What Does Homeowners Insurance Cover?

What Does Homeowners Insurance Cover?

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A typical homeowners insurance policy protects you in three major areas: the structure of your house, your belongings and your personal liability for injury and property damage to others. While the only way to understand exactly when coverage does or does not apply is to read your homeowners insurance policy, homeowners insurance generally protects both your home and possessions from a wide variety of perils, or causes of damage. Usually, earthquakes and floods are specifically excluded and require the purchase of additional insurance.

Perils that homeowners insurance protects against

The most common type of homeowners insurance is an HO-3 policy. HO-3 policies have open perils coverage on the structure of a house and named perils coverage for your personal property.

Open perils coverage means that you're covered for all causes of damage except for those that are specifically excluded. Common exclusions include war, earthquakes and nuclear explosions, but check your policy to be sure.

Common named perils

If you have named perils coverage for your home or personal property, it's likely to include the following common named perils.

  • Theft
  • Fire or lightning
  • Windstorm or hail
  • Smoke
  • Falling objects
  • Weight of ice, snow or sleet
  • Vandalism and malicious mischief
  • Explosions
  • Riots and civil disturbances
  • Aircraft and vehicles
  • Volcanic eruption
  • Overflow or freezing of pipes, heating, A/C, fire sprinkler or other household appliances
  • Tears, cracks and burns in water, heat, A/C or fire sprinkler systems
  • Damage from electrical currents in appliances and wiring

Named perils coverage, on the other hand, only covers perils that are explicitly named in the policy. This will usually include a wide variety of perils including fire, wind, falling objects and theft.

Named perils policies also usually have exclusions listed, though the way named perils and named exclusions interact is sometimes complex and can vary from state to state. For example, in California, if an earthquake causes a fire that damages your home, you're covered, even though earthquakes are generally excluded from homeowners insurance.

What homeowners insurance covers

Here are the main coverage types that a standard home insurance policy can have. In most policies, what is covered is explicitly listed out and can be grouped into the categories below. There are a number of perils or additional protections that aren't usually included in policies by home insurance companies (we'll go into that below). Home insurance companies will pay out for any claims covered after your deductible.

The structure of the home

Sometimes called "dwelling coverage," this part of the policy covers physical damage to the home itself. Damage to any walls, the roof, the floor or doors is included in this section. The foundation of your home and other parts that might not necessarily be visible are also covered.

Personal belongings

Homeowners insurance also pays for the cost to repair or replace your belongings. You're protected no matter where in the world the belongings are located — so if your cellphone is stolen while you're on vacation, you'll be reimbursed. It also covers the belongings of others if the person lives with you, and the belongings of guests while the policyholder is present.

Personal belongings include things such as furniture, electronics, clothing, sporting equipment, watercraft, silverware, firearms, furs and jewelry. Trees, plants and shrubs are also usually covered, except in cases of wind damage and disease.

Keep in mind that very valuable items, like jewelry, cash or firearms, may have limited or no coverage under a typical homeowners insurance policy. If you have any high-value items, check with your insurer to make certain they're sufficiently insured.

Documenting the belongings you own is critical to making the most out of your homeowners insurance protection. Most people are unable to recall all of their possessions in the event of a partial or total loss. For that reason, policyholders need to inventory their belongings they would claim if damaged or lost due to a peril. The inventory of belongings should include photos or videos of the items as well as any receipts and proof of purchase to attach, which is much easier in this current age of smartphones.

Liability coverage

This coverage protects the policyholder and their family members (including pets) from lawsuits for bodily injury or property damage that they are responsible for. It will pay for court costs as well as any awards you’re ordered to pay in court, up to the limit of the policy. The liability portion of your homeowners insurance also travels with you and your family members to your neighbor's house or anywhere else in the world.

For example, if you spill a glass of wine and ruin a neighbor's rug, homeowners insurance would cover the cost, but it will not cover your own rug if you spill wine and ruin it. If you're hosting a party and you spill wine on your neighbor's authentic fur coat, that'd be another liability situation created that home insurance would cover. Another example would be if your dog bites someone — home insurance would cover that incident. If you are bit by your own dog, homeowners insurance will not cover that incident.

Covered by homeowners liability coverage
Not covered by liability coverage
You spill wine on your neighbor's rugYou spill wine on your own rug
You tear a guest's fur coatYou tear your own coat
Your dog bites someone on the streetYou are at fault in a car accident

Homeowners insurance also sometimes provides no-fault medical coverage, meaning if a friend or neighbor is injured in your home, they can submit medical bills to your insurance company. This allows their expenses to be paid without filing a liability claim against you. This portion of the policy will not cover medical bills of the policyholder, their family or pets — for that, you'd have to turn to your health insurance or pet insurance, if you have any.

Additional living expenses (ALE)

Sometimes shortened to ALE, this portion of a home insurance policy covers the cost of staying elsewhere if your home is uninhabitable. ALE covers things like hotel bills, restaurant meals and other expenses.

For example, if an insured peril destroys the roof of your home, it's likely you will need to find somewhere else to stay until it is repaired. ALE would cover the costs of a hotel room and restaurant meals. An example of an additional expense might be the cost to wash clothing if you don’t have access to your own washer and dryer.

Though it is a common coverage under a homeowners insurance policy, additional living expense coverage can vary greatly from company to company. Some companies provide expenses up to a certain total limit. Others do not have an expense limit but only offer the coverage for a limited amount of time after an incident.

ALE also will reimburse policyholders for rent payable to them. For example, say you rent part of your home but that portion of it became uninhabitable due to a peril covered by your policy. In that circumstance, ALE would pay you the lost income from the tenant who had to relocate until the space was repaired, subject to the terms of your policy.

Other protections home insurance can provide

Every insurance policy is different, but there are other coverages homeowners insurance frequently provides. These are coverages one doesn’t typically think of when purchasing homeowners insurance, but it’s important not to forget about them if you would benefit from having the coverage.

  • Debris removal: Companies usually pay reasonable expenses to remove debris on property from a covered peril that caused a loss. Ash, dust and particles from a volcanic eruption that caused a direct loss or damage also fall under this category; trees downed by a peril are covered, too.
  • Grave markers: Homeowners insurance policies sometimes cover grave markers and mausoleums damaged or lost by a covered peril. The grave markers or mausoleums can be on or off the property of the policyholder's residence.
  • Green home coverage: Also called "green improvement" or "green reimbursement," this is an endorsement that allows a home to be rebuilt with green materials, or items to be upgraded with more energy-efficient versions, in after a covered loss. Travelers' green endorsement, for example, includes an extra 10% to cover things like an Energy Star-approved appliance.
  • Identity fraud: Identity fraud coverage protects a homeowner and pays to help them restore their identity in the event it is used fraudulently.
  • Loss assessment: If a peril impacts your home or property covered by your homeowners insurance, you’ll have to have a professional damage assessment made. Depending on what is damaged and the extent of the damage, assessments might be costly. Thankfully, homeowners insurance policies frequently cover loss assessments up to a certain limit.
  • Unauthorized use of credit cards: Most homeowners insurance policies cover unauthorized charges to your credit card. However, the limit on this is usually low ($500), and most credit card companies will remove unauthorized charges from your card once you report them.

What homeowners insurance doesn’t cover

There are a number of things homeowners insurance will not cover. Some are obvious and some aren’t so obvious. The two most important to take note of are earthquakes and floods. These are common perils in some areas, and there are insurance products designed specifically for each one. Homeowners insurance exclusions also differ between companies and from state to state.

Some other things homeowners insurance will not cover include neglect or failure to make repairs, wear and tear, corrosion and rust, contamination, animals and pests, fungi, nuclear hazards, power failure, government actions and war.

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