What Homeowners Insurance Covers

Homeowners insurance is a great way to protect your home. But what does it cover? Read more about what home insurance covers here.
family in front of home

Buying a home is a big event in anyone’s life. The next step is to protect your home from any possible disasters. Homeowners insurance can do that for you. Buying it can protect your finances and help put your worries at ease.

Home insurance covers your home from a variety of different threats. You can expect it to cover the physical structure of your home. It’ll cover any personal property you have inside as well. You may also receive liability protection and coverage for any extra living costs you rack up if your home is unlivable.

This article will explore what a basic homeowners policy covers. We’ll tell you about each type of coverage that home policies include. This includes how each coverage type works. We’ll also answer some frequently asked questions about what homeowners insurance covers.

What a Standard Home Insurance Policy Includes

Four coverage types make up a standard homeowners policy. The most popular type of policy is HO-3 or “special form” home insurance. This policy type includes all four types of coverage. The four types of coverage are:

  • Dwelling coverage
  • Personal belongings coverage
  • Liability protection
  • Additional living expenses coverage

The most common choice is to buy a policy, such as HO-3, that includes all four types. This is because it offers you the most protection from most disasters that life can throw at you. A standard home insurance policy will also protect you from any perils unless your insurer says differently. A peril is a disaster that could threaten your home at any point.

Dwelling Coverage

Coverage for dwellings on your property is part of a home policy. Dwelling coverage can help cover any repair or replacement costs for the physical structure of your home. It may also cover other structures on the property. Keep in mind that the damage needs to be from a peril that your policy covers. These types of perils include disasters such as:

  • Fires
  • Lightning strikes
  • Hailstorms
  • Hurricanes

These aren’t the only perils that your insurer will cover. But they are some of the most common. There are about 16 perils that most insurers will cover. A standard HO-3 policy would cover all of them.

Some Disasters Aren’t Part of Dwelling Coverage

While homeowners covers a lot of different perils, it won’t cover everything. For instance, most policies don’t include earthquake or flood insurance. You’ll have to buy that separately if you live in an area that’s at risk for these types of disasters.

What About Other Structures on Your Property?

In general, a dwelling refers to your home. But it’s common for a policy to cover other structures on your property. Common structures include:

  • Garages
  • Gazebos
  • Sheds
  • Pool and guest houses

Personal Belongings Coverage

Your homeowners insurance may also cover any personal belongings that you own. This includes furniture, devices, cookware, and any other property you can think of. It’ll be up to you to know what property you have and how much it costs to replace in the event of any disaster. A good way to keep track of your items is by taking regular inventory of them. It’s smart to have a written checklist while you take inventory.

Personal belongings coverage isn’t just for the items in your home. It’ll cover your property no matter where it is in the world. For example, if someone breaks into your car and steals your phone, your homeowners policy would cover that. Keep in mind that you must pay your homeowners deductible when you file a claim.

Actual Cash Value (ACV) or Replacement Cost?

Personal belongings coverage will either give you the replacement cost or actual cash value for your items. This depends on the type of policy that you choose. Replacement cost will give you an amount of money equal to the price you paid for the item. Actual cash value will give you the replacement cost minus any loss in value. Wear and tear or a decline in usability over time are what cause the depreciation of an object.

A policy with actual cash value is usually cheaper. But you might take a loss on your property. Replacement cost offers you the most financial protection.

Renters Will Need to Buy Coverage

If you’re renting a house or apartment, you’ll need to buy your own coverage. Your landlord’s homeowners insurance won’t protect your personal belongings. Buying an HO-4 or renters policy will make sure you have the proper protection for your belongings.

Liability Protection

Your home insurance may also cover you from liabilities that involve your home. It’ll cover any bodily injury or property damage that occur on your property. For example, if your friend falls down the stairs and hurts their leg, your insurer will cover the costs.

Liability coverage also covers damages that you or your family cause. Imagine that your kid hits a baseball into your neighbor’s window. No need to worry, your insurance will cover it. Liability home coverage will protect you from lawsuits and having to pay for the damages out of pocket.

Liability protection limits usually have a minimum of $100,000. But you may want to buy more. Generally, the more coverage, the better. This is especially true if you have a lot of money or valuable assets worth protecting.

Additional Living Expenses Coverage

Your homeowner’s policy can also cover any living expenses you rack up when your home is out of commission. This only kicks in when damages are from a covered peril. It’ll cover extra living costs, such as:

  • Hotel bills
  • Rentals
  • Boarding for pets
  • Restaurants and food

Just like the other types of coverage, you’ll have a limit to how much your insurance will cover. It’ll be up to you to decide whether or not you should have more coverage. Some policies may even limit the amount of time that your homeowners coverage will cover your living costs. Be sure to check with your insurer about their time policies on additional living expenses.

Additional living expenses coverage is separate from the other three types. If you reach your limit for additional living expenses, it won’t affect how much your insurance will cover your home or belongings. Though, you may still want to raise your limits to allow for extra protection.

How to Add Extra Protection

Sometimes, a standard policy may not be enough to cover the damages. Even after you’ve raised your limits, your home coverage still might not get the job done. There are ways that you can add extra protection so that you can avoid paying for the damages on your own.

Umbrella Policies

One way to add extra coverage is by buying an umbrella policy. Umbrella policies afford you extra liability protection. An umbrella policy is especially useful if you’re trying to protect very expensive and valuable objects or structures. It also protects you if you’re liable for damages to other expensive property.

Endorsements or Policy Riders

Endorsements or policy riders are another way to get extra coverage for your home. They cover you from damages that go beyond your current limits. This lessens the risk of a disaster costing you any of your own money. Riders may also help cover perils that your policy doesn’t already include. If you feel you need more protection, you should speak with your agent about adding endorsements to your policy.

Frequently Asked Questions

What does homeowners insurance not cover?

Standard homeowners policies don’t include some perils. Your policy likely won’t cover disasters like floods and earthquakes. This means you’ll have to decide whether you should go out and buy coverage for these perils.

Home insurance also doesn’t cover damages that you cause. This includes a lack of maintenance on your home. You’ll have to pay for these damages. You also won’t get coverage for weathering of your property over time.

Are cars part of personal belongings coverage?

Your car wouldn’t be part of your personal belongings coverage. If a random disaster damages your car, this will fall under your comprehensive auto insurance. Comprehensive coverage protects cars from random events like:

  • Natural disasters i.e., severe weather, hurricanes, volcanoes, tsunamis, etc.
  • Vandalism and theft
  • Hitting an animal

Keep in mind that your comprehensive coverage doesn’t cover any of the property inside your car. Your personal belongings coverage would take care of that.

Does dwelling insurance cover my tool shed?

Dwelling coverage covers several types of structures on your property. This includes buildings like tool sheds, guest houses, and garages. It may also include fences. Check with your insurer about what they count as an acceptable structure in your policy.

Does my home insurance cover my belongings if they’re in my car?

Your homeowners insurance covers your belongings, no matter their location. This means that if a disaster destroys any items in your car, your policy will cover the objects. You should have an idea of what objects you own and how much they cost. To do this, make sure to keep an inventory checklist of your personal belongings. It’ll help you avoid any roadblocks when you’re trying to file a claim.


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