What Is and Isn’t Covered by My Home Insurance Policy?

A standard home insurance policy insures your home and belongings against damage from sudden perils — like fire and vandalism — and covers other people’s expenses if you are held liable for their losses. However, homeowners insurance doesn’t cover all types of property damage, with floods and earthquakes being among the most common home insurance exclusions.

Read below to learn more about what homeowners insurance covers — and when you may need additional policies to be adequately insured.

Key Takeaways A standard home insurance policy insures your home and belongings against sudden perils, like fire, theft, vandalism and windstorms. Homeowners insurance includes liability coverage in case you injure someone or damage their property. Your policy will likely exclude coverage for some sudden perils, like floods and earthquakes, while predictable wear and tear is never covered. You can expand the protection provided by your homeowners policy by adding home insurance endorsements or purchasing separate policies.

What Does Homeowners Insurance Cover?

Home insurance policies generally include at least six types of coverage: dwelling, other structures, personal property, loss of use, personal liability and medical payments coverage. You may also be able to add extra coverage types to your policy by paying a higher premium. Through these various coverages, homeowners insurance helps you avoid bearing the full financial burden when unexpected accidents occur.

Continue reading for an overview of the losses that are covered by each of the main types of homeowners coverage.

Dwelling Coverage

Dwelling insurance protects the physical structure of your house and any structures connected to it, like a porch or garage. It also covers internal fixtures, such as plumbing, heating and air conditioning systems. As a general rule, you should maintain enough dwelling insurance to cover the entire cost of replacing your home in case of a total loss.^[1]

The majority of homeowners insurance policies provide open peril coverage — also known as all-risk coverage — for the structure of your home.^[2] This means that your insurance company will cover any source of damage to your house unless your policy explicitly says that it is not covered.

Other Structures Coverage

Other structures coverage insures structures on your property that are not directly attached to your house, such as a shed, fence or in-ground swimming pool. Usually, your other structures coverage limit will automatically be set at 10% of your dwelling coverage limit.^[1] In addition, the standalone structures on your property are typically covered on an open peril basis, just like your home.^[3]

Personal Property Coverage

Personal property insurance covers the items within your home, including electronics, furniture, clothing and more. Your belongings are often insured at their actual cash value (ACV), which means your insurer will deduct money from the payout for an approved claim to account for how the lost item has depreciated since you first obtained it.

However, you should be able to upgrade to replacement cost value (RCV) personal property coverage if you’re willing to pay a higher premium.

Most policies cover your personal belongings on a named peril basis, unlike your home.^[2] As a result, personal property insurance will only cover damage from perils that are specifically mentioned in your policy. You can generally expect your possessions to be insured against the following 16 named perils:

Fire or lightning	Theft
Windstorm or hail	Volcanic eruptions
Explosion	Falling objects
Riot or civil commotion	Weight of ice, sleet or snow
Damage by aircraft	Water/steam discharge from home systems and appliances
Damage by vehicle	Sudden/accidental tearing, cracking, burning or bulging of home systems
Smoke	Freezing of home systems
Vandalism or malicious mischief	Sudden/accidental power surges

Generally, your personal property coverage limit is set between 50% and 70% of your dwelling coverage limit. Your policy may also include off-premises coverage, meaning your belongings may be covered even if they are not stored in your primary residence. That said, the coverage limit for off-premises claims may be restricted to 10% of your overall personal property coverage limit.^[1]

Loss of Use Coverage

If a peril covered by your dwelling insurance damages your home so severely that it is not safe to stay there, then your loss of use coverage can help you temporarily pay for additional living expenses (ALEs), such as hotel stays and restaurant meals. To qualify for an ALE payout, your house may need to be declared uninhabitable, which will likely happen if you lose access to basic necessities, like water and electricity, for an extended period of time.^[4]

Even if your home is not technically uninhabitable, your ALEs may still be covered if you are unable to return home due to a physical obstruction or government mandate. Additionally, if you are a landlord, loss of use insurance can make up for lost rent payments if your rental property becomes uninhabitable or your tenants are otherwise restricted from returning there.

Your loss of use coverage limit will often be 20% of your dwelling coverage limit.^[5] Keep in mind that your insurance company will only cover ALEs that exceed your ordinary living costs. For example, if you normally pay $2,000 per month to rent an apartment and end up spending $3,000 on a one-month hotel stay after your apartment complex is severely damaged, then your loss of use insurance payout should be $1,000.

Personal Liability Coverage

Personal liability coverage kicks in if anyone in your household is held liable for injuring someone else or damaging their property. For example, it can cover medical bills and lost wages if a guest trips and breaks their arm on your property, or it can pay for property repairs if a tree that you failed to maintain falls from your yard and damages your neighbor’s house.

In addition, personal liability coverage can take care of your legal expenses if a property damage or bodily injury claim escalates into a lawsuit.

At a minimum, homeowners insurance policies generally include at least $100,000 worth of personal liability coverage. However, it’s recommended that you purchase a policy that will provide between $300,000 and $500,000 for personal liability claims, especially if you have highly valuable assets or an attractive nuisance that raises your liability exposure.^[5]

Medical Payments Coverage

Medical payments coverage can also pay for medical treatments, though it has a relatively low coverage limit of $1,000 to $5,000, so it may only apply for relatively minor injuries.^[6] Notably, it can take effect even if you are not held liable for the other person’s injury. While medical payments insurance doesn’t cover legal expenses, it can help prevent a minor claim from producing a costly legal battle.

Endorsements

Alongside the basic coverage types discussed above, you may be able to add various endorsements to your home insurance policy to expand your coverage. Examples of extra coverages you may have the option to buy include the following:

• Scheduled property coverage: Most home insurance policies apply a sublimit to claims involving expensive items, like jewelry and antiques, meaning your payout after a covered loss may be well below your standard personal property coverage limit. By purchasing a scheduled personal property endorsement, you may be able to insure your valuables at their RCV.
• Water backup coverage: Your homeowners insurance likely won’t cover water damage caused by a backed-up drain, sump pump or sewer line unless you buy additional water backup coverage.
• Service line coverage: Service line coverage can protect your sewer lines and other utility lines against perils that aren’t covered by basic homeowners insurance, such as mechanical breakdowns, leaks and tree root damage.
• Ordinance or law coverage: If you must rebuild your home after a covered peril, ordinance or law coverage can cover additional expenses related to bringing your new home up to local building codes.
• Home-based business insurance: A standard homeowners policy may only pay out up to $2,500 for claims involving damaged business equipment.^[7] As a result, you may need a commercial insurance endorsement to fully protect your property if you operate a business out of your home.
• Identity theft protection: An identity theft insurance endorsement can cover expenses like legal fees, lost wages and credit monitoring in the event that your personally identifiable information is compromised.

What Doesn’t Homeowners Insurance Cover?

Even if your home insurance policy includes open peril coverage, it will still come with a set of exclusions — perils that your insurance company will not cover. See the following sections for an overview of losses that are commonly excluded from home insurance coverage.

Floods and Earthquakes

Although home insurance covers most sudden perils, flooding and ground movements are typically excluded. Specifically, your homeowners insurance won’t cover flooding from external sources, like heavy rain or an overflowing river — on the other hand, your policy may cover flooding from internal sources, like burst pipes or appliance malfunctions. Coverage is also typically excluded for earthquakes, sinkholes, landslides and mudslides.

Nevertheless, you can usually purchase separate insurance policies to cover these perils. Depending on where you live, your insurer may even be legally required to offer you extra coverage. For example, home insurance companies in California must offer optional earthquake insurance to their customers at least once every two years.^[8]

Wear and Tear

Your insurance company won’t cover damage that happens due to predictable wear and tear or aging. Home insurance policies are designed to give you financial support if you need to make significant repairs after a sudden and unexpected accident. Conversely, regular upkeep and maintenance of home systems and appliances is generally your responsibility, and you will have to pay for these out of pocket as a result.

Although your home insurance won’t take care of minor repairs, you could cover them by purchasing a home warranty. Your home warranty company may pay to repair or replace your heating and air conditioning system, microwave, refrigerator, washer, dryer and other home systems or appliances if they break down during the coverage period — usually lasting one year with the option to renew annually.^[9]

Other Property Damage Exclusions

Some other sources of damage to your property that likely won’t be covered by your dwelling or personal property insurance include the following:

Intentional losses or neglect	Mold
War or nuclear hazards	Pollution
Government confiscation or condemnation of property	Pests and infestations

Liability Exclusions

Your personal liability insurance may also exclude coverage for certain losses. For example, if you own a dog with a reputation for being aggressive — such as a Rottweiler — your insurer may not cover a guest’s medical expenses if your dog bites them. Furthermore, if you fail to tell your insurance carrier that you have purchased an attractive nuisance — such as a trampoline — a guest who is injured by that attractive nuisance may not be covered.

Types of Home Insurance Policies

There are eight types of homeowners insurance policies — also known as homeowners insurance forms — ranging from HO-1 to HO-8. Keep reading for a brief overview of each policy type.

Type	Description
HO-1	Basic coverage that only protects your home and belongings against 10 named perils
HO-2	Broader coverage that protects your home and belongings against all 16 named perils
HO-3	Standard coverage that offers dwelling insurance on an open peril basis and personal property insurance on a named peril basis
HO-4	Renters insurance
HO-5	Comprehensive coverage that offers dwelling and personal property insurance on an open peril basis, plus higher coverage limits for expensive items
HO-6	Condo insurance
HO-7	Coverage for mobile homes
HO-8	Named peril coverage that insures old and historic homes at their ACV rather than their RCV

HO-3 policies are the most commonly sold type of homeowners insurance, and they meet the insurance coverage standards required by most mortgage lenders.^[2] Of course, HO-3 home insurance is not all-encompassing, so you may still have to pay for repairs out of pocket after certain perils if you select an HO-3 policy.

How To Get the Right Homeowners Insurance Coverage for My Needs

It can be helpful to compare quotes from three to five different home insurance companies before picking a policy to make sure you get the best possible deal on the coverage you need. However, it can be tedious to individually reach out to several insurers to give them the information they need to generate quotes — including the age of your house, the condition of your roof and the number of people living in your household.

Fortunately, SmartFinancial can facilitate a more streamlined insurance shopping experience. Simply fill out our online questionnaire, and we’ll connect you with an insurance agent who can help you find an affordable, personalized insurance policy, potentially in as little as a few minutes. Click here to get started on comparing homeowners insurance quotes for free.