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Insurance

What Does Homeowners Insurance Cover? 

By Alison Tobin MONEY RESEARCH COLLECTIVE

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Your home is likely the largest investment you’ll make in your lifetime, and it’s financially smart to make sure you protect it. When you purchase a home and take out a mortgage, you are required to purchase a homeowners insurance policy. It offers financial protection that can help cover the costs to repair or rebuild your home if you suffer a covered loss like a fire or vandalism.

Homeowners insurance offers you peace of mind that you’ll be able to recover from costly damage. It can lighten the financial burden if the unthinkable were to happen to you and your home. This guide walks you through all the important information you need to know about what homeowners insurance covers (and what it doesn’t).

So, what does homeowners insurance cover exactly? Let’s dig in.

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Table of Contents

What does home insurance cover?

Homeowners insurance offers protection for your house and its contents, helping you pay for the cost to repair or replace your house and belongings in the event of damage. It also offers liability protection for accidents that could happen inside your house.

Like any insurance, a home insurance policy only covers damage that occurred as a result of a covered loss. Homeowners insurance typically covers losses from the following covered perils:

  • Fire and smoke
  • Lightning
  • Windstorm and hail
  • Snow and ice
  • Freezing
  • Explosion
  • Falling objects
  • Damage from vehicles or aircraft
  • Theft
  • Vandalism
  • Accidental water overflow
  • Riot or civil destruction
  • Volcanic eruption

All home insurance policies have coverage limits and deductibles. Damage is covered by your policy up to your policy’s limits and after you’ve paid your deductible.

Types of homeowners insurance

A homeowners insurance policy is like a puzzle; many different pieces of coverage make up the policy. Each component addresses particular perils or parts of your home, and come with limitations on coverage.

Dwelling coverage

Dwelling insurance coverage protects the physical structure of your house. It helps cover the cost of damage to the building that occurs from a covered loss such as fire or vandalism.

Dwelling protection may also cover any permanent fixtures in your home, such as appliances, and attached structures, such as a garage.

If your home is a total loss, dwelling coverage helps cover the cost to rebuild it. When choosing a coverage amount, you should get enough indemnity to cover the cost to rebuild your home at current costs.

Your homeowners policy may also have other structures coverage. As the name suggests, this protects structures on your property that are not attached to your house, such as a gazebo, swimming pool or detached garage.

Personal property coverage

Personal property coverage protects your belongings, including furniture, clothing and more. It may provide restitution to help cover the cost of repairing or replacing damaged or destroyed items in a loss that’s covered by your policy. Certain electronics or high-value items may need additional endorsements or add-ons for property damage.

There are two types of personal property insurance policies: actual cash value and replacement cost. The type you have determines how much the policy covers.

An actual cash value policy gives you the current value of your items at the time of the loss, taking depreciation into account. Replacement cost value policies give you more repayment; they pay out the cost to replace your items with ones of like kind and quality, within your policy limits.

Loss of use coverage

In some cases, your home may be uninhabitable due to the destruction of your house. If this happens, you may rack up additional living expenses for an alternative living situation. That’s where loss of use provisions come into play.

Loss of use coverage helps pay for your living expenses if you are unable to safely stay in your home after experiencing a loss covered by your homeowners insurance policy. It helps cover the cost while your home is repaired or rebuilt.

Loss of use coverage is also a handy provision of homeowners insurance when the power goes out. If you experience a power outage in your home, this safeguard may kick in to help pay for the loss of food and temporary housing if needed.

As with all coverage options, there are limits and exclusions. You can typically receive reimbursement for temporary housing, moving costs, storage, transportation, certain food costs and pet boarding. However, every policy is different, so be sure to check with yours to see what your loss of use policy includes.

Personal liability coverage

Personal liability coverage is an important part of your homeowners insurance policy that protects you if an accident occurs in your house that results in bodily injury to one of your guests. You may think you would never be sued for an accident in your home, but this coverage is an important component to help pay for the expensive legal consequences of an accident.

If someone falls in your house and is injured, you could be responsible for their medical expenses if found legally liable for the accident. Your personal liability insurance coverage helps cover those medical bills.

Your personal liability coverage may also cover dog bites on your property. If you have a dog, you need to make sure that you receive coverage for liability protection around your dog. Some home insurance companies have a blacklist of breeds that they won’t insure.

In addition to medical expenses, personal liability safeguards other costs associated with an accident such as lost wages if the injured person is unable to work, pain and suffering, death benefits if the accident is fatal and legal costs if you need a lawyer.

Something that some people don’t often think about is homeowners insurance when selling a house. Your home insurance covers any mishap that may happen during this stage of your homeownership.

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What does homeowners insurance not cover?

A number of catastrophes and items aren’t covered under a standard homeowners insurance policy, unfortunately. The good news is that you can purchase additional coverage to receive protection for certain excluded losses.

In general, homeowners insurance typically won’t cover damage caused by your negligence or lack of maintenance. This means if you have a problem in your home that you neglect to take care of and it eventually causes severe harm, you may not be covered.

Flooding and water damage

One of the big perils that homeowners insurance doesn’t cover is certain water damage. A standard homeowners insurance policy doesn’t cover flood damage. In order to receive coverage for flooding, you need a separate flood insurance policy through the National Flood Insurance Program or a private insurer.

In addition to flooding, homeowners insurance typically doesn’t cover disturbance incurred from other natural disasters like earthquakes (for which separate policies are also available) and landslides.

Another type of disturbance that isn’t covered by basic homeowners insurance is water backup. This can happen if wastewater reverses back into your home from an outside sewer system.

An instance in which your homeowners insurance policy may cover water damage is if the destruction occurred because of a sudden accident. This could be harm from a burst pipe or washing machine hose breakage. You may also be covered for water damage from vandalism or extinguishing a fire.

Mold is another tricky scenario because whether you’re covered will depend heavily on the cause of the problem. As a rule, mold damage is usually not covered, especially if it is a result of lack of maintenance.

High-value items

When it comes to personal property, standard homeowners insurance won’t cover certain high-value items or collectibles unless you have additional endorsements for them. If you have a home-based business, your business property isn’t covered by your homeowners insurance. The same goes for any business liability issues.

Other common things that are excluded from standard home coverage include pest destruction, rot, general wear and tear, and identity theft protection.

If you choose to rent your house out to other people, a homeowners insurance policy won’t be effective. You would need landlord insurance to cover your rental property building and liability. Tenants would need renters insurance to cover their belongings.

What to know when choosing a homeowners insurance policy

When buying homeowners insurance, it’s important to make sure you purchase adequate coverage and know how to choose home insurance. If you suffer a loss in your home and need to file a homeowners insurance claim, you don’t want to find out that all your repairs won’t be covered because you don’t have enough coverage.

For dwelling coverage, make sure you have enough coverage to rebuild your home. For personal property coverage, make sure you have the appropriate amount of coverage so you can comfortably afford to replace all your belongings.

When determining personal property coverage limits, create a home inventory to help you figure out the value of all your belongings. An insurance agent may be able to help you determine how much coverage you need.

Another thing to consider when buying home insurance is to shop around. Getting homeowners insurance quotes from multiple companies before purchasing a policy will allow you to compare coverage options and prices to find the best homeowners insurance.

All companies offer various homeowners insurance discounts so make sure to ask if you qualify for any when you receive your home insurance quote.

Homeowners Insurance Coverage FAQs

Does homeowners insurance cover theft?

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Homeowners insurance typically covers loss from theft of your belongings under your personal property coverage. If someone breaks into your house and steals personal items from you, your homeowners insurance will help pay for the cost to replace them.

Your homeowners insurance may also help cover theft of items when away from your home. For example, if you are on vacation and someone steals items from your car or hotel room, your personal property coverage will likely cover that as well.

In addition to personal property, homeowners insurance also covers any damage to your home's structure caused by a burglar. If an intruder kicks down your door, for example, your dwelling coverage would kick in to cover replacement or repair. However, home insurance does not cover theft damage to your car. That's covered by your auto insurance, assuming you carry comprehensive coverage that covers theft, vandalism and the like.

If you experience a theft, make sure to report it to the police and then file a homeowners insurance claim for the loss. Your theft insurance coverage is subject to your coverage limits and deductible.

What type of water damage is covered by homeowners insurance?

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Water damage that is sudden, accidental and unexpected is generally covered by your homeowners insurance. This could be something like a burst pipe or a mechanical malfunction.

You may not be covered, though, if you're found culpable for water damage. For example, if a persistent slow leak in your home causes damage to ceilings and woodwork, you likely won't be covered if the insurance company finds you knew about the problem in advance, or even should have known about it.

It's important, then, to take care of any water issues promptly in order to avoid extensive home devastation that may not be covered by insurance.

Flooding from a storm or other weather calamity is also not covered by standard homeowners insurance policies. You must purchase a separate flood insurance policy to protect you against flooding — which for insurance purposes is defined as any water that contacts the ground before entering your home.

What is homeowners hazard insurance?

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Your hazard homeowners insurance is the specific part of your policy that protects your building from damage caused by hazards identified as covered perils.

The actual term "hazard insurance" may not be used by your homeowners insurance company. You may see the term noted because a mortgage lender often requires a certain minimum of homeowners insurance dwelling coverage (or hazard insurance) before you can receive a loan.

What is the difference between hazard insurance and homeowners insurance?

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Hazard insurance is part of your homeowners insurance policy, rather than separate provisions. Typically when someone is talking about hazard insurance, they are referring to the part of your homeowners insurance that covers the structure of your home from natural disasters or other hazards. Homeowners insurance is the full policy you purchase that includes not only that safeguard for your home's structure, but protection of your personal belongings and against liability claims.

In some cases, homeowners may need to purchase supplemental hazard insurance if the house is at a higher risk for certain damage. For example, if you live in a flood zone, you will be required to have flood insurance. If you live in Tornado Alley, you may need additional windstorm insurance endorsements.

What should homeowners insurance cover?

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Homeowners insurance should cover damage and destruction to your home and your personal belongings. A homeowners insurance policy gives you peace of mind that you would be able to financially recover from a loss in your home.

Homeowners insurance should reimburse the cost (usually minus a deductible) to repair or replace your items or your house, as long as the damage occurred as a result of a covered peril outlined in your policy.

Every homeowners insurance policy has certain coverage limits and exclusions. If you file a homeowners insurance claim, you'll receive compensation for the covered loss after you pay your deductible and up to your policy limits.

When purchasing a policy, make sure your dwelling coverage limit would cover the cost to rebuild your home. Your personal property coverage limit should reflect the value of your property and all of your belongings.

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Summary of What Does Homeowners Insurance Cover

  • Homeowners insurance covers damage or destruction to your home and personal belongings.
  • A standard homeowners insurance policy includes dwelling coverage, personal property coverage, loss of use coverage and personal liability coverage.
  • Home insurance only covers damage caused by a covered peril. Some of the common covered perils are theft, fire, vandalism, falling objects and windstorms.
  • Homeowners insurance won’t cover harm caused by your negligence or lack of maintenance.
  • You may need certain add-on coverage options for high-value items that need additional protection.
  • Water damage may not be covered by standard homeowners insurance unless the damage was sudden and accidental.
  • When choosing a homeowners insurance policy, make sure to purchase enough dwelling coverage to rebuild your home and enough personal property coverage to replace all of your personal items.
  • The term hazard insurance may be used to describe your dwelling protection that covers the home’s structure from natural disasters and other hazards.
  • Always shop around for a home insurance policy. Get homeowners insurance quotes from multiple companies, and ask companies about home insurance discounts – such as those for bundling the coverage with other policies like car insurance.
Alison Tobin

Alison Tobin is a personal finance news writer and editor. She covers news topics in the areas of savings, investing, real estate, taxes, insurance, and more. Her work has been featured in Yahoo!, Forbes, AP News, PropertyCasualty360, and various local publications across the United States.