What Does Home Insurance Cover and What Does It Exclude?

Homeowners insurance can help pay to repair damage from covered events. But some damage may be excluded.

Catherine Collins
Written by
Catherine Collins
Catherine Collins
Written by
Catherine Collins
Catherine Collins is a freelance financial writer and author based in Detroit. She's the co-founder of MillennialHomeowner.com and MomsGotMoney.com, and author of the book Mom’s Got Money: A millennial mom’s guide to managing money like a boss. She has written for US News, Huffington Post, Money, Business Insider, Investopedia, Entrepreneur, Go Banking Rates, and many other publications. She currently resides in Detroit, Michigan with her boy-girl twins and a rescue dog named Julep.
Courtney Mikulski
Edited by
Courtney Mikulski
Courtney Mikulski
Edited by
Courtney Mikulski
Senior Editor
Courtney Mikulski is a Senior Editor at Insurify with more than three years editing and producing personal finance content. She's experienced with insurance, credit cards, consumer lending, and banking products. Courtney works to provide easy-to-understand and actionable advice to readers looking for their next insurance provider. Her previous work with Bankrate, Reviews.com, and The Simple Dollar, helped readers make smarter financial decisions. When Courtney isn't working, you can find her hanging out with her cat or on a bike ride with her husband. She earned a bachelor's degree in journalism at Ohio University in Athens, Ohio. 

Updated January 31, 2023

Reading time: 10 minutes

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Depending on your policy, home insurance can cover damage or losses from fires, theft, vandalism, injuries, and other unforeseen circumstances. While home insurance covers various events, you should also be aware of exclusions to consider when choosing a policy.[1]

Understanding exactly what your home insurance policy covers and excludes is key to ensuring that you have the best level of financial protection in place.

Quick Facts

  • Home insurance offers different types of coverage for various kinds of damage.

  • A standard home insurance policy is called an HO-3, and it covers several types of damage to your home and property.

  • Floods and earthquakes aren’t covered by homeowners insurance.

What does standard home insurance cover?

Standard home insurance (HO-3) is a type of property insurance that covers damage to your home and its contents. It typically covers the structure of the home, personal possessions, liability protection, water backup damage, and additional living expenses if you need to relocate temporarily due to damages.

Standard HO-3 policies provide coverage for most disasters like fires, windstorms, falling objects, theft, vandalism, and even volcanic eruptions. Policies typically include coverage for water overflow damage, sudden hot water heater damage, and freezing of certain household systems or appliances.[1]

Most standard policies also include liability protection, which may financially protect you if someone gets hurt on your property.

The cost for standard home insurance varies by state, but on average it’s $2,570 per year in the U.S., according to Insurify data.

Home insurance covered perils

Homeowners insurance policies typically cover 16 standard perils — events that can damage your home and other property. Here are the commonly covered perils:

What coverage is not included in a standard policy?

Standard home insurance policies typically don’t cover flood or earthquake damage. But you can purchase additional coverage for these events for an extra cost.

Damage caused by poor maintenance or intentional acts is also excluded from standard coverage. This is because maintenance is a homeowner’s responsibility. If a storm damages your roof, a policy will typically cover it. However, termite infestations or mold falls under maintenance, and insurance likely doesn’t cover it.

Some policies may exclude certain expensive items or have specific value limits on them. Again, you can purchase separate policies for valuables.[2]

What does each type of home insurance cover?

Eight different types of home insurance policies are available. Here are some of the most common ones and what they cover.

HO-1 policy

An HO-1 policy is the most basic type of homeowners insurance. It covers damage and losses from fire, lightning strikes, windstorms, and theft. The cost for this type of insurance may be low due to its limited coverage. Keep in mind, this type of policy typically only covers your dwelling, not personal property.

HO-2 policy

This policy provides broader coverage than an HO-1 policy and includes protection against everything HO-1 covers, plus events like falling objects, freezing of household systems like HVACs, and damage from electric currents. These policies are still relatively affordable, but they have limited coverage that might not be adequate for homeowners who face large, unexpected issues.

HO-3 policy

This is the most popular type of homeowners insurance. It covers everything in an HO-2 policy, plus any other damage caused by events not explicitly excluded from coverage. This policy is more expensive than an HO-1 or HO-2 policy as it provides much broader coverage. An HO-3 policy doesn’t cover earthquakes, floods, landslides, mold, nuclear accidents, pests, and problems related to a lack of homeowner maintenance.

Learn More: What is HO-5 Home Insurance? A Complete Beginner’s Guide

Homeowners insurance coverage categories

Home insurance policies typically have five coverage categories:

  • Dwelling coverage: Dwelling coverage pays to repair or rebuild your home if it’s damaged in a covered event.

  • Other structures coverage: This type of coverage pays to repair damaged structures on your property — like a fence, shed, or garage — under covered events.

  • Personal liability coverage: This coverage financially protects you if someone is injured on your property, and you’re liable for the injured person’s medical expenses and legal fees.

  • Personal property coverage: This type of coverage pays to replace or repair your damaged or stolen personal belongings.

  • Loss of use coverage: This coverage helps pay for necessary living expenses if your house becomes uninhabitable due to a covered event. This might include the cost of a hotel or rental property while repairs occur.

Learn More: Home Insurance and Loss of Use Coverage: What You Need to Know

Other home insurance coverage questions

Here are some other common home insurance coverage questions and answers.

What coverage covers mold damage?

Mold damage is often not covered under a standard homeowners insurance policy. However, it’s possible that if mold is related to a flood, it could be covered if you have a federal flood insurance policy.[3]

Are roof leaks usually covered?

It depends on the cause of the roof leak. Most standard home insurance policies cover sudden and accidental water damage, such as a pipe burst or wind-driven rain. However, if another reason causes the roof leak, then your policy may not cover it.[4]

Which policy applies to water damage?

A standard home insurance policy will cover some water damage, but the coverage specifics depend on the type and extent of damage. Most policies cover sudden and accidental water damage caused by leaks, rain, or burst pipes, but they may not provide coverage for problems caused by flooding. To cover flooding, most homeowners need to purchase a separate flood insurance policy.[4]

Is termite damage covered?

Most standard home insurance policies don’t cover damage caused by termites or other pests, as insurers consider this event preventable with home maintenance.

What coverage applies for theft?

Standard home insurance policies typically cover theft, but it depends on the damage’s cost. For example, most policies cover loss or damage caused by theft, vandalism, fire, or windstorms. However, the policy has limits. If you have a particularly expensive item, consider purchasing an additional endorsement or increasing your liability limits.[5]

What about plumbing disasters?

Homeowners insurance policies usually cover plumbing disasters like pipes bursting. But it’s a good idea to review your policy, especially when it comes to water damage, as policies are specific about what type of water damage they will and will not cover.[4]

Check Out: Does Homeowners Insurance Cover Water Damage?

Is fire damage covered?

Standard home insurance policies typically cover fire damage. To determine if you have enough home insurance coverage, calculate the cost to replace your house’s entire structure in case of a fire and compare that number to your coverage limits.[2]

Does home insurance cover HVAC?

Your personal property or dwelling coverage could cover an HVAC system. But because home insurance is used to cover damage and hazards, normal wear and tear or an HVAC system getting older is typically not covered.

Which policy covers the structure of your home?

An HO-3 policy will cover the structure of your home. This is the most common home insurance policy type.[1]

When does home insurance cover dog bites?

Your homeowners insurance should include liability coverage, so if your dog bites someone and they sue you for medical bills, your homeowner policy pays for your legal fees or the medical bills up to the limit in your policy. Check your home insurance policy to see what your liability limit is, especially if you’re worried your dog will bite someone. Some insurance companies will ask what breed your dog is, which could affect your premium, and some will not.[6]

Keep Reading: Does Homeowners Insurance Cover Dog Bites?

Home insurance policy endorsements

Home insurance policy endorsements are additional riders that homeowners can add to provide extra protection and coverage. These riders can provide extra coverage for specific incidents, such as floods or theft, and may offer liability protection if specific criteria are met.[7]

When an endorsement covers an incident, the insured party will file a claim with their home insurance provider. The insurer will then assess the damage and determine if it falls within the scope of the endorsement’s protection. If it does, it will cover the costs associated with repairs or replacements up to the limits specified in the policy. Most endorsements come with a deductible or other out-of-pocket expense.

Here are some common home insurance policy endorsements:

  • Replacement cost coverage: Provides coverage for repairing or replacing items damaged in a covered incident, up to the limits specified in the policy

  • Flood insurance: Provides coverage for flooding damage that includes rising water and storm surge

  • Sewer backup coverage: Covers backed-up sewer lines damage to your home

  • Personal property endorsement: Provides additional protection for personal items such as electronics, furniture, jewelry, and more

  • Liability protection endorsement: Protects homeowners against lawsuits or other legal issues under specific criteria

Ultimately, home insurance policy endorsements are important, especially if you live in an area prone to flooding or earthquakes or have many valuables that you want to cover beyond what’s insured in a standard home insurance policy.

Important Information:

Replacement cost coverage will reimburse you for the full cost to repair or replace your damaged home or belongings, based on current prices. Actual cash value, however, reimburses you for the actual cost of the items minus depreciation for age and wear and tear.

How to choose a home insurance policy

To find the right policy for your needs, it’s important to consider several different factors:

  1. Coverage limits: It’s important to ensure coverage limits are appropriate for your needs. Most policies have a set limit for each type of coverage, such as liability or replacement cost coverage, so understand these limits before buying a policy.

  2. Deductibles: Many policies have deductibles you pay out of pocket for specific incidents before the insurer covers the remaining costs. Learn each policy’s deductible and how much you’ll need to pay if you file a claim.

  3. Discounts: Some insurers offer discounts, such as having multiple policies with them or having no claims history. Ask what discounts they offer and if you qualify for them.

  4. Personal liability protection: Find out how much your insurer will cover if someone else is injured on your property.

  5. Your location: Consider your location when choosing a home insurance policy, especially if you live in an area prone to flooding or earthquakes. Some insurers may offer different coverage options depending on where you live, so it pays to shop around and compare plans before committing to any one provider.

  6. Property types: It’s also important to consider the type of property you own when selecting a home insurance policy. If you have a valuable property that requires additional coverage, such as a second home or rental property, make sure to inquire with your insurer about specialty policies.

  7. Financial strength rating: Before signing contracts or agreeing to any terms, it’s always wise to check an insurer’s financial strength rating from independent ratings agencies. Five independent agencies rate insurance companies’ financial strength: A.M. Best, Fitch, Kroll Bond Rating Agency (KBRA), Moody’s, and Standard & Poor’s.[8]

  8. Review period: Some insurers allow customers a short period of time after purchasing their policy, during which they can review their choices and cancel if needed without penalty or additional fees (often 30 days). This period allows customers to thoroughly review their purchased plan before committing fully, so be sure to look into this option if it’s available with your chosen provider.

  9. Price differences: Finally, compare prices among different providers, as costs can vary significantly. The cheapest option isn’t always the best — do your research and ensure that you’re getting the best coverage for your needs at a price you can afford.

How to compare home insurance companies

One of the easiest ways to compare home insurance companies is to use a quote-comparison website that provides easy access to multiple quotes from top-rated insurers all in one place. You’ll be able to easily compare policy options, coverage levels, and premiums from various insurers without having to manually search for each insurer separately.

You’ll need to provide personal information, such as your name, address, and coverage needs, to receive customized quotes tailored precisely to your requirements. Next, select which quote you want to view in more detail.

Best home insurance companies

Cost is an important factor when choosing a homeowners insurance policy, as you want to find a policy that fits your budget. Consider other factors in addition to cost, such as the coverage limits, the types of losses covered, and any additional endorsements or packages that your homeowners policy includes.

Below are the 10 most affordable insurance companies average annual costs.

Insurance CompanyAverage Annual Quote
Commonwealth Casualty$924
Velocity Risk$1,092
Integrity$1,164
Plymouth Rock$1,320
Grange$1,332
Bamboo$1,512
Stillwater$1,692
Liberty Mutual$1,932
State Auto$1,944
Nationwide$1,980
Actual quotes may vary based on the policy buyer's unique profile.

How to reduce the costs of home insurance

Here are some ways to lower your home insurance costs:

1. Shop around for the best rates. Compare quotes from different insurance companies to get the best rates.

2. Increase your home security. Installing a home security system, deadbolts, or other safety features can help lower your premiums.

3. Increase your deductible. Raising your deductible could reduce your premium significantly if you’re willing to pay more out of pocket when filing a claim.

4. Bundle your policies. Bundling multiple policies like auto and homeowners with one insurer can potentially save hundreds of dollars each year on premium payments.

5. Monitor your credit. Good credit can help you qualify for lower rates, so it pays to periodically check your credit score and report errors that could affect your insurance costs.

6. Invest in home maintenance. Regular maintenance on your home can prevent costly repairs in the future, which could save you money in premiums.[9]

Keep Reading: Compare Home and Auto Insurance Bundles

Home insurance coverage FAQs

Here are answers to some commonly asked questions about home insurance.

  • Home insurance coverage helps protect you from financial losses that events such as fires, storms, and burglaries can cause. It provides liability protection if someone is injured on your property. Additionally, it can help protect your family after a disaster by providing living and meal expenses while your house is being rebuilt. If you have a mortgage, your lender will require you to carry adequate homeowners insurance.

  • Home insurance typically covers damage to the structure of your home that events like fires, explosions, lightning strikes, and windstorms can cause. It may also cover possessions inside your home that are damaged or stolen. Liability coverage is usually included in case someone is injured on your property.

  • Speak to your insurance provider if you have a rental property to ensure you’re properly covered. You may need to purchase an endorsement or a landlord policy to protect against loss or liability if other people stay in a home you own.[10]

  • Home insurance policies typically last for a year and must be renewed annually.

  • Actual cash value provides coverage for the current market value of your possessions minus any applicable deductible. Replacement cost value coverage pays you to replace damaged items with new ones without deducting depreciation costs.[11]

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Sources

  1. III. "Homeowners Insurance Basics." Accessed January 30, 2023
  2. III. "Am I Covered?." Accessed January 30, 2023
  3. III. "Protecting your home from mold." Accessed January 30, 2023
  4. III. "Water Damage: What's Covered; What's Not." Accessed January 30, 2023
  5. III. "Special coverage for jewelry and other valuables." Accessed January 30, 2023
  6. III. "Spotlight on: Dog bite liability." Accessed January 30, 2023
  7. NAIC. "A Consumer's Guide to Home Insurance." Accessed January 30, 2023
  8. III. "How to assess the financial strength of an insurance company." Accessed January 30, 2023
  9. III. "12 Ways to Lower Your Homeowners Insurance Costs." Accessed January 30, 2023
  10. III. "Coverage for renting out your home." Accessed January 30, 2023
  11. NAIC. "Rebuilding After a Storm: Know the Difference Between Replacement Cost and Actual Cash Value When It Comes to Your Roof." Accessed January 30, 2023
Catherine Collins
Written by
Catherine Collins
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Catherine Collins is a freelance financial writer and author based in Detroit. She's the co-founder of MillennialHomeowner.com and MomsGotMoney.com, and author of the book Mom’s Got Money: A millennial mom’s guide to managing money like a boss. She has written for US News, Huffington Post, Money, Business Insider, Investopedia, Entrepreneur, Go Banking Rates, and many other publications. She currently resides in Detroit, Michigan with her boy-girl twins and a rescue dog named Julep.

Learn More
Courtney Mikulski
Edited by
Courtney Mikulski

Senior Editor

Courtney Mikulski
Edited by
Courtney Mikulski
Senior Editor
Courtney Mikulski is a Senior Editor at Insurify with more than three years editing and producing personal finance content. She's experienced with insurance, credit cards, consumer lending, and banking products. Courtney works to provide easy-to-understand and actionable advice to readers looking for their next insurance provider. Her previous work with Bankrate, Reviews.com, and The Simple Dollar, helped readers make smarter financial decisions. When Courtney isn't working, you can find her hanging out with her cat or on a bike ride with her husband. She earned a bachelor's degree in journalism at Ohio University in Athens, Ohio.