What Does Homeowners Insurance Cover?
A standard homeowners insurance policy (HO-3) includes six main types of coverage:
1. Dwelling Coverage (Coverage A)
Pays to repair or rebuild your home if it's damaged by a covered peril like fire, wind, hail, or lightning. This should equal the cost to rebuild your home (not the market value).
2. Other Structures (Coverage B)
Covers detached structures on your property: garages, sheds, fences, and guest houses. Typically set at 10% of your dwelling coverage.
3. Personal Property (Coverage C)
Covers your belongings — furniture, electronics, clothing, appliances — if they're stolen or destroyed. Usually set at 50–70% of dwelling coverage.
4. Loss of Use (Coverage D)
Pays for temporary living expenses (hotel, meals, etc.) if your home is uninhabitable after a covered loss.
5. Personal Liability (Coverage E)
Protects you if someone is injured on your property or you cause damage to someone else's property. Covers legal defense and settlements up to your policy limits.
6. Medical Payments (Coverage F)
Pays medical bills for guests who are injured on your property, regardless of fault. Typically $1,000–$5,000.
Standard home insurance does not cover: floods, earthquakes, sewer backups, normal wear and tear, pest infestations, or intentional damage. You'll need separate policies or endorsements for flood and earthquake coverage.
Homeowners vs. Renters Insurance
Renters insurance (HO-4) covers your personal belongings, liability, and additional living expenses — but not the building itself (that's your landlord's responsibility). It's surprisingly affordable at $15–$30/month and is essential for anyone renting.
How to Choose the Right Coverage
- Dwelling coverage: Get enough to rebuild your home at today's construction costs
- Personal property: Choose replacement cost over actual cash value
- Liability: At least $300,000 (consider an umbrella policy for more)
- Deductible: $1,000–$2,500 is the sweet spot for most homeowners
- Special endorsements: Scheduled items for jewelry, art, or collectibles over standard limits
How to Lower Your Home Insurance Premium
- Bundle with auto insurance for 10–25% savings
- Increase your deductible
- Install security systems, smoke detectors, and deadbolts
- Maintain a good credit score
- Ask about loyalty and claims-free discounts
- Shop around every 2–3 years
- Improve your roof and plumbing
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