Here’s What Homeowners Insurance Covers—and What it Doesn’t

A home is a big investment, so it makes sense that you’d want to protect it with homeowners insurance. Many people choose to invest in a homeowners policy with the purchase of their home, partly as a financial failsafe in the event of unforeseen emergency needs and partly because a little bit of risk aversion is always a good idea when you’re dealing with something as large and expensive as a house. That being said, there’s a lot of confusion over what homeowners insurance covers (and what it doesn’t) and it pays to do your research before signing on the dotted line for a policy.

So what can you expect? Here’s what homeowners insurance covers, as well as additional information that will help you select the best plan.

What Homeowners Insurance Covers

The specifics of what homeowners insurance covers can vary from plan to plan, but a standard policy will offer coverage in four key areas.

Structural coverage in the event of disaster. A homeowners insurance policy won’t cover structural damage that’s part of the general wear and tear of a home, but it will cover structural damage related to natural disasters like fires, hail, and tornadoes. Sometimes referred to as dwelling coverage, this applies to all attached parts of the structure of your home, including add-ons like an attached garage or deck.

Non-attached structural coverage. Following the same guideline as above that damage must be incurred by natural disaster, many homeowners insurance policies also cover repairs or other associated costs related to damage on structures that are part of your home but not directly attached to it—things like sheds and fences. This coverage may be considered additional though and so may cost extra. If it is extra, be sure to only add it on to your policy if you have freestanding structures on your property.

Personal property coverage. Most homeowners insurance policies include personal property coverage that reimburses you for about 50% to 70% of the value of your belongings if they are damaged in a disaster. There are limits to what personal property will be covered though, since some policy providers prefer not to extend coverage to high-price valuables like jewelry. Check the personal property details of a plan before signing, and if you want something covered that’s not included, ask if supplemental insurance is available. In addition to protecting personal belongings inside of the home, some policies also offer protection for belongings outside the home, like trees and plants.

Liability coverage. If someone visits your home and gets injured on your property, you may be found liable for the damages. For example, a guest who trips on a busted floorboard and breaks their leg will have recourse to sue you to reimburse their medical expenses. For that reason, part of what homeowners insurance covers is liability protection that pays for some or all of the costs related to another individual’s injury on your property. This may include everything from medical bills and lost wages to legal fees in the event of a law suit.

What Homeowners Insurance Doesn’t Cover

Just as important as knowing what homeowners insurance covers is knowing what it doesn’t cover. As you might expect, this list is a little bit longer than the former list.

Flood damage. Wait a minute, you’re probably thinking, doesn’t a flood count as a natural disaster? And while it’s true, you’re going to need a separate flood insurance policy if you want coverage for structures and personal belongings damaged by flooding. Check out the federal government’s National Flood Insurance Program if you live in an area prone to floods.

Damage due to negligence. Aside from personal liability coverage, what all the things that homeowners insurance does cover have in common is damage due to circumstances outside of your control. It’s not surprising then that things within your control aren’t covered, for example damages due to improper or negligent maintenance. So if your water pipes burst in the winter after you did your best to protect them you may be in luck, but if they burst and you haven’t put any winterizing efforts into place you’re probably not going to be covered.

Earthquakes and landslides. Similar to flooding, you’ll need a separate insurance policy to cover disasters related to earth movement, notably earthquakes, landslides, and sinkholes. However, there are some exceptions. Florida and Tennessee, for example, do offer “catastrophic ground cover collapse” in most homeowners insurance policies.

Other things your homeowners insurance probably won’t cover include:

    • Termites
    • Trampoline accidents
    • Dog bites on your property
    • Sewer backups
    • Mold

    Always read a homeowners insurance policy very carefully before signing so that you know exactly what’s covered and what isn’t. That way, you won’t be in for an unpleasant surprise if you file a claim for damages that turn out to not be covered under your policy.

    Are You Required to Purchase Homeowners Insurance?

    Another common question in addition to what homeowners insurance covers is whether you need to purchase it in the first place. Risk aversion aside, almost all lenders do require a home buyer to provide proof of homeowners insurance in order to secure a mortgage. And it makes sense, since the bank is similarly invested in ensuring your property doesn’t lose a huge chunk of its value.

    Even if your lender doesn’t require it though, you have little to lose from investing in a homeowners insurance policy and a lot to lose if you don’t. Look at the available options to pick a plan that fits in your budget. Costs vary by state, with the average annual premium for a homeowners policy falling around $1,200. While it’s certainly pricey (though less so than the costs associated with damages from things like fire and hail), you may be able to save in other ways, such as by bundling your homeowners insurance with your auto insurance for lower rates.

    When it comes to choosing a policy, shop around. Get quotes from at least three different homeowners insurance providers so that you can be sure to pick the plan that is as expansive and cost effective as possible. Ask about additional discounts too, such as the aforementioned homeowners/auto insurance bundle or a premium discount for raising your annual deductible.