What coverages are included in a standard home insurance policy?

Generally, a homeowners insurance policy includes at least six different coverage parts. The names of the parts may vary by insurance company, but they typically are referred to as Dwelling, Other Structures, Personal Property, Loss of Use, Personal Liability and Medical Payments coverages. They are usually presented as policy sections and are often labeled Coverages A through F.

Coverage Parts A, B, and C protect property.

Coverage A, Dwelling

The homeowner policy's first coverage section protects your house and any attached structures, such as garages, decks or fences. The typical policy covers your home when it is damaged by many perils (also known as causes of loss) including fires or storms. However, the following causes of loss are usually excluded from coverage under the homeowners policy:

• Earthquake
• Flood
• Faulty maintenance
• Damage from insects or vermin
• Wear and tear, gradual damage or deterioration

Coverage B, Other Structures

This coverage section protects structures that are not attached to the home, such as a detached (separate) garage, storage or utility shed playground equipment and swimming pools.

Coverage C, Personal Property

This covers your possessions, whether they are at your home or away with you on vacation. Personal property is often covered on a named peril basis. This means that only the causes of loss listed in the policy section are covered. The coverage is also subject to limitations and exclusions. Types of property having significant value, such as jewelry, fine arts, collectibles, etc., may require special protection. Talk to your agent about scheduling (adding) coverage on a floater which broadens and extends coverage for high-valued possessions.

Actual Cash Value vs. Replacement Cost

Commonly, protection under sections A and B is provided on either an actual cash value or a replacement cost basis. Actual cash value is defined as replacement cost minus depreciation. Replacement cost is the actual cost to replace the structure, regardless of depreciation. Check your policy to see which type of coverage you have. Coverage under section C is usually provided on an actual cash basis. However, your agent may be able to add replacement cost to your possessions just like that found in Coverage A.

Coverage D, Loss of Use

This coverage handles the cost of additional living expenses while your home is being repaired. The coverage also applies if the home is unusable. However, the loss or loss of access has to be the result of an event that is covered by the policy. For instance, if your home was damaged during a war and you had to abandon it, Coverage D would not be available because war is excluded. Additional expenses normally include food, housing, and transportation. However, the expenses must exceed what your family normally incurs.

Coverage Parts E and F address coverage for injuries to persons or damage to property that belongs to others.

Coverage E, Personal Liability

This Coverage Part responds if you are legally responsible for causing property damage or physical injury. Protection includes paying for your defense costs and any financial judgment for covered incidents. Naturally the coverage would not apply for excluded situations, such as intentional injuries. Example: Joe is sued by a guy he injured after tackling and repeatedly punching him during a pickup basketball game. The injuries from this incident are not accidental and would not be covered.

Coverage F, Medical Payments

This Part provides rapid reimbursement for minor injuries, such as a guest who trips and falls while visiting your home. This coverage does not apply to a family member. For example, if your child and your neighbor's child are both injured while playing and need to go to the emergency room, this coverage will pay for your neighbor's expenses but not for your own child.

This is a brief overview of homeowners insurance. All of the coverage provided by the homeowners policy is subject to limitations such as exclusions, policy limits, and deductibles. It's important that you discuss the details of coverage and any other insurance questions with your insurance agent.

Whether you’re a first-time homebuyer or have lived in your home for some time, knowing what homeowners insurance covers and doesn’t cover can help you secure the coverage you need, without paying for coverages you don’t. With this knowledge, you can make an informed decision on finding the right home insurance coverage with the best carrier to meet your needs.

Most standard homeowners insurance policies cover these four types of home insurance coverage:

• Your home’s structure
• Your personal belongings
• Liability protection
• Additional living expenses

There are additional types of coverage that are considered add-ons like medical payments, scheduled personal property and sewer backup.

Dwelling coverage

Your homeowner’s policy is designed to pay to rebuild or repair your home in the case of specified disasters like fire, hurricane, hail and lightning. Dwelling coverage includes the main structure of your home, but not any other detached structures on the same premises.

Other structures coverage

When you have detached structures on your property, other structures coverage is designed to protect them. These detached structures can include detached garages, sheds, barns, gazebos and fences.

Personal property coverage

Coverage for your personal belongings will pay the value of your damaged or lost possessions, including furniture, electronics, clothing and collectibles. Even trees, plants and shrubs are covered in some cases. Coverage for personal items also includes items that are stored off-premises.

If you are unsure about how much coverage you need, you can conduct a home inventory to determine the right home insurance coverage plan for you.

Liability protection

Liability insurance protects you from financial losses resulting from damage to others’ property and personal injury to others if you are found legally responsible. Unless they are excluded, this insurance also covers damage caused by your family members and even your pets. Liability protection covers court awards and expenses, depending on your policy.

If you think you need more liability protection than the average homeowner’s policy offers, consider an umbrella liability policy, which provides broader protection and higher liability limits.

Additional living expenses (ALE)

If damages make your home uninhabitable, this kind of coverage pays for the additional costs of living somewhere else until your home is repaired or rebuilt. It could include hotel and restaurant expenses and other costs you may incur during that time, like laundromat fees and even pet boarding. This coverage does have limits, and in some cases, a time limit.

What does homeowners insurance not cover?

There are some crucial exclusions to note under homeowners insurance that will help you decide whether additional coverage is necessary. Keep in mind that most policies offer extra, optional protection for things not covered under homeowners insurance.

Earthquake and flood damage

Generally, damage caused by earthquakes and floods is not covered by a standard homeowners policy, but can be purchased as a separate policy — or as an endorsement in some cases.

Water damage

Your policy covers some water damage, but some instances are excluded. Water damage issues involving your sewage systems, such as an overflow or backup, are typically not covered, but coverage can be purchased as an endorsement.

Homeowners neglect

Proper care and routine maintenance are crucial to keeping your property in tip-top shape. Staying current on cleanings, home systems repairs and inspections can save you from a lot of heartache down the road. Any damages caused by neglect or failure to properly maintain your home are not covered by homeowners insurance.

Those damages include but are not limited to:

• Termites and insect damage
• Mold
• Rust
• Bird or rodent damage
• General wear and tear

To avoid costly repairs that your policy might not cover, maintain your home regularly.

Identity theft

Homeowners insurance typically does not cover expenses related to identity theft, such as someone using your credit card to purchase new furniture. This can usually be purchased for additional coverage under a separate identity theft plan or, in a few cases, as an endorsement on your homeowners policy. Some insurers automatically include this coverage on standard home insurance policies.

Choosing the right homeowners insurance coverage

When choosing the right homeowners insurance company, the cost of coverage is just one factor. Each person has different criteria they want their insurance company to meet, whether it’s 24/7 claims response, online and mobile accessibility or the ability to speak with a dedicated agent who recognizes their name each time they call.

If you have unique coverage needs or home characteristics, such as living in a historic home, consider a company that has special endorsements that fit your needs. Knowing how to choose the best home insurance company for you will ensure you’re financially protected if a loss occurs.

Learn more: Affordable home insurance companies

Frequently asked questions

• • Yes, your personal belongings are covered through your homeowners insurance, but there could be coverage limits on valuable items. For instance, jewelry and fine arts have coverage caps under personal property coverage. If you have high-value items, it may be worth buying scheduled personal property coverage to ensure your items are fully covered against losses.

  • While states do not make homeowners insurance coverage mandatory, it is usually a worthwhile expense. Home insurance helps financially protect you against covered perils. If you were to suffer a substantial loss without the ability to pay for it in full, homeowners insurance can bridge the gap, allowing you to pay a deductible rather than the full cost of repairs or replacement.

  • Two things that are not covered in standard homeowners insurance policies are earthquakes and floods. Some companies offer an earthquake endorsement that you can add to your policy for an additional cost. You may also be able to buy a separate earthquake policy, like you can for flood insurance. Without an optional endorsement or separate policy, you would not have coverage if your home or belongings are damaged by an earthquake or flood.