Your home is more than just a shelter; it’s a valuable asset you likely can’t afford to replace out of pocket in case of a disaster. So, protecting your home, investment, and wallet means getting the right home insurance coverage. But what does home insurance cover? We will cover that here. 

What Home Insurance Covers

Homeowners insurance provides protection for your house and belongings in case of events such as fires, hail, tornadoes, and burst pipes. If such events cause damage, your policy can cover the repair costs. Additionally, home insurance can reimburse you for theft or vandalism of your personal items.

It can also help defend you against lawsuits or cover medical bills if someone gets injured on your property. If you can’t live at home due to a covered disaster, your policy could cover temporary living expenses such as hotel stays or rental costs.

Standard Types of Home Insurance Coverage

Home insurance policies typically include six standard types of coverage:

  1. Dwelling Coverage: Protects the structure of your home, including walls, floors, and built-in appliances. Coverage usually amounts to the cost of rebuilding your home.
  2. Other Structures Coverage: Covers detached structures on your property, such as fences or sheds. Typically, this is about 10% of your dwelling coverage.
  3. Personal Property Coverage: Pays to repair or replace stolen or damaged belongings, generally ranging from 50% to 70% of dwelling coverage.
  4. Loss of Use Coverage: Helps cover temporary living expenses if your home is being repaired, usually 20% of dwelling coverage.
  5. Personal Liability Coverage: Covers you if you unintentionally injure someone or damage their property, typically between $100,000 and $500,000.
  6. Medical Payments Coverage: Pays for minor medical expenses if someone is injured on your property, with limits usually between $1,000 and $5,000.

Detailed Breakdown of Coverage Types

Dwelling Coverage

This coverage protects the physical structure of your home, including the roof, walls, and built-in appliances. It covers most types of damage unless specifically excluded in your policy. Commonly covered events include wind, hail, fire, and lightning. For example, if a severe thunderstorm knocks a tree onto your home, damaging the roof and attic, your insurance would cover the repair costs minus your deductible.

Other Structures Coverage

This covers structures on your property that aren’t attached to your house, such as sheds or detached garages. Similar to dwelling coverage, it typically includes damage from events like fire and hail. Meaning…if heavy snow causes your fence to collapse, your insurance will pay for repairs after you pay the deductible.

Personal Property Coverage

This covers your personal belongings, including furniture, electronics, and clothing, both inside and outside your home. Coverage often extends to specific perils listed in your policy, such as fire, theft, and vandalism.

Loss of Use Coverage

If your home becomes uninhabitable due to a covered disaster, this coverage helps pay for additional living expenses such as hotel stays and restaurant meals.

Liability Coverage

This protects you if you’re responsible for injuring someone or damaging their property. Coverage extends to household members and pets, and typically does not cover intentional acts or car accidents. So, say a delivery person slips on your icy sidewalk and sues for medical expenses and lost wages; your liability coverage would help pay the legal fees and any damages up to your policy limit.

Medical Payments Coverage

This provides coverage for minor injuries to guests on your property, regardless of who is at fault.

What Homeowners Insurance Won’t Cover

Home insurance policies have exclusions, meaning certain types of damage are not covered. These typically include:

  • Flooding from external sources like heavy rainfall or storm surges.
  • Earthquakes, landslides, and sinkholes.
  • Infestations by birds, vermin, fungus, or mold.
  • Wear and tear or neglect.
  • Government actions or nuclear hazards.

For protection against these risks, you may need to purchase additional insurance policies, such as flood or earthquake insurance.

Expanding Your Coverage with Endorsements

If you have specific concerns about risks not covered by your standard policy, you can often purchase endorsements or add-ons. Common endorsements include:

  • Scheduled Personal Property: Provides coverage for valuable items like jewelry or musical instruments.
  • Ordinance or Law Coverage: Pays to bring your home up to current building codes during repairs.
  • Water Backup Coverage: Covers damage from backed-up sewers or drains.
  • Equipment Breakdown Coverage: Covers major home systems and appliances if they fail.
  • Service Line Protection: Covers damage to utility lines you’re responsible for.
  • Identity Theft Insurance: Covers expenses related to identity theft.

Types of Homeowners Insurance Policies

Homeowners insurance policies come in various forms, with HO-3 and HO-5 being the most common:

  • HO-3 Insurance: Covers damage to your home from any cause except those specifically excluded. Belongings are covered for listed perils only.
  • HO-5 Insurance: Offers the broadest coverage, protecting both home and belongings from all causes except those excluded.

Less common forms like HO-1 and HO-2 provide limited coverage for specified events only.

How Homeowners Insurance Works

When disaster strikes, you’ll need to file a claim to receive compensation. The amount you receive can depend on several factors, including whether you have:

  • Actual Cash Value Coverage: Pays for the cost to repair or replace property, minus depreciation.
  • Replacement Cost Coverage: Pays for repairs with materials of “like kind and quality,” up to policy limits.
  • Extended Replacement Cost Coverage: Pays above the policy limits, up to a specified amount.
  • Guaranteed Replacement Cost Coverage: Covers the full cost to repair or replace your home, regardless of policy limits.

Homeowners Insurance Deductibles

Your policy includes a deductible, which is the amount you must pay out of pocket before your insurance kicks in. This can be a flat amount or a percentage of your home’s insured value. Opting for a higher deductible can lower your premium but means higher out-of-pocket costs when you file a claim.

Home insurance protects your home, your belongings, and your financial stability. It offers comprehensive coverage for various types of damage, including fires, hail, tornadoes, and burst pipes. Additionally, it provides protection against theft, vandalism, and liability claims, ensuring you are safeguarded against numerous potential risks. Now you are equipped to make informed decisions about your policy and ensure you are adequately protected.