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What does homeowners insurance cover?

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A man sits with his son next to a sink and consult instructions on a smartphone to figure out what to do about a leak.
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Whether you’re a first-time homebuyer or have lived in your home for some time, knowing what homeowners insurance covers and doesn’t cover can help you secure the coverage you need, without paying for coverages you don’t. With this knowledge, you can make an informed decision on finding the right home insurance coverage with the best carrier to meet your needs.

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, scheduled personal property and sewer backup.

Dwelling coverage

Your homeowner’s policy is designed to pay to rebuild or repair your home in the case of specified disasters like fire, hurricane, hail and lightning. Dwelling coverage includes the main structure of your home, 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.

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 homeowner’s 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 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 for things not covered under homeowners insurance.

Earthquake and flood damage

Generally, damage caused by earthquakes and floods is not covered by a standard homeowners policy, but can be purchased as a separate policy — or as an endorsement in some cases.

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

Frequently asked questions

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a former personal finance contributor at Bankrate. She is a finance and business journalist who has been featured in Business Jet Traveler, MSN, CheatSheet.com, Freshome.com and TheSimpleDollar.com.
Edited by
Insurance Editor