What Does Homeowners Insurance Cover?

Does your homeowners insurance policy provide enough coverage?

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What does home insurance cover?

Homeowners insurance protects you, your personal property, and your home from covered losses. What counts as a covered loss depends on the type of homeowners policy you choose. Below are common home insurance options.

Home Insurance TypeProperty Covered AgainstContents Covered Against
HO-2 - Broad FormNamed perilsNamed perils
HO-3 - Special FormOpen perilsNamed perils
HO-5 - Comprehensive FormOpen perilsOpen perils


A named peril policy covers only the specific hazards listed on your policy. A peril is a cause of damage. A HO-2 or HO-3 policy covers only events listed on your policy. Below are the 16 named perils commonly covered by named perils insurance policies.

  • Lightning or fire
  • Hail or windstorm
  • Damage caused by aircraft
  • Explosions
  • Riots or civil disturbances
  • Smoke damage
  • Damage caused by vehicles
  • Theft
  • Vandalism
  • Falling objects
  • Volcanic eruption
  • Damage from the weight of snow, ice, or sleet
  • Water damage from plumbing, heating, or air conditioning overflow
  • Water heater cracking, tearing, and burning
  • Damage from electrical current
  • Pipe freezing

HO-3 and HO-5 homeowners insurance policies are "open perils" policies. The majority of insured homes in the US are covered by HO-3 policies. An open peril includes any circumstance aside from those specifically excluded from the policy. Floods, earthquakes, and sinkholes are typically excluded from HO-3 and HO-5 open peril policies. For a comprehensive list of events, check your declarations page. A general list of exclusions can be found here.

Home insurance covers both your property and your liability — an important distinction. 


What does your homeowner's insurance cover?
  1. Your property: what is and isn’t covered
  2. Your liability: what is and isn’t covered
  3. Exclusions
  4. Additional coverage options


Homeowners insurance: property coverage

Home property coverage comprises four categories: A) dwelling, B) other structures, C) personal property, D) and additional living expenses.

Each of these home insurance categories carries different coverage details:

CoverageAmount of Coverage
Coverage A - DwellingReplacement cost of your home
Coverage B - Other Structures10% of Coverage A
Coverage C - Personal Property50-70% of Coverage A
Coverage D - Additional Living ExpensesActual Loss Sustained/Maximum Days or Amount
 
Coverage A: Dwelling Coverage

This coverage works to replace your home if it is destroyed as a result of a covered loss. The value of your home is not factored into this amount. Because the value of your land does not change the cost of building a dwelling, the market value of a home and the amount of coverage provided by Coverage A may differ.

This coverage is subject to a deductible, i.e, what you pay before an insurance company steps in to handle the losses.


Coverage B: Other Structures

If Coverage A amounts to $250,000, the policy's "other structures" coverage will be $25,000 — 10% of Coverage A. Coverage B is subject to a deductible. This coverage applies to the following types of other structures:

  • Driveways
  • Sheds
  • Swimming pools
  • Gazebos
  • Fences
  • Sheds
  • Detached Garages

This 10% is a general percentage used by insurance companies. Depending on the value of the other structures, you can increase this coverage level amount.

 
Coverage C: Personal Property

This coverage applies to the insured party's belongings. If a policy has a replacement cost of $250,000, the maximum personal property coverage would be $187,500 — 75% of $250,000. The policy could extend 50% personal property coverage, providing a max claims payout of $125,000. Each of these payouts would be subject to a deductible.

Personal property coverage extends to cover covered losses occurring away from the home, but usually at a decreased coverage level and not always for the same threats. For the exact limitation on your worldwide coverage personal property coverage, refer to your policy details.

Coverage C may come with sub-limits on certain items. Most insurance companies will cap the amount of coverage on valuable items, creating sub-limits. Below are some common sub-limits for personal property home insurance. 

Sub-limitPropertyLimitations
$200Money, Gold, Coins 
$1,500Jewelry, watches, fursTheft-only
$1,500Watercraft, trailersTheft-only
$2,500Firearms 
$2,500Silverware 
$2,500Business propertyOn-premises
$500Business propertyOff-premises
VariesElectronics 


You can increase personal property sub-limits by adding an endorsement — a rider or floater — to your policy. An endorsement raises the sub-limit to a certain amount for a general collection of items. For example, a jewelry endorsement raises the level of coverage for all jewelry owned by the insured party.

If you have one particularly valuable item for which you want individual coverage, consider a scheduled endorsement. This requires an appraisal and that the item is explicitly listed on the policy. This is a common practice for engagement or wedding rings.


Coverage D: Additional Living Expenses

If your home were to be destroyed or unlivable because of a covered loss, your additional living expenses would provide coverage for you to live elsewhere — up to the limits listed in your policy. Usually, your policy will give you a set amount of money or duration they will compensate. Unlike Coverages A, B, and C, additional living expenses are usually not subject to a deductible.


Liability coverage in homeowners insurance

Homeowners insurance liability coverage includes Coverage E: Your Personal Liability, and Coverage F: Your Medical Payments to Others.

 
Coverage E: Personal Liability

Home insurance personal liability provides coverage for property or bodily injury damage suffered by others for which you are deemed legally responsible. If your child throws a ball through a neighbor’s window and breaks their TV, you could be held liable for the damage to the window and the TV. Your personal liability coverage would provide settlement to the not-at-fault party as well as provide you with legal services if you are sued.

There are no state requirements for personal liability insurance. Typically, liability coverage is a fairly inexpensive part of homeowners insurance. High personal liability limits are recommended — greater than Coverage A level is a good place to start. A common measurement for personal liability coverage is it should be equal to or greater than your net income. If your personal liability limits are exhausted, you could be sued and be forced to forfeit your assets.


Coverage F: Medical Payments to Others

If someone injures themselves on your property (and they do not live at the residence), this coverage can cover their medical care. While it can vary, the following are typical medical expenses covered:

  • Medical bills and payments
  • Surgical costs
  • Cost of x-rays
  • Dental procedures
  • Ambulance and hospital fees
  • Nursing care
  • Prosthetic devices
  • Funeral services

This coverage is based on a limit you can set and is not subject to a deductible.


Homeowners policy exclusions

Many exclusions on a standard homeowners insurance policy can be added via endorsements. Below are major exclusions worth keeping in mind when buying a homeowners policy.

  • Freezing pipes and systems in vacant dwellings
  • Damage to foundations or pavements from ice and water weight
  • Theft from a dwelling under construction
  • Vandalism to vacant dwellings
  • Latent defects, corrosion, industrial smoke, pollution
  • Settling, wear and tear
  • Pets, other animals, and pests
  • Weather conditions that aggravate other excluded causes of loss
  • Government and association actions
  • Defective construction, design, and maintenance

There are perils that are never covered in a homeowners policy — regardless of whether the policy is a named peril or open peril policy.

  • Enforcement of building codes and similar laws
  • Earthquakes
  • Flooding
  • Power failures
  • Neglect (failure to take reasonable steps to protect your property)
  • War
  • Nuclear hazard
  • Intentional acts

 

Additional coverage options

Owning a home is a major investment — you should make sure it is properly protected. Below are some additional coverage options.


Mold/fungi coverage

Depending on your location, this can be a useful coverage. Nearly all insurance policies exclude damage caused by mold. In the eyes of an insurance company, it is difficult to determine the cause of the mold and the damage can be too risky to insure. If you’d like, you can add limited mold and fungi coverage as an endorsement.

The coverage you receive will vary based on your insurance provider. It may include the following:

  • Removal of fungi from property
  • Cost to repair damaged areas
  • Cost of testing air quality
  • Cost of additional living expenses associated with mold/fungi damage

Personal property endorsements

There are many caveats to covering personal property via homeowners insurance. If you have any valuable item from the list above, consider increasing your coverage level with an endorsement.

An endorsement for art, for example, will increase the coverage level for your entire art collection. If you have one particular piece that you’d like to cover at a higher amount, consider a scheduled endorsement. This ensures your item is individually appraised and insured at its exact value.


Earthquake coverage

Damage caused by earthquakes is excluded from every insurance policy. But depending on your location and company, you can add it back or add a complementary policy. If you live in an earthquake-prone area, you should definitely consider this coverage. If your current provider does not provide it, you can use outside providers. In California, the California Earthquake Authority (CEA) is a major provider for earthquake coverage.


Replacement cost coverage

For a small additional fee, you can usually upgrade your reimbursement on your personal property from Actual Cash Value (ACV) to Replacement Cost Coverage. With an ACV reimbursement policy, your claims check would factor into depreciation. With a replacement cost policy, you would get the value to replace your belongings at its current value.


Flood insurance

Because of the risk and cost of claim payouts, most standard insurance providers will not provide flood coverage. If you live in a flood plain, you should acquire flood insurance via the National Flood Insurance Program (NFIP) or a private flood insurance policy. This will be separate from your homeowners insurance but can turn out to be equally important in the event of a flood.


How much home insurance do you need?

What is covered by home insurance varies based on what type of home insurance policy you have. HO-2 offers the least coverage. HO-3 is a middle point between HO-2 and HO-5. Below are our top recommendations for ensuring you are probably covered:

  • Consider HO-5 home insurance if your personal property values are high.
  • Any valuable items should have an endorsement or scheduled endorsement
  • Take inventory of all of your belongings to understand how much personal property coverage you might need.
  • Make sure your personal liability insurance is high — greater than or equal to your net income.
  • Walk through your policy with an insurance agent. Homeowners insurance can be confusing. Make sure you understand what is — and isn't — covered.

If you'd like to speak to a licensed agent regarding homeowners insurance or get a quote, call 888-444-2833 or click below!



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