HomeInsuranceWhat Does Homeowners Insurance Cover?

What Does Homeowners Insurance Cover?

Homeowners insurance is a contract between you and an insurance company. You pay a premium, and in exchange, the insurance company agrees to pay for certain types of losses or damage to your home and personal property. The specific terms and conditions of your policy will depend on the type of coverage you choose and the insurance company you work with.

What does homeowners insurance cover

Dwelling protection

Dwelling protection is the most basic type of coverage provided by homeowners insurance. It covers the structure of your home and any attached structures, such as a garage or porch. If your home is damaged or destroyed by a covered event, dwelling protection will pay to repair or rebuild it.

Other structures coverage

Other structures coverage covers structures on your property that are not attached to your home, such as a shed or fence. It will pay to repair or rebuild these structures if they are damaged or destroyed by a covered event.

Personal property coverage

Personal property coverage covers your personal belongings, such as furniture, clothing, and electronics. If your personal property is damaged or destroyed by a covered event (peril), personal property coverage will pay to repair or replace it.

Liability coverage

Liability coverage provides financial protection in case someone is injured on your property and sues you for damages. It will also cover any medical expenses for the injured party.

Guest medical payments

Guest medical payments coverage is a type of coverage that is typically included in homeowners insurance policies. It is separate from liability coverage and is specifically designed to cover medical expenses for guests who are injured on your property. This coverage will pay for medical bills, such as ambulance rides, hospital stays, and doctor visits, without the need to prove fault or negligence.

One key difference between guest medical payments coverage and liability coverage is the requirement of fault. With medical payment coverage, medical bills will be paid (up to your coverage limits) regardless of who was at fault. On the other hand, liability coverage will only pay for medical expenses if you are liable for causing the injury.

Another difference to consider is the coverage limits. Most medical payments coverage is capped at around $5,000. Liability coverage, however, can range from $100,000 (this is the standard on most homeowner policies) up to $500,000 or even higher depending on the insurance company. This means that you may have more protection with liability coverage in case of a large settlement or judgment.

Additional living expenses (ALE)

Additional living expenses (ALE) coverage pays for the cost of temporarily living elsewhere if your home is uninhabitable due to a covered event. This can include the cost of a hotel, meals, and other expenses.

Covered perils

In insurance a “peril” is an event or circumstance that results in property damage. Coverage of these perils may vary depending on the insurance company and the specific policy. It’s important to carefully review the policy to understand what perils are covered. Homeowners insurance policies typically cover a wide range of perils, the following is a list of the most basic perils covered:

  • Fire and smoke damage
  • Windstorm and hail damage
  • Lightning damage
  • Damage caused by vehicles
  • Theft and vandalism
  • Damage caused by civil commotion or riot
  • Damage caused by aircraft or vehicles not on your property
  • Volcanic eruption
  • Weight of ice, snow, or sleet
  • Freezing of plumbing, heating, air conditioning, or other systems
  • Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, air conditioning or automatic fire protective system, or household appliance
  • Sudden and accidental damage from artificially generated electrical current
  • Leakage or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective system or household appliance

Cash value policy or a replacement cost policy

A cash value policy will pay the current market value of your home and personal property, while a replacement cost policy will pay the cost to repair or replace your home and personal property.

It’s also important to consider that with the current rate of inflation rebuilding costs may increase in the future. Improvements or additions made to your home, increased labor or material costs, and changes to zoning requirements might require more coverage. So, it’s crucial to ensure that the policy you choose offers enough coverage to rebuild your home in case of a total loss.

For all these reasons, you may want to consider a replacement cost homeowners insurance policy rather than an actual cash value policy. The former provides coverage to make repairs or replace your home and its contents at current costs, taking into account the inflation and the cost of materials. A cash value policy, on the other hand, factors in depreciation due to age, wear and tear, and other factors, which may not fully cover the cost of rebuilding or replacing your home and personal property.

What Doesn’t Homeowners Insurance Cover?

Earthquake damage

Earthquake damage is not typically covered by homeowners insurance policies. If you live in an area at risk for earthquakes, you may need to purchase additional coverage.

Flood damage

Flood damage is typically not covered by standard homeowners insurance policies. It is important to note that if you live in an area at risk for flooding, you will need to purchase additional coverage from the National Flood Insurance Program (NFIP) or from private insurance companies that offer flood insurance coverage. This separate policy is necessary to protect your home and personal property from flood damage as it is not included in a standard homeowners insurance policy.

Water damage

Water damage caused by outside flooding, sewer backup or a neglected repair, typically won’t be covered by your home insurance. It’s important to note that even if your homeowners insurance policy does cover water damage to your home, most homeowners insurance policies will not cover the source of the water damage. So, while your policy may cover the cost of cleaning up the damage and any repairs needed as a result of the sewer backup, it may not cover the cost of replacing or repairing the source of the water damage. For example, if your dishwasher or washing machine was the cause of the backup, the policy may not cover the cost of replacing or repairing it.

Another point to consider is that if water backs into your home through an outside sewer or drain, you also will not typically be covered by a traditional homeowners policy. You may, however, be able to purchase additional sewer or water backup coverage that may help cover damage from that type of event.

Homeowners neglect

Homeowners insurance does not cover damage or loss caused by neglect, such as a leaky roof that went unrepaired for a long period of time.

Different types of homeowners insurance policies

It’s important to understand that there are various types of policies available to meet the different needs of homeowners. Each type of policy is designed to provide coverage for specific situations and types of properties. For example:

  • Standard homeowners insurance policy (HO-3) is typically for homeowners who own a single-family home and is the most common type of policy. It provides coverage for the dwelling, other structures, personal property, liability, guest medical payments, and additional living expenses.
  • Renters insurance (HO-4) is for people who rent their home and typically provides coverage for personal property, liability, and additional living expenses. This policy is designed to protect the tenant’s personal property in case of damage or loss and also provides liability protection in case someone is injured on the rental property.
  • Condo insurance (HO-6) is designed for people who own a condominium. It typically provides coverage for personal property, liability, and any improvements made to the unit. It is different from standard homeowners policy as the owner is responsible for the interior of the unit and the insurance policy will cover that and also the common areas of the building are usually covered by the building’s insurance.
  • Manufactured home insurance (HO-7) is designed for homeowners who live in a manufactured or mobile home. This type of policy provides coverage for the home and personal property, as well as liability protection, similar to a standard homeowners policy. However, it may have additional coverage options specific to manufactured homes, such as coverage for the home’s foundation or transportation of the home.

How to choose the right policy

When choosing a homeowners insurance policy, it’s important to consider the following:

  • The amount of coverage you need
  • The types of coverage you need
  • The specific perils covered by the policy
  • The deductibles and limits
  • The reputation and financial stability of the insurance company
  • It’s also a good idea to shop around and compare quotes from multiple insurance companies to find the best policy for your needs.


How long are home insurance policies in effect?

Home insurance policies are typically in effect for one year, after which they must be renewed. A renewal statement will be sent to you a few weeks prior to its renewal date.

Is home insurance tax deductible?

In most cases, homeowners insurance is not tax-deductible. However, there may be certain situations where a portion of the premium may be tax-deductible, such as if the home is used for business purposes.

What do I need for a homeowners insurance quote?

To get a homeowners insurance quote, you will typically need to provide information about your home, such as its age and location, as well as any other structures on the property and your personal property. You will also need to provide information about your insurance history and claims experience.

Latest Articles