What Does Homeowners Insurance Cover?

MoMo Productions/Getty Images
Bankrate Logo

Why you can trust Bankrate

While we adhere to strict , this post may contain references to products from our partners. Here's an explanation for . This content is powered by HomeInsurance.com (NPN: 8781838). For more information, please see our

Accidents can happen in the blink of an eye, even in the comfort of your home.

According to the Insurance Information Institute, homeowners insurance provides you with financial protection in the event of a disaster or accident and insures your home’s structure and belongings. It provides you with the funds needed to repair or rebuild your home, pay for damaged or lost possessions, pay for liability coverage and even cover expenses that you incur if need temporary housing while your house is being repaired or rebuilt.

There are three reasons homeowners typically purchase homeowners insurance:

  1. To protect their assets, such as the building structure and the items inside.
  2. To protect themselves against personal legal liability.
  3. To satisfy mortgage lenders, who typically require homeowners to buy insurance.

If you’re in the market for new homeowners insurance coverage, it’s important to know the answer to the question, “what does homeowners insurance cover?”

What does home insurance cover?

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

  • Your home’s structure
  • Your personal belongings
  • Liability protection
  • Additional living expenses

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

Coverage for your home’s structure

Your homeowner’s policy will pay to rebuild or repair your home in the case of specified disasters like fire, hurricane, hail and lightning. Typically, your policy will also cover detached areas of your home like a garage or gazebo. A general rule of thumb when purchasing coverage is to buy enough insurance to cover the expense of completely rebuilding your home.

Coverage for your personal belongings

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’re unsure about how much coverage you should purchase, the Insurance Information Institute suggests conducting a home inventory to determine the right home insurance coverage plan for you.

Liability protection

Liability insurance protects you from financial losses from property damage and personal injury to others if you are found legally responsible. 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 homeowner’s policy offers, consider an umbrella liability policy, which provides broader protection and higher liability limits.

Coverage for 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, as well as other costs you may incur during that time. This coverage does have limits, and in some cases, a time limit.

In addition, if you rent out part of your home, ALE will cover you for the amount of rent you would have collected if your home hadn’t been destroyed.

What does homeowners insurance not cover?

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 (like hazard insurance) for things that aren’t covered under homeowners insurance.

Earthquake and flood damage

In most states, damage caused by earthquakes and floods aren’t covered by a standard homeowners policy but can be purchased as a separate policy.

Water damage

Water damage issues involving your sewage system, such as an overflow or backup, are typically not covered, but it can be purchased under a separate policy.

Homeowners neglect

Proper care and routine maintenance are crucial to keeping your property in tip-top shape. It can save you from a lot of heartache down the road. Any damages caused by neglect or failure to properly maintain your home aren’t 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 might not be covered by your policy, 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 be purchased for additional coverage under a separate identity theft plan.

Choosing the right homeowners insurance coverage

Before you commit to a policy, make sure it is the right fit for you. There are many companies offering coverage, but not all of them are going to fit your needs.

Research your options thoroughly. Look for how long it takes the company to process claims and how satisfied their customers are with their service. Top ratings indicate consistent service that you can rely upon.

Cost is just one factor when determining the best insurance company for your homeowners insurance. Some additional coverage may be recommended, such as sewer backup, earthquakes, hail and contents replacement add-ons. Inflation protection is also vital because as your property value changes, your policy adjusts to cover the fluctuating values.

Decide which coverage options you need based on your location and property. For example, if you live in a place that has flooding or the potential of storms like hurricanes, the extra money spent on flood insurance could be worth it. Similarly, you might want earthquake coverage if you live in a place like California that has frequent earthquakes.

When comparing quotes, compare the right coverage. For example, some quotes may include an umbrella policy while others may not. Thoroughly review and understand your coverage so there are no surprises later.­


What does home insurance cover?

A homeowners policy pays the cost of repairing or rebuilding your home in case of the natural disasters listed in your policy, theft or fire. It’s important to read what hazards are covered to make sure you have enough insurance for your area.

What is covered under a home insurance policy and what is not included?

Most homeowners policies provide coverage if your home is lost or damaged from hail, lightning, windstorms and fire. Not everything is included — earthquakes and floods are not usually included as standard and need to be purchased separately.

Are personal belongings covered through my homeowners insurance?

Your personal property is covered to a certain amount. If you have expensive items such as jewelry or art, you should consider adding special coverage for your more expensive property.

Is homeowners insurance coverage mandatory?

You’ll need to have homeowners insurance if you’re paying a mortgage. Once your home is paid in full, you’re no longer required to have homeowners insurance, although it’s still advisable to have coverage. Homeowners insurance is much cheaper than having to rebuild your house out of pocket.

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a finance and business journalist who has been featured in Bankrate, Business Jet Traveler, MSN, CheatSheet.com, Freshome.com and TheSimpleDollar.com. She regularly travels to Africa and the Middle East to consult with women’s NGOs about small business development and works with select startups and women-owned businesses to provide growth and visibility.