8+ years writing about insurance, taxes, and personal finance
Certified public accountant
Janet applies her experience in personal finance, taxes, and accounting to make complex financial topics accessible. Her byline has appeared on numerous web media.
3+ years producing insurance and personal finance content
Main architect of the Insurify Quality Score
Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.
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If you have a mortgage, your lender likely requires you to have home insurance. You’re paying for the policy, but what does home insurance cover?
Home insurance protects you in the event of a claim — such as a fire, hailstorm, or vandalism — by paying for part of the cost to repair or replace your property. Without insurance, you’d have to cover the entire cost out of pocket.
Here’s what you need to know about home insurance, including what a standard policy covers, what it typically doesn’t cover, and how to choose the right policy for you.
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What home insurance usually covers
Home insurance is a package policy, meaning it bundles several coverages into one. While coverages and limits might differ among policies, here’s what a standard home insurance policy covers:[1]
Dwelling and other structures
Home insurance provides coverage to repair or rebuild your dwelling in the event of damage from a covered peril, such as a fire, lightning, a windstorm, hail, or vandalism. Your coverage also includes other structures on your property, such as detached garages, sheds, decks, and fences.
Personal property
Your personal belongings also have coverage with a standard homeowners insurance policy. If your possessions are damaged or destroyed, your policy provides coverage to repair or replace items such as furniture, jewelry, clothes, and more, up to the policy limits.
Liability
Liability coverage safeguards you financially if someone sustains injuries on your property. For example, if someone slips on your icy driveway, liability coverage pays their medical bills and covers legal fees and settlements if they sue you and you’re liable for the injury.
Additional living expenses
If your home becomes uninhabitable due to a covered event, such as a fire or severe storm damage, your home insurance policy includes coverage for the cost of temporary housing during your home’s reconstruction and repairs.
The specific coverages and limits vary depending on the policy’s terms and conditions. It’s a good idea to review your policy documents and declaration page carefully to ensure you have the right coverage for your needs. You can also reach out to your insurance agent with specific questions about your home insurance coverage.
Home insurance and home warranty plans aren’t the same. Home insurance protects against hazards and unexpected events that cause physical damage. A home warranty provides coverage for the repair or replacement of certain systems and appliances in the home due to normal wear and tear. One is for disaster coverage, while the other is for simple wear-and-tear coverage.
Examples of appliances and systems in a home warranty plan include washers and dryers, oven ranges, refrigerators and freezers, air conditioning units, furnaces, and water heaters.
What home insurance usually doesn’t cover
While home insurance provides comprehensive coverage for many risks, standard policies have exclusions, such as:
Earth movement: Home insurance generally doesn’t cover damages from earthquakes, landslides, and sinkholes.[2]
Animal or rodent damage: You won’t have coverage for damages from insects, birds, and rodents.
Water damage: If you want coverage for damage from floods, sewer backups, and other gradual water damage, you may need to purchase supplemental coverage since a standard policy won’t include this.
Mold: Most standard homeowners insurance policies don’t cover mold damage, although you may be able to add it for an additional premium.
Later volcano eruption effects: A standard home insurance policy may not include damage from the after-effects of a volcanic eruption, like wind-deposited ash, landslides, shockwaves, and more.
Wear and tear: Home insurance won’t cover gradual deterioration or wear and tear of the home.
Foundation settling and cracking: Damage caused when your home’s foundation settles is typically not covered under a standard homeowners insurance policy.[3]
Refer to your policy to understand what it does and doesn’t cover. It’s important to take into account your location’s climate, weather, and common risks to determine if you need additional coverage.
Types of home insurance coverage
Home insurance isn’t a one-size-fits-all solution. What you need to cover as a homeowner may be different from what your neighbors need.
Home insurance companies have standard coverages and also offer unique add-ons and endorsements for homeowners to customize their policies. Here are common home insurance coverages and add-ons you can purchase.
Dwelling coverage
Dwelling coverage helps cover the costs of repairing or rebuilding your home’s walls, roof, and floors after a covered claim. The coverage may also include built-in features and permanent fixtures, depending on your specific policy.
Your policy names covered perils, like fire, hurricanes, hail, lightning, and other disasters, that your coverage will pay for.[1] It’s important to ensure that your dwelling coverage limits are sufficient to cover the full cost of rebuilding your home, taking into account factors like construction costs and local building codes.
Other structures
While dwelling coverage protects your home, other structures coverage protects other buildings on your property. This can include fences, sheds, gazebos, detached garages, and more. This is a separate part of your home insurance policy but has protection from the same covered perils as your dwelling coverage.
Personal property coverage
Personal property coverage safeguards your belongings within the home. It extends protection against damage or theft both inside and outside the home. For events such as fire, burglary, or natural disasters, personal property coverage helps cover the cost of repairing or replacing your possessions, up to the policy’s limits.
This coverage typically includes:
Furniture
Clothing and apparel
Electronics
Appliances
Personal belongings
Your policy may limit coverage for high-value items, like jewelry, silverware, electronics, or artwork. Your insurance company may be willing to increase the limit for these categories in exchange for an additional premium, or you may be able to purchase a separate policy to cover them.[1]
Personal property coverage usually reimburses you the actual cash value of the covered items, which is the cost of the items minus depreciation. If you want insurance to fully pay to replace belongings, you’ll need replacement cost coverage.
Liability coverage provides financial protection if you, a family member, or your pet is responsible for causing bodily injury or property damage to others. Liability coverage helps cover legal expenses, medical bills, settlements, and court-ordered judgments resulting from covered incidents.
In addition to incidents occurring on your property, liability coverage may also provide coverage for personal liability off-premises. For example, if you or a family member accidentally injures someone or damages their property away from home, liability coverage may apply. It’s essential to review your liability coverage limits to ensure they provide adequate protection against potential lawsuits and liabilities.
If you need higher limits than your policy provides, you can usually purchase an umbrella liability policy to extend your limits and provide more coverage.[1]
Additional living expenses coverage
Additional living expenses coverage, also known as loss of use coverage, helps cover the costs of temporary living arrangements if your home becomes unlivable due to a covered claim. This coverage includes expenses for temporary housing, meals, transportation, and other essential costs you and your family members incur.
Some policies may also cover additional expenses related to accommodating pets during the displacement.[1]
Medical payments coverage
Medical payments coverage pays for medical expenses for injuries people sustain on your property. This will typically pay for necessary medical treatments, ambulance fees, and hospital bills for injured parties, up to your policy’s limits. This coverage applies in any situation, regardless of your liability in the incident.
In cases where a guest passes away as a result of injuries sustained on your property, medical payments coverage may also cover funeral expenses. This can help ease the financial burden on the homeowner and the guest’s family.
Medical payments coverage is intended to offer swift reimbursement for minor injuries, avoiding potential lawsuits and disputes over liability. While it’s not a substitute for liability coverage, medical payments coverage provides an extra layer of protection and goodwill toward injured guests.[4]
Choosing the right home insurance coverage for you
Your home insurance needs are likely different from your neighbor’s needs, which is why it’s important to find a policy that matches your situation and preferences.
When choosing a home insurance policy, start by assessing the value and location of your home, the replacement cost of your belongings, your risk tolerance, and any circumstances that may require specialized coverage. Once you have a clear understanding of your needs, shop home insurance quotes to compare coverages and prices from different insurers and find the best fit.
Using a quote-comparison platform like Insurify can help streamline this process. You can provide your information once to compare quotes and choose a policy with the right coverage options, deductibles, limits, and price.
Remember, it’s not just about the cost of the policy but also the level of coverage it provides and the insurance company’s reputation for customer service and processing claims. By taking the time to assess your needs and compare policies carefully, you can find the best home insurance coverage for you.
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Common misconceptions about home insurance coverage
Misconceptions about home insurance coverage often lead homeowners to misunderstand their level of protection. Here are some common misunderstandings about home insurance and what you need to know:[1]
Full replacement cost: Many homeowners believe their home insurance policy covers the full replacement cost of their home and belongings, but this isn’t always the case. Some policies provide actual cash value coverage, which pays to replace your home or possessions after accounting for depreciation. You need replacement cost coverage if you want your insurance to fully cover repairing or replacing their belongings.
Coverage for natural disasters: A standard home insurance policy typically doesn’t cover damages from certain natural disasters, like floods and earthquakes. You may need to purchase separate flood or earthquake coverage if you live in an area prone to these types of events.
Neglect: Some homeowners believe that home insurance covers damage from a lack of maintenance, but many policies exclude it. You must take reasonable steps to safeguard your property from damage, including fixing leaks and preventing animal infestations.
What home insurance covers FAQs
Purchasing the right coverage for your needs can be complex. To help you make your decision, here are answers to a few frequently asked questions about home insurance.
What does a standard home insurance policy cover?
A standard home insurance policy offers four main coverages: the physical structure, personal belongings inside the home, liability protection, and additional living expenses.
Does home insurance cover damage from natural disasters like floods or earthquakes?
Standard home insurance policies usually don’t cover damage from floods or earthquakes. You may need to purchase separate flood insurance and earthquake insurance policies to protect your property against these risks.
Under what circumstances can you get coverage for personal belongings inside your home?
You can get coverage for personal belongings inside your home under a standard home insurance policy. Most policies protect your belongings against losses from theft, fire, vandalism, and other common sources of damage.
Will your home insurance policy cover damages if you rent out your property?
Home insurance may not cover damages if you rent out your property. Consider landlord insurance for coverage against rental property risks.
What does home insurance cover if your home becomes uninhabitable from damage?
A standard homeowners policy provides additional living expenses coverage to reimburse costs of temporary housing, food, transportation, and utilities if your home becomes uninhabitable after a covered loss.
Janet Berry-Johnson, CPA is a freelance writer with a background in accounting and income tax planning and preparation. She's passionate about making complicated financial topics accessible to readers. She lives in Omaha, Nebraska with her husband and son and their rescue dog, Dexter. Visit her website at www.jberryjohnson.com.
3+ years producing insurance and personal finance content
Main architect of the Insurify Quality Score
Courtney’s deep personal finance knowledge extends beyond insurance to credit cards, consumer lending, and banking. She thrives on creating actionable content.
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