work purposes.

  • $500 on property, away from the residence premises, used primarily for business or work purposes.

  • $1,500 on electronic apparatus and accessories, while in or upon a motor vehicle. Accessories include antennas, tapes, wires, records, discs or other media

  • $1,500 on electronic apparatus and accessories used primarily for business or work while away from the residence premises and not in or upon a motor vehicle. Accessories include antennas, tapes, wires, records, discs or other media that can be used with any apparatus described above.

Most policies cover personal property on a named-peril basis, which means they are only insured against perils specifically listed in the policy. However, this coverage can easily be amended as an open-peril policy, which covers every condition except for perils that are specifically listed, like your dwelling coverage.

The 16 perils that your personal belongings are certainly protected from are:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism or malicious mischief
  • Theft
  • Volcanic eruption
  • Falling objects
  • Weight of ice, snow, or sleet
  • Accidental discharge or overflow of water or stream
  • Sudden & accidental tearing apart, cracking, burning, or bulging freezing
  • Sudden & accidental damage from artificially generated electric current

Loss of use

This coverage will help pay for expenses that arise if your home is uninhabitable or inaccessible due to damage from a covered peril. This coverage will cover payments for extended hotel stays, eating out at restaurants and other living expenses associated with you not being able to use your property. Loss-of-use is typically around 20% of your dwelling limit.

Personal liability

Personal liability coverage is one of the more comprehensive coverages on your home insurance policy and provides protection for any bodily injury or property damage to others for which you are held liable.

Liability protection extends to you everywhere, not just within your home. However, it doesn’t provide coverage for injuries sustained by you, the insured, that would be covered by a health insurance policy. It also doesn’t cover liability due to an auto accident – that would be covered by auto insurance.

Liability coverage limits are typically in the amounts of $100,000, $300,000, $500,000 or as high as $1,000,000.

Medical payments

Medical payments coverage, also known as “goodwill coverage”, is designed to provide medical expenses for people who were injured in your home or were injured by you.

This coverage can be used immediately to get an injured individual the medical attention they need without repercussions of a claimant lawsuit that’s required for liability coverage to go into effect. This limit isn’t determined as a portion of any other coverage provision and is typically $1,000 to $5,000.

Insurance Expert

Pat Howard

Insurance Expert

Pat Howard is an Insurance Editor at Policygenius in New York City, specializing in homeowners insurance. He has been featured on Property Casualty 360, MSN, and more. Pat has a B.A. in journalism from Michigan State University.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.