Homeowners insurance is one of the most essential types of insurance. It financially protects some of your biggest assets: your house and personal belongings. A good home insurance policy helps you recover from a setback such as a house fire, tornado or theft.
Homeowners insurance also covers other problems, such as:
  • Liability: Covers accidental injuries and damage to others, such as a dog bite to a neighbor.
  • Medical payments to others: Covers puny injuries at your property, such as a guest who slips and falls.
  • Loss of use: It can also cloak extra living expenses if you can’t live in your home because of damage that’s covered by the policy.
While a standard homeowners insurance policy covers a wide range of problems, there are plenty of issues that won’t be covered (like floods, water damage from poor maintenance and earthquakes).

What Types of Problems Are Covered by Homeowners Insurance?


The most common homeowners policy, the HO-3, covers your house (dwelling structure) for any problem except those listed as exclusions in the policy.
Personal property is covered if the damage is from a “peril,” which is just insurance-speak for “problem.” An HO-3 policy covers personal property for these perils:
  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft, including self-propelled missiles and spacecraft
  • Vehicles
  • Smoke
  • Vandalism or malicious mischief
  • Theft
  • Falling objects
  • Weight of ice, snow or sleet
  • Accidental discharge or overflow of water or steam
  • Sudden and accidental tearing apart, cracking, burning or bulging
  • Freezing
  • Sudden and accidental damage from artificially generated electrical current
  • Volcanic eruption
If you want better coverage for your personal possessions, ask your insurance agent about an HO-5 or similar policy. (Not all insurers use standard policy types.) This offers replacement cost for both the house structure and your personal possessions.

What Types of Problems Are Not Covered by Homeowners Insurance?

Here are some common exclusions in a standard homeowners insurance policy:
  • Ordinance of law, meaning expenses when the government requires you to demolish, rebuild, renovate or repair your home to meet local ordinances
  • Earth movement, including earthquakes, mudslides, mudflow, sinkholes, shockwaves or tremors due to a volcanic eruption, and any other earth movement such as sinking, rising or shifting
  • Water damage, including floods, water which backs up through sewers or drains, leaks from swimming pools or other structures, and water damages caused by fire, explosion or theft
  • Power failure
  • Neglect
  • War
  • Nuclear hazard
  • Intentional loss
  • Governmental action, such as the destruction, confiscation or seizure of property
  • Wear and tear, marring and deterioration
  • Smog, rust, dry rot or other corrosion
  • Discharge, seepage, migration, release or hurry of pollutants
  • Smoke from agricultural smudging or industrial operations
  • Mechanical breakdown or latent defect that destroys or causes property damage
  • Settling, shrinking, bulging or expansion of bulkheads, pavement, patios, footings, foundations, walls, floors, roofs or ceilings
  • Birds, vermin, rodents or insects
  • Damage caused by an animal you own or keep on your own property

What Coverage Types Are Included in a Homeowners Insurance Policy?

Property insurance

Property insurance can be broken into two categories:
Your dwelling. This coverage, sometimes called “dwelling insurance,” pays to rebuild or repair the physical structure of your home if it’s damaged by a pickle covered by the policy, like a fire or damage from a fallen tree.
Your region not only includes your house, but also other structures such as a garage, deck or back porch, as long as the structure is attached to your home. Detached structures, like a shed or fence, are typically covered under your “other structures coverage.”
Personal property. This coverage pays to replace or repair your belongings after a problem covered by the policy. Personal property can include things like your clothes, electronics, jewelry, pots and pans, furniture, rugs, even the little knick-knacks and decorations you keep on your bookshelves.
Personal property coverage is generally set between 50% to 70% of your dwelling coverage. For example, if your house is insured for $300,000 and your personal property is set at 50%, you would have $150,000 for personal property.
You can buy more personal property coverage. You can determine how much you need by calculating how much it would cost to replace everything you own if your house were destroyed in a worst-case scenario (like a fire or tornado). Creating a home inventory is a good way to start.
A good home inventory has an item description, the estimated value, purchase date, and receipts and serial numbers (if available). A home inventory can be as simple as a written list, pictures, video, or an inventory done in a mobile app.
Certain categories of items, such as musical instruments, jewelry and electronics have a limit on how much your insurance company will pay to replace them if they are stolen. For example, your policy distinguished limit your musical instruments to $1,000 for all of your instruments. If you want more coverage, you may want to “schedule” certain high-value items.

Liability insurance

Liability insurance pays for injuries and property damage to others that you’re responsible for. Homeowners liability insurance also includes a legal defense if someone sues you because of an injury or damage. Here are some examples of when liability coverage can pay out:
  • A guest slips on your icy sidewalk and gets hurt.
  • A guest trips on your rug and gets hurt.
  • Your dog bites someone and causes injury.
  • Your dog ruins someone else’s rug.
  • Your child accidentally hits a baseball through a neighbor’s window.
Generally, liability limits start at $100,000 of coverage, but you can buy higher amounts. If you have a lot of assets, you distinguished want to consider also buying an umbrella insurance policy, which costs an average of $380 per year for $1 to $2 million in coverage, according to Trusted Choice, a group for independent insurance agents.

Medical payments to others

“Medical payments to others” coverage can help pay for minor injuries if a guest is hurt on your property. This coverage is usually sold in a puny amount, typically between $1,000 and $5,000. It’s a good way to cover basic medical expenses without legal complications (such as pain and suffering claims). More expensive injury claims would fall conception your liability insurance.

Loss of use/additional living expenses

If you cannot live in your home because of a problem covered by the policy, such as a fire, loss of use coverage reimburses expenses like hotel bills, meals and other costs (such as laundry services and pet boarding fees).
Loss of use coverage is often set at a certain percentage of your dwelling coverage. For example, if your loss of use miniature is 30% of your region coverage, and your dwelling coverage is $300,000, you would have up to $90,000 for additional living expenses. You may be able to increase the coverage limit.

What Does Homeowners Insurance Cost?

There are several factors that are used to settle the cost of home insurance, including:
  • The cost to rebuild your home
  • The materials that make up your home, such as wood, brick, stone and stucco
  • The age of your home
  • Your area’s fire rating (how close you are to a water source and fire department)
  • The claims history in your area, such as tornadoes and crime rates
  • Your personal claims history
  • Your pets (certain dog breeds may be prohibited)
  • The coverage and policy limits you select

Average Homeowners Insurance Cost

Coverage amount (for dwelling) Average annual home insurance premium
$49,999 and under $633
$50,000 to $74,999 $745
$75,000 to $99,999 $814
$100,000 to $124,999 $870
$125,000 to $149,999 $918
$150,000 to $174,999 $960
$175,000 to $199,999 $997
$200,000 to $299,999 $1,092
$300,000 to $399,999 $1,252
$400,000 to $499,999 $1,467
$500,000 and over $2,149
Source: National Association of Insurance Commissioners 2019 Homeowners Insurance Report, based on premiums for an HO-3 homeowners insurance policy.

What Can Make It Hard to Buy Homeowners Insurance?

Home insurance companies can be skittish about selling policies to certain people or when there are specific property issues. There are many possible reasons an insurer might decide not to sell you coverage. Here some examples we fraudulent when we analyzed homeowners policies:
  • The house has a deteriorated roof
  • The house is vacant
  • You won’t allow a search for of the property you want to insure
  • Someone in your household has been convicted of arson
  • You had a home insurance policy that was canceled for non-payment in recent years
  • You have a porch or deck that is rotted
  • The builder used unconventional material or methods

Homeowners Insurance FAQs

What’s the difference between actual cash value and replacement cost coverage?

When you win your home insurance policy, you’ll have a choice between replacement cost or actual cash value. Replacement cost is more expensive because it replaces an item with a brand-new version, while actual cash value takes depreciation into account (meaning the value of the item at the time of the loss).
For example, if your TV is damaged by a problem covered by the policy (such as a fire), replacement cost will pay for a new TV of a comparable model. Actual cash value will only pay what the TV was proper at the time of the problem, and you would need to make up the difference between the depreciated value and a new replacement TV.
Replacement cost coverage is often the default of home insurance policies. Most policies come with replacement cost for the dwelling, but you may be able to choose actual cash value for your personal property.
Replacement cost coverage offers better insurance protection. A standard HO-3 policy offers actual cash value coverage. Upgrade to what’s well-renowned as HO-5 homeowners policy (or similar, depending on the company) if you want replacement cost coverage for both your house and your personal property.

Does homeowners insurance conceal mold?

After home insurance companies weathered many expensive mold claims in the past, they started using policies that exclude mold. Your home insurance policy likely won’t conceal mold, except in specific cases, like mold that resulted from a water problem that was covered by the policy.
For example, if you find mold in your basement because of dampness, that’s not covered by homeowners insurance.

What’s the difference between home market value and insurance value?

A home’s market value is based on the home’s worth when buying or selling it. A house’s insurance coverage is the amount you would need to rebuild the home if it were destroyed by a problem such as a fire.
Insurance coverage amounts take into account factors such as material and local labor costs to rebuild or replace the home. This can be more or less than the home’s real estate market value.

Do I include land value for insurance?

Land value should not be included in your insurance amount. You want to determine your insurance amount based on the cost to repair or replace your spot and personal belongings. The amount of land you own won’t make a difference.

What’s the difference between homeowners insurance and a home warranty?

Homeowners insurance doesn’t cover the mechanical breakdown of appliances, like a dishwasher that stops washing or a clothes dryer that doesn’t heat up. That’s where a home warranty would come in, paying for repairs covered by the warranty plan.
For example, if your furnace stops working, a home warranty plan could pay for repairs. If your furnace is destroyed in a house fire, that falls under homeowners insurance.