What Does Homeowners Insurance Cover? — Complete Breakdown

Most homeowners have a general sense that their insurance covers their house. But the details matter — especially when it's time to file a claim. A standard HO-3 policy (the most common type) covers a surprisingly broad range of perils for your dwelling but is more restrictive about personal property and has specific exclusions that catch people off guard.

Estimate your coverage needs and premium with the Homeowners Insurance Calculator.

The Six Parts of a Standard Homeowners Policy

Coverage	What It Protects	Typical Limit
A — Dwelling	Your home's structure	Rebuild cost (e.g., $300,000)
B — Other Structures	Detached garage, fence, shed	10% of Coverage A
C — Personal Property	Furniture, electronics, clothing	50–75% of Coverage A
D — Loss of Use	Hotel, food, temporary housing if displaced	20% of Coverage A
E — Personal Liability	Lawsuits if someone is injured on your property	$100,000–$300,000
F — Medical Payments	Guest's medical bills (no lawsuit needed)	$1,000–$5,000

So on a policy with $300,000 dwelling coverage, you'd typically have $30,000 for other structures, $150,000–$225,000 for personal belongings, and $60,000 for temporary living expenses — automatically.

What's Covered (Standard Perils)

A standard HO-3 policy covers your dwelling against all perils except those specifically excluded. For personal property, it covers only "named perils":

Named Perils (Personal Property)	Covered?
Fire and smoke damage	Yes
Windstorm and hail	Yes
Lightning strikes	Yes
Theft and vandalism	Yes
Water damage from burst pipes	Yes
Falling objects (tree on house)	Yes
Weight of ice/snow/sleet	Yes
Explosion	Yes
Vehicle or aircraft damage to home	Yes
Volcanic eruption	Yes
Riots and civil commotion	Yes

What's NOT Covered (Major Exclusions)

This is where most homeowners get surprised during claim time:

Excluded Peril	Why	What to Do
Flooding	Too costly to pool with other risks	Buy separate NFIP or private flood insurance
Earthquake	Catastrophic regional risk	Separate earthquake policy or endorsement
Sewer/drain backup	Common but excluded by default	Add sewer backup endorsement ($50–$100/yr)
Mold	Often caused by maintenance neglect	Limited coverage; some endorsements available
Termites/pests	Considered maintenance issue	Not insurable — prevention is key
Normal wear and tear	Maintenance, not sudden damage	Not insurable
Intentional damage	Obvious moral hazard	N/A
War/nuclear hazard	Uninsurable catastrophic risk	N/A

Flooding is the biggest gap. Many homeowners assume water damage from external flooding is covered — it is not. Even homeowners outside FEMA-designated flood zones file flood claims. A separate flood policy starts at $400–$600/year and goes up from there based on risk zone.

Replacement Cost vs. Actual Cash Value

This policy detail determines how much you actually receive after a claim:

Replacement cost pays what it costs to repair or rebuild with equivalent materials at today's prices. If a storm destroys your 15-year-old roof, replacement cost pays for a brand-new roof.

Actual cash value pays replacement cost minus depreciation. That 15-year-old roof might be depreciated 60%, so you'd receive only 40% of the replacement cost.

Always opt for replacement cost coverage on both dwelling and personal property. The premium difference is typically 10–15%, but the claim payout difference is enormous.

How Much Coverage Do You Need?

Your dwelling coverage should equal the full cost to rebuild your home from scratch — not your home's market value or purchase price. The rebuild cost depends on local construction costs, square footage, and materials. Land value isn't included since the land survives most disasters.

A rough estimate: multiply your square footage by your local cost per square foot ($150–$300 in most areas). A 2,000 sq ft home at $200/sq ft needs $400,000 in dwelling coverage even if the purchase price was $350,000.

For tips on reducing your premium without reducing coverage, see How to Lower Homeowners Insurance Premiums. For flood-specific guidance, read Flood Insurance — Do You Need It?. And for comparing costs across states, check Average Home Insurance Cost by State 2026.