What does homeowners insurance cover?

Whether you are a current or prospective homeowner, homeowners insurance offers important financial protection for what may be your most valuable asset. But what does homeowners insurance cover? The answer is: it depends. While standard policies largely offer the same types of coverage, certain things are almost always excluded from a typical policy. Bankrate’s insurance editorial team explains the ins and outs of what home insurance typically covers, as well as what it doesn’t, so you can better understand what to look for when you are shopping for home insurance.

What does home insurance cover?

A standard home insurance policy, or HO-3 policy, typically offers six coverage types:

• Your home’s structure (dwelling coverage)
• Other structures
• Your personal belongings
• Liability protection
• Guest medical payments
• Additional living expenses (loss of use)

So what kinds of damage does your policy cover? The unexpected things that cause damage to your home and property are known as perils. Your dwelling and other structures coverage typically fall under what’s known as ‘open perils’ or ‘all risk’ coverage.’ Open perils provide coverage for any disaster unless it’s been excluded in your policy. Your belongings, on the other hand, fall under  what’s known as ‘named perils.’ That means that only the perils that are named in that portion of your policy are covered.

Additional types of coverage are also available, known as endorsements, or add-ons, and include coverage like scheduled personal property (for expensive items) and sewer backup. Some types of coverage, like flood coverage, must be purchased as a separate policy altogether. We’ll cover more on that later. First, let’s dive into what each of the standard six coverage types mean.

Dwelling coverage

Your homeowners policy is designed to pay to rebuild or repair your home in the case of damage caused by things 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.

It’s important to note that, in a standard policy, a dwelling coverage claim is typically designated to be paid out as replacement cost, which means that no depreciation is factored into what the insurance company pays to make the repairs or replacements.

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. Other structures coverage is also typically designed to be paid out at replacement cost.

Personal property coverage

Coverage for your personal belongings will pay for 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.

Your personal property coverage in a standard policy is often designated to be paid out as actual cash value, which means that your insurance company would only pay for what the original item would be worth today at depreciated values. Replacement cost for your belongings is often available as an option, but will increase your premium.

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.

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. Guest medical payments coverage differs from liability protection in that it can pay out regardless of who is found legally responsible for the injury.

Additional living expenses (ALE)

If damages make your home uninhabitable after a covered claim, 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 financial limits, and in some cases, a time limit as well.

What is not typically covered by home 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. Some of these types of damages can be covered by purchasing an endorsement, or add-on, to your policy, while others will require an entirely separate insurance policy.

Keep in mind: If you live in an area that is prone to disasters, like hurricanes or earthquakes, it’s important to choose coverage that will provide the best financial protection for damage to your home and personal belongings.

Flood damage

Damage from floods is not covered by your standard home insurance policy. You may be required by your lender to purchase flood insurance if your home is located in or near a flood zone. But flooding can (and does) happen anywhere. Given how expensive water damage from even a small flood can be to repair, you may want to consider purchasing flood coverage even if you aren’t in a high-risk zone or required to do so. Policies are available from the National Flood Insurance Program (NFIP) and many private insurers.

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. Additionally, there is typically a 30-day waiting period before flood coverage goes into effect, so purchasing a policy when a major storm is already on the way won’t help.

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.

Water damage

While a standard home insurance policy covers some types of water damage in some circumstances, such as when your refrigerator leaks and it wasn’t caused by neglect, many instances are excluded. Water damage issues involving your sewage systems, such as an overflow or backup, are typically not covered, but that type of coverage can be purchased as an endorsement. And of course, damage from flooding caused by storms needs to be purchased as a separate policy.

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 financial headache 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, it’s a good idea to 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 do automatically include this coverage on standard home insurance policies, so check with your insurance agent to see if that’s the case before looking for additional coverage for this.

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 offers 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 cost for homeowners insurance is $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, known as scheduled personal property, if you have expensive items you want fully covered. Maintaining receipts and photos of your belongings as part of your home inventory could be very helpful if you ever need to file a claim.
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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.
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    How do I get coverage for damage not covered by homeowners insurance?

    Most insurance companies offer the ability to purchase separate policies or add endorsements to home insurance in order to cover any gaps that may not be protected under primary coverage. These can be purchased for things like floods and earthquakes, mold and water damage, and additional coverage for specific valuables that you may keep in your home. Another financial protection tool, home warranty coverage, could also help pay for repairs when things are damaged  or break that are not covered by your home insurance.