What Does Home Insurance Actually Cover?
Kenneth Schaub, Owner & Licensed Insurance Advisor
A standard HO-3 homeowners policy covers six separate things: the structure of your home, other structures on your property, your personal belongings, your legal liability, medical payments for injured guests, and extra living costs if you're displaced. Each one has its own coverage limit, so "I have homeowners insurance" doesn't automatically mean every part of your risk is covered equally.
What are the six parts of a homeowners policy?
Each coverage type pays for a different category of loss, with its own dollar limit set separately from the others.
| Coverage | What it pays for | Typical limit |
|---|---|---|
| Dwelling | Rebuilding your house itself after a covered loss | Set to full rebuild cost |
| Other structures | Detached garage, shed, fence | 10% of dwelling limit |
| Personal property | Your belongings: furniture, electronics, clothing | 50-70% of dwelling limit |
| Loss of use | Hotel/rent if your home is uninhabitable | 10-20% of dwelling limit |
| Personal liability | Legal costs if you're sued for injury/damage to others | $100,000-$500,000 |
| Medical payments | Minor guest injuries, regardless of fault | $1,000-$5,000 |
What does dwelling coverage specifically pay for?
Dwelling coverage rebuilds the physical structure, walls, roof, floors, built-in cabinets, after a covered loss like fire, wind, or a falling tree. It's priced to your home's rebuild cost, not its market value or sale price, which is why two homes worth the same amount can carry very different dwelling limits.
Does home insurance cover my belongings?
Yes, under personal property coverage, typically at 50-70% of your dwelling limit. Higher-value items like jewelry, fine art, and collectibles usually have sub-limits far below their actual value (often $1,000-$2,500) unless you add a separate scheduled endorsement for them specifically.
What does liability coverage protect against?
Personal liability pays legal defense costs and damages if you're sued because someone was injured on your property or you (or your dog, or your kid) accidentally damaged someone else's property. Most policies default to $100,000, but many advisors recommend $300,000-$500,000, since a single serious injury lawsuit can easily exceed the lower limit.
What's NOT covered by a standard policy?
Flood and earthquake damage are excluded from every standard HO-3 policy and require separate coverage. Routine wear and tear, pest damage, and (in many states) sewer backup also need a specific endorsement rather than being automatically included.
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Frequently asked questions
What are the main parts of a homeowners insurance policy?
Six parts: dwelling coverage for the structure, other structures coverage, personal property for belongings, loss of use for temporary living costs, personal liability, and medical payments for guest injuries.
Does homeowners insurance cover flooding?
No. Flood damage is excluded from every standard homeowners policy and requires a separate flood insurance policy, typically through the National Flood Insurance Program or a private carrier.
How much personal property coverage do I actually have?
Most policies set personal property coverage at 50-70% of your dwelling coverage limit automatically, though high-value items like jewelry or art usually need a separate scheduled endorsement to be fully covered.
What does loss of use coverage pay for?
Loss of use pays for temporary housing, meals, and other extra living expenses if a covered loss makes your home temporarily uninhabitable, typically limited to 10-20% of your dwelling coverage.
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