Homeowners insurance commonly covers damage from storms, fire, theft, and vandalism. However, policies vary widely, so you'll want to know what's considered a covered event. If a certain peril isn't listed, you won't be able to make a claim for it.

In general, insurance is a pretty complicated topic. Yet most people know more about the intricacies of their health and auto insurance policies than they do about their homeowners insurance.

Perhaps this is because so few people actually file claims on their homeowners policies.

In the rare instance that you will need to file a claim, knowing the answer to that question is more important than you can ever imagine.

What is homeowners insurance?

Homeowners insurance covers (just about) any disaster that might happen to the exterior and interior of your home, any structures or land attached to it, and personal belongings — anything from weather damage to theft.

You’re also covered for liability if anyone is harmed on your property.

What homeowners insurance typically covers

It’s almost impossible to generalize about what a typical homeowners insurance policy covers. While there are common provisions from one home insurance policy to another, exactly what is covered can vary from state to state and based on the type of policy that you choose.

But more specifically, a homeowners insurance policy only covers perils that are specifically listed as covered events in the policy. Or put another way, if a certain disaster is not listed as a covered event, you will not be able to make a claim should it happen.

Some of the more commonly covered perils

  • Fire and smoke damage
  • Weather-related damage, such as wind damage or hail
  • Water damage from internal sources, but not from flooding
  • Theft of personal property
  • Vandalism
  • Damage caused by snow or ice on the roof (such as a collapse)
  • Damage from civil disturbances
  • Explosions (like gas explosions)
  • Damage caused by motor vehicles or aircraft

Contents of the home

Most homeowners insurance policies will also include a provision for contents, which is personal property not affixed to the house.

This is why theft of personal property is typically considered a covered event.

Read more: Should you get home contents insurance?

Damage to landscaping, fencing, and outbuildings

Most homeowners insurance policies will also cover damage to landscaping, fencing, and even outbuildings. This coverage is generally equal to up to 10% of your total policy amount.

For specifics about what is and isn’t considered a covered peril under your specific homeowners policy, you will need to contact your insurance agent.

Temporary housing expenses

There is usually a provision that will provide you with temporary living expenses if your home has been damaged to the point that you cannot live in it. The insurance company will reimburse you for your living expenses during the time that the home is being repaired.

Liability insurance coverage

Homeowners insurance policies typically provide liability coverage in the event that you, a member of your family, or a third-party, are injured on your property.

This also extends to someone being bitten by your dog, which is why insurance companies exclude such coverage if you have a breed of dog that is considered to be particularly aggressive.

What homeowners insurance doesn’t usually cover

Unfortunately, it’s probably not possible to cover your home for every potential calamity that could strike it. And if you could, the policy would be prohibitively expensive.

Source: Giphy.com

While the list of covered events above may seem pretty comprehensive, there are certain common disasters that will specifically not be covered by a typical policy.

Floods and earthquakes

If you live in an area that has been determined to be prone to threats of flooding and earthquakes, you will need to get a separate policy for each.

Where these become complicated is if one of these strikes a property that is not located in either a flood or earthquake zone.

For this reason, it can be advisable to add flood insurance or earthquake coverage to a regular homeowners insurance policy. Since the property is not located in a threat zone, the premium will be extremely low. But in the event either calamity hits, you’ll be covered.

Examples of other threats that are not covered by the typical policy include landslides and mudslides, sinkholes, and damage due to warfare or nuclear accidents.

Read more: What is flood insurance? (And what does it cover?)

Damage due to homeowner neglect

One other very important exclusion is damage that is the result of homeowner neglect. For example, if your roof has not been replaced in 40 years, and is destroyed in a violent storm, the insurance company could reject your claim based on the fact that the destruction of the roof was primarily the result of neglect, rather than the storm.

Different types of homeowners insurance coverage

You’ll choose from eight types of policies, all with different coverage needs in mind.

HO-1 – Basic form (uncommon)

HO-1 is a limited, bare-bones policy that mortgage companies don’t offer much anymore. It only covers 10 possible damages (compared to a more standard 16) and doesn’t include liability.

HO-2 – Broad form

A broad form HO-2 policy encompasses more than an HO-1 — it covers the replacement cost of your home and the cash value of the personal property. But it’s a “named perils” policy, which means it only covers 16 types of damages (like fire, floods, etc.) and, like an HO-1, it doesn’t add liability coverage.

Named perils policies tend to be more affordable than open peril or all-risks policies, which cover a much wider variety of damage causes. But a named perils policy can be more of a headache if you have to file a claim, since you’re responsible for proving the damage happened because of a covered disaster and not for another reason.

HO-3 – Special form (most common)

This is what most single-family homeowners get. It’s the minimum level of coverage required by most mortgage issuers, and unless you have an extremely high-value home or a high-risk location, it’s probably all you need.

HO-3 policies are “all risks” meaning they’ll provide dwelling coverage after almost any damaging cause, unless the cause is listed as an “exclusion” in the policy (like earthquakes, floods, or neglect). Personal property coverage, though, is limited to “named peril” damages. Liability and medical coverage are included, as well as additional living expenses in case you need to vacate your home after a covered event.

HO-4 – Renters insurance form

If you’re renting or leasing a home or apartment, you’ll get an HO-4 policy. It comes with named-peril coverage, personal property at replacement cost, and liability. Since you don’t own the building, you don’t need dwelling coverage.

Read more: Best renters insurance companies

HO-5 – Comprehensive form

This is the highest level of coverage, and as you probably guessed, the most expensive. An HO-5 policy has some perks an HO-3 policy doesn’t, like “all risks” replacement cost coverage for both dwelling and personal property, and higher coverage limits for expensive items. There may still be named exclusions.

Your insurer’s more likely to offer HO-5 policies for newer homes in low-risk areas, particularly to buyers with good credit. If you can afford the extra protection and you have valuable items you want fully covered, an HO-5 may be worth it.

HO-6 – Unit owners form (condo insurance)

An HO-6 policy covers a condo or co-op. Like HO-4 renters insurance policies, HO-6 covers personal property and liability. You may or may not need dwelling coverage, depending on how much coverage your condo association already has for the building.

Read more: Best condo insurance companies

HO-7 – Mobile home form

An HO-7 policy modifies an HO-3 policy slightly for mobile or manufactured homes, including trailers or any “tiny houses” you can take on the road. Dwelling insurance covers all risks, while personal belongings are covered if they’re damaged by named perils.

Read more: Are mobile homes a good deal? How their value compares to traditional homes

HO-8 – Modified coverage form (uncommon)

If your home is older or built with older, riskier materials, it’s harder to insure at replacement cost, which may be much higher than market value. An HO-8 policy is designed for these homes, offering named-perils cash value coverage for the dwelling and personal property. Historic homes, which are deliberately left in their original condition or close to it, usually have HO-8 coverage. 

You can often qualify for the higher coverage of an HO-3 policy after replacing outdated materials and appliances, since your home will be less vulnerable to damage as a result.

How much coverage do you need and why

Source: Giphy.com

Mortgage lenders usually require a certain coverage amount, but even if you don’t finance your home with a mortgage, insurance is a smart idea.

As a general rule, you’ll need three types of coverage: dwelling, liability, and medical payments.

Dwelling

Dwelling insurance covers repairs to the physical structure of your home or “dwelling” if it’s damaged by an event covered under your policy. When you choose how much dwelling coverage to buy, you’ll want enough to cover the replacement cost of your home.

Replacement cost isn’t the same as market value. Your replacement cost total reflects how much it will cost to repair or replace the home, including any property upgrades. Market value is what a buyer would pay to purchase your home in its current condition; unlike replacement cost, this value can be affected by factors like the neighborhood, schools, et cetera. These two totals may be similar, but replacement cost is the one to keep in mind for dwelling coverage.

To make sure you get your money’s worth, insurers recommend you get a policy that covers at least 80% of your replacement cost. While 100% coverage is optimal, 80% is the minimum most insurers require to cover full damages.

Since the replacement cost of a home increases over time, your policy should also include inflation protection. This will allow the amount of coverage to increase based on the rise in building costs in your area. Some home insurance policies add an “inflation clause” for this purpose.

You should also have an amount of contents insurance that will provide reasonable replacement costs for the personal effects that you have. However, if you have certain personal property that is particularly high value, such as jewelry and artwork, you’ll need to purchase additional coverage.

Liability

Liability coverage protects you if someone sues you for injuries or property damage. Liability coverage should be comparable to what is customary in your area.

This amount can vary from state to state since the laws of each state covering damages awarded are different. For most policies, though, you’ll start at around $100,000 in personal liability coverage. Since lawsuits can get expensive, experts advise you to go up to $300,000 if possible.

Read more: Renters liability insurance: What it covers, what it costs, and who needs it

Medical coverage

Medical coverage pays for minor injuries to any guests in your home. It’s not as pricey as some liability coverage options; limits are generally $1,000 or $5,000. As with dwelling and liability insurance, go for the upper coverage limit ($5,000) for better protection.

Where to get homeowners insurance


How much does homeowners insurance cost?

An average annual premium was $1,899 or about $158 a month in 2022, according to Policygenius. But this is a nationwide average, and amounts can vary widely by state and city. You might pay as little as $400 or as much as $3,000 a year.

Home insurance works a little like life insurance; if you’re at greater risk, you’ll pay more. Insurance underwriters use an acronym called COPE: Construction (building materials), Occupancy (who lives there), Protection (from fires and other natural disasters), and Exposure (risk inherent in your location).

Variables that can affect your cost include:

  • Weather and environment (location is probably the biggest factor in your cost)
  • Age of your home (older homes are more expensive to insure)
  • Building materials used
  • Your home’s claims history (more claims make the price higher) and claims history of homes in the surrounding area
  • Your credit history (and the likelihood of filing a claim)

You’ll probably pay more than average if you live in a major city or anywhere with a dense population since home values are higher there. It’s costlier to insure a home in any state with a track record of natural disasters. 

If you’re buying a home in Texas, Florida, Alabama, Louisiana, or another state near the Gulf Coast, you’ll pay more because of storm and hurricane risk. The same goes for homeowners in inland, tornado-prone states like Oklahoma and Kansas.

Read more: Were you affected by a hurricane this year? If so, you may qualify for natural disaster tax relief

Some of the least expensive states for home insurance, on the other hand, are Delaware, Vermont, Hawaii, and Pennsylvania— spots where the weather has historically been a little less noteworthy. Little details that lower your risk, like living near a fire station, might save you money. 

Costs also vary based on the insurance company you pick. Some companies specialize in high-value homes, for instance, and they’ll naturally charge higher prices.

Read more: How much does homeowners insurance cost? (And is it worth it?)

Are there deductibles on homeowners insurance?

If you’ve shopped for a health insurance or car insurance policy, you know about deductibles — the money you pay out of pocket before your coverage kicks in. This could be represented as a dollar amount or a percentage.

When you file a claim on your home insurance, you’ll pay the deductible amount before your insurer covers the rest of the cost. Note that deductibles don’t apply to liability claims, only to property and personal belongings.

You’ll choose your deductible amount when buying a policy. Typically these amounts range from $500 to $2,500, or they may be a percentage (around 1%-2%) of your home’s value. If you’re tacking on extra coverage for perils like earthquakes and hurricanes, these policies may have separate, larger deductibles. The higher the deductible, the lower the premium — the amount you pay every month — and vice versa.

So, should you spring for a higher deductible or go with a lower one?

That depends somewhat on how likely you think you are to file a claim. A high deductible saves you money month to month, and if you’re lucky enough never to make a claim on your policy, you’ll save a ton in the long term. But you’ll pay a lot more if you do need to repair or replace anything.

Lower deductibles cost more on a regular basis since you’re paying high premiums. The upside is that your insurance will make a bigger contribution if you do file a claim. This could be a good choice if you think you’ll face an excessively expensive peril covered by your insurance, like fire, water damage, or freezing pipes. But if your risk is relatively low, a high-deductible policy may lead to more savings.

Will your premium go up if you make a claim?

Homeowners insurance is a good deal compared to other types of insurance when it comes to making claims. Typically, your premium will not be increased when you file your first claim. There are, of course, exceptions, such as if your dog bites someone.

But usually, if the claim is the result of natural events, the insurance company will not raise your premiums. However, it is possible that your rates will be increased in the event you have two or more claims within a short span of time, such as three years or less.

What’s more likely is that an insurance company will raise its rates due to higher-than-normal claims in your area. In this case, the increase will be for the entire market and not specific to you personally.

For this reason, you shouldn’t not file a claim just to keep your premium down. The bigger concern will be paying the deductible. If you’ve taken a large deductible to keep the premium at a minimum, it’s always a good idea to make sure that you have enough extra cash in your emergency fund to cover that deductible in the event that you file a claim.

Not sure how much you need in your emergency fund? We can help you calculate that with our emergency fund calculator.

Summary

Homeowners insurance is a must when you buy a home (literally, it’s the law), but you want to make sure your policy has all the coverage you want and need. Unfortunately, there are things insurance just doesn’t cover, but for less traditional coverage, you can add riders to your policy. Just make sure you read the fine print before signing anything!

Featured image: Antonio Guillem/Shutterstock.com

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About the author

Total Articles: 144
Since 2009, Kevin Mercadante has been sharing his journey from a washed-up mortgage loan officer emerging from the Financial Meltdown as a contract/self-employed “slash worker” – accountant/blogger/freelance web content writer – on Out of Your Rut.com. He offers career strategies, from dealing with under-employment to transitioning into self-employment, and provides “Alt-retirement strategies” for the vast majority who won’t retire to the beach as millionaires. He also frequently discusses the big-picture trends that are putting the squeeze on the bottom 90%, offering work-arounds and expense cutting tips to help readers carve out more money to save in their budgets – a.k.a., breaking the “savings barrier” and transitioning from debtor to saver. He’s a regular contributor/staff writer for as many as a dozen financial blogs and websites, including Money Under 30, Investor Junkie and The Dough Roller.