Understanding the Basics: What Does Homeowners Insurance Cover?

When you purchase a home, one of the most important investments you’ll make is homeowners insurance. This insurance policy is designed to protect you financially against unforeseen circumstances, such as fire or theft. A standard homeowners policy, known as HO-3, covers your home, belongings, and structures on your property. Understanding what your policy covers — and doesn’t cover — can ensure that you arrange adequate protection for your home and belongings.

Structural Damage

The main purpose of a homeowners insurance policy is to provide coverage to replace or repair the structure of your house in cases of covered damages. If you have coverage, it means that the insurance company will pay you up to the policy limits for repairs needed following a covered event. Get a home insurance quote to choose your coverage amounts and see what is and isn’t covered in the policy.

HO-3 policies cover a variety of common events that affect homes. If something isn’t covered, it must be listed explicitly in the policy. They usually cover damage from smoke, fire, water damage, vandalism, and theft, as well as weather events like wind, hailstorms, and lightning. They may also cover damage that results from outside forces, like a falling tree branch.

Personal Property

In addition to covering the structure of your home, insurance policies also typically cover personal belongings in your home that are damaged. This includes your heater, the air conditioning system, furniture, clothing, and appliances like your refrigerator and washing machine. This does not mean that you can make a claim if your stove breaks. It’s only able to be claimed if it becomes unusable due to one of the covered events, such as a fire.

Basic homeowners insurance covers the belongings in your home, but it’s typically insufficient for high-value items. Be prepared to purchase additional coverage for collectibles, expensive jewelry, designer clothing, and high-end technology. You can still get protection if they are damaged or destroyed, but it will just be extra beyond the basic coverage of an HO-3 policy.

Detached Structures

What happens if lightning strikes your child’s swing set? Are you covered? In most cases, yes. Homeowners insurance usually covers detached structures on your property. This may include a standalone garage, shed, swing set, grills, fireplace, and fences. The coverage typically extends to repair or replacement costs if these structures are damaged or destroyed by covered events.

Structures that are higher risk — such as a trampoline, swimming pool, or similar equipment — may also be covered. However, in most cases, they will require additional liability coverage because of the dangers associated with them.

Living Expenses and Liability

If your home becomes uninhabitable due to a covered event, you are typically provided with additional living expenses until your home is repaired. Also known as loss of use coverage, this may include the cost of a hotel, meals, and similar expenses. Coverage usually is for a limited time period or a set dollar amount. However, in some cases, you can add coverage to your policy to extend these figures.

You’re also provided with liability protection. This coverage offers financial protection if someone is hurt while on your property and you are legally liable. Homeowners insurance will repay you for medical or legal bills associated with such injuries, whether from a fall, dog bite, or other trauma. Some policies require extra fees to cover being hurt by your pet and others will not cover certain breeds at all. The main breeds that are often banned include the Rottweiler, Doberman pinscher, and pit bull.

What’s Not Covered

Homeowners insurance may cover a lot of damaging events, including mold, plumbing issues, and foundation repairs. However, in each and every case, the damage must be the result of one of the covered events. If lack of maintenance is proven, such as a slow plumbing leak that could have been repaired by the homeowner prior to a burst pipe, then it will not be covered.

Insurance policy exclusions vary depending on the insurer, but there are certain events that are almost always eliminated from standard policies. Flood and earthquake damage are typically not included in coverage. However, if you live in an area that commonly experiences either of these dangers, you can usually get additional insurance to cover them.

Other events that are often excluded from HO-3 insurance policies are sinkholes and landslides, government seizure, and war and nuclear hazards. If the house must be rebuilt or adjusted to meet building codes, it won’t be covered. If there is a power failure, but the source of the problem is off-site, it also won’t be covered. And of course, homeowner neglect is not covered.

Your Homeowner Policy

As a homeowner, you want to protect your investment and your financial security. Homeowners insurance provides essential financial protection for your home, your belongings, and your liability risks. Understanding what your policy covers and any limitations or exclusions is necessary to ensure you have adequate protection.

Since each insurer is different and policies can be adjusted to meet your needs, it’s important to fully review your policy. Discuss your needs with an insurance agent or get an online quote for your unique policy. By understanding your homeowners insurance policy, you can make informed decisions to guard against financial loss and protect your home and assets.