What does homeowners insurance cover?

Homeowners insurance is one of the most common types of insurance, but understanding it can seem daunting. Bankrate’s insurance experts — who share nearly fifty years of experience in the industry — can help you see how this simple type of insurance policy insures what may be one of your most valuable financial investments, and how you can make adjustments to ensure you’re protected.

What does home insurance cover?

Most standard homeowners insurance policies cover these six types of home insurance coverage:

• Your home’s structure
• Other structures
• Your personal belongings
• Liability protection
• Guest medical payments
• Additional living expenses

There are additional types of coverage that are considered add-ons like medical payments, scheduled personal property and sewer backup.

Dwelling coverage

Your homeowners policy is designed to pay to rebuild or repair your home in the case of specified disasters like fire, wind, hail and lightning. Dwelling coverage includes the main structure of your home and any attached structures, but not any other detached structures on the same premises.

Other structures coverage

When you have detached structures on your property, other structures coverage is designed to protect them. These detached structures can include detached garages, sheds, barns, gazebos and fences.

Personal property coverage

Coverage for your personal belongings will pay the value of your damaged or lost possessions, including furniture, electronics, clothing and collectibles. Even trees, plants and shrubs are covered in some cases. Coverage for personal items also includes items that are stored off-premises.

If you are unsure about how much coverage you need, you can conduct a home inventory to determine the right home insurance coverage plan for you.

Guest medical payments

If a visitor to your home injures themselves, this type of coverage would pay to cover some of their medical expenses, such as ambulance fees, hospital stays and more. The amount varies by home insurance company, so it’s important to review the coverage limit to see if you want to make any adjustments.

Liability protection

Liability insurance protects you from financial losses resulting from damage to others’ property and personal injury to others if you are found legally responsible. Unless they are excluded, this insurance also covers damage caused by your family members and even your pets. Liability protection covers court awards and expenses, depending on your policy.

If you think you need more liability protection than the average homeowners policy offers, consider an umbrella liability policy, which provides broader protection and higher liability limits.

Additional living expenses (ALE)

If damages make your home uninhabitable, this kind of coverage pays for the additional costs of living somewhere else until your home is repaired or rebuilt. It could include hotel and restaurant expenses and other costs you may incur during that time, like laundromat fees and even pet boarding. This coverage does have limits, and in some cases, a time limit.

What types of damage are not protected by most homeowners insurance?

Certain types of damage are typically not covered by home insurance. There are some crucial exclusions to note under homeowners insurance that will help you decide whether additional coverage is necessary. Keep in mind that most policies offer extra, optional protection for things not covered under homeowners insurance.

Earthquake damage

Generally, damage caused by earthquakes is not covered by a standard homeowners policy, but can be purchased as a separate policy — or as an endorsement in some cases. An earthquake insurance policy is typically optional but may be something to consider if you live near an active fault line.

Flood damage

Flood insurance is also separate from your home insurance policy. However, unlike earthquake insurance, you may be required by your lender to purchase the policy if your home is located in or near a flood zone. Flood insurance premiums are typically paid in full up front, so if you need flood insurance, you might want to budget for that in advance if possible.

Water damage

Your policy covers some water damage, but some instances are excluded. Water damage issues involving your sewage systems, such as an overflow or backup, are typically not covered, but coverage can be purchased as an endorsement.

Homeowners neglect

Proper care and routine maintenance are crucial to keeping your property in tip-top shape. Staying current on cleanings, home systems repairs and inspections can save you from a lot of heartache down the road. Any damages caused by neglect or failure to properly maintain your home are not covered by homeowners insurance.

Those damages include but are not limited to:

• Termites and insect damage
• Mold
• Rust
• Bird or rodent damage
• General wear and tear

To avoid costly repairs that your policy might not cover, maintain your home regularly.

Identity theft

Homeowners insurance typically does not cover expenses related to identity theft, such as someone using your credit card to purchase new furniture. This can usually be purchased for additional coverage under a separate identity theft plan or, in a few cases, as an endorsement on your homeowners policy. Some insurers automatically include this coverage on standard home insurance policies.

Choosing the right homeowners insurance coverage

When choosing the right homeowners insurance company, the cost of coverage is just one factor. Each person has different criteria they want their insurance company to meet, whether it’s 24/7 claims response, online and mobile accessibility or the ability to speak with a dedicated agent who recognizes their name each time they call.

If you have unique coverage needs or home characteristics, such as living in a historic home, consider a company that has special endorsements that fit your needs. Knowing how to choose the best home insurance company for you will ensure you’re financially protected if a loss occurs.

Learn more: Affordable home insurance companies

How much does homeowners insurance cost?

In the U.S., the average homeowner pays $1,428 per year for a home insurance policy with $250,000 in dwelling coverage. Depending on your location, average premiums can range from $700 to more than $3,000 per year.

Some of the factors that may impact the cost of your policy include your ZIP code, the age of the home, the size of the home, your insurance claim history and the insurance company that underwrites your policy.

Note that adding additional coverage through separate policies or endorsements, like flood insurance or earthquake insurance, will affect your premium. If you need to purchase additional policies or supplemental coverage beyond what’s typically included in a basic home insurance policy, your home insurance costs will increase. Flood or earthquake insurance may be required in some areas.

To find the most affordable home insurance policy, it’s a good idea to shop around and get quotes from a few different insurers. You might want to think about getting new quotes every year or after a major event, like getting married or making renovations, and not just when you move.

Frequently asked questions

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    Are personal belongings covered through my homeowners insurance?

    Personal belongings are covered through homeowners insurance, but there are limits on specific items. High-value possessions, like jewelry and fine arts, are capped at set dollar amounts, so it’s important to know that you’ll need to add an endorsement to your homeowners insurance policy for full coverage. If you have high-value items, it may be worth buying scheduled personal property coverage to ensure your items are fully covered against losses.
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    Is homeowners insurance coverage mandatory?

    Home insurance isn’t a legal requirement the way that car insurance is for drivers, but that doesn’t mean it can’t be mandatory in some cases. If you have a mortgage or lien on your home, for example, your lender may require home insurance. And even if you’ve paid off your home, home insurance helps financially protect you against covered perils. If you were to suffer a substantial loss without the ability to pay for it in full, homeowners insurance can bridge the gap, allowing you to pay a deductible rather than the full cost of repairs or replacement.
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    What do I need for a homeowners insurance quote?

    For a home insurance quote, most insurance agents and online quoting platforms will ask for information about your home, such as the age, square footage, roof material and more. If you have an existing policy, you can also provide the declarations page to ensure that you have a baseline for coverage types and limits. If you don’t have this, working with a licensed agent could help you determine what you need to insure your home.