Homeowners insurance gives you four essential coverage types:
- Property, including the house and your possessions. This includes damage and theft.
- Liability, for certain injuries or damage that members of your household are legally responsible for.
- Medical payments to others, for small injuries to guests on your property.
- Loss of use, which reimburses you for extra costs if you can't live at home because of a problem covered by the policy (such as a fire or tornado).
Let's look more closely at what's covered, so you know what you're buying and where you might want extra coverage.
Standard home insurance policies
The problems covered by home insurance are called "perils." The most common type of standard home insurance policy, called an HO-3, covers your house for all perils, except problems that are specifically excluded (floods, earthquakes, landslides and other problems). If you have an HO-3 policy, you can check it for the list of exclusions. Here's a sample HO-3 policy.
An HO-3 policy covers your personal property for 16 problems, listed below. Remember, your dwelling is covered for everything except what's named as exclusions. Personal property means your belongings: Furniture, curtains, rugs, clothes, shoes, jewelry, pots and pans, and TVs, down to the little knickknacks on the windowsill.
Here are the problems and disasters you can expect an HO-3 home insurance policy to cover for your personal property:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- Vandalism or malicious mischief
- Volcanic eruption
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or stream
- Sudden and accidental tearing apart, cracking, burning or bulging
- Sudden and accidental damage from artificially generated electrical current
The coverage amount for personal property is sometimes set at 50% of the dwelling coverage. So if your house is insured for $200,000, you'd have $100,000 for personal property. You can can buy more coverage. Remember, in a worst-case scenario like a tornado, the personal property coverage should be enough to replace everything you own.
If you want a homeowners insurance policy that provides coverage for both your dwelling and personal property for all problems -- except those excluded -- look into an HO-5 policy. Here's a sample HO-5 policy.
Summary: Standard home insurance policies
What's not covered by home insurance
It's good to know what's generally excluded by home insurance so you're not taken by surprise later on. The top things to know about:
- Water: Water damage that's sudden and accidental is usually covered, such as a burst pipe.
- Maintenance problems: If you end up with home damage because you didn't make repairs, that's not covered.
Excluded in an HO-3 policy
|Earth movement (such as an earthquake, landslide, mudslide or sinkhole)|
|Ordinance or law (some coverage may be provided)|
|Water damage (sudden & accidental water damage is included; other water damage can be added, such as sewer back-up coverage and flood insurance)|
|Collapse (some coverage may be provided)|
|Theft to a dwelling under construction|
|Vandalism or malicious mischief (only if the house is vacant more than 60 days)|
|Mold, fungus or wet rot (some coverage may be provided in the policy)|
|Wear & tear, deterioration|
|Smog, rust & corrosion|
|Smoke from agricultural smudging & industrial operations|
|Discharge, dispersal or seepage of pollutants|
|Settling, shrinking, bulging or expanding|
|Birds, vermin, rodents, insects|
|Animals owned by you|
Liability coverage for homeowners
Liability coverage can come to the rescue if you (or members of your household) are legally responsible for someone else's injury or property damage. (This does not include injuries or damage from a car accident, which are fall under liability car insurance.) Home insurance liability coverage includes your legal defense cost.
Here are examples of cases where liability coverage could pay out:
- Your dog bites someone.
- Someone visiting you falls down your stairs.
- A visitor slips on ice on your sidewalk.
Check to see how much liability insurance your homeowners policy has. It may include a baseline coverage amount such as $100,000, but you can buy higher coverage. For even better liability coverage, consider an umbrella insurance policy.
Medical payments to others
Medical payments coverage is usually in a small amount, such as $1,000, but you can buy more. It's useful if a guest gets a minor injury on your property. The coverage will pay medical bills quickly no matter who was at fault. (More expensive injury claims would fall under liability insurance.)
Loss of use
"Loss of use" coverage is also known as "additional living expenses" coverage, or ALE. Loss of use insurance is valuable if you can't live at home because of damage that's covered by the policy. You can make claims for the extra expenses of living somewhere else -- such as hotel and restaurant bills.
Loss of use coverage is sometimes set at 20% of the dwelling coverage. So if your house is insured for $200,000, you'd have $40,000 for additional living expenses. You can raise your loss of use coverage amount. See more about loss of use coverage.