What Homeowners Insurance Covers and Doesn't Cover

Homeowners insurance is a crucial aspect of being a homeowner, but it's essential to understand what it covers and what it doesn't.

Most homeowners insurance policies cover damage to your home due to fire, lightning, and other disasters.

Personal property, such as furniture and clothing, is typically covered up to a certain amount, usually 50% of the dwelling coverage.

You can expect your insurance to cover repairs or replacement of damaged or stolen items, but you'll need to keep receipts and records for reimbursement.

Homeowners insurance usually doesn't cover maintenance-related issues, such as termite damage or worn-out roof tiles, unless specifically added to your policy.

Earthquakes, floods, and other natural disasters may require separate coverage, as they're often not included in standard policies.

Homeowners insurance covers a wide range of events, including fires, hail, tornadoes, and burst pipes. It can also reimburse you for theft or vandalism of your belongings.

A standard homeowners policy typically includes six types of coverage, which are listed below. These coverages are:

Personal property coverage includes items stored off-premises, such as when you're traveling or storing items in a storage unit. However, expensive items like jewelry, furs, art, collectibles, and silverware may have dollar limits if they're stolen, so you may want to consider purchasing additional insurance to cover those items fully.

Your home's structure is protected by your homeowners insurance policy. If your home is damaged or destroyed by a disaster like a fire, hurricane, or hail, your policy will pay to repair or rebuild it.

A standard policy will cover damage to the home and attached structures, such as a porch. This is known as dwelling coverage, and it should be enough to rebuild your home.

Detached structures like a garage, tool shed, or gazebo may also be covered in some policies. However, it's essential to check with your agent and read your policy carefully to confirm.

Some policies won't pay for damage caused by a flood, earthquake, or routine wear and tear. So, when purchasing coverage for the structure of your home, remember to purchase enough coverage to rebuild your home.

Here's a breakdown of what's typically covered under dwelling and other structures coverage:

In most policies, other structures coverage is 10% of dwelling coverage. This means if you have $100,000 in dwelling coverage, you'll have $10,000 in other structures coverage.

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If you want the broadest coverage for your home and belongings, consider an HO-5 insurance policy. This type of policy pays for damage from all causes, except those the policy excludes. It's typically available only for well-maintained homes in low-risk areas, and not all insurers offer it.

An HO-5 policy is sometimes called "comprehensive form" or "premier" coverage. However, an HO-3 policy may also be labeled "premier" in some cases, without offering the broader coverage of an HO-5 policy. If you want HO-5 insurance coverage, be sure to ask your agent or representative.

To give you a better idea, here's what the different types of home insurance coverage typically include:

Keep in mind that HO-5 insurance policies are typically more expensive than other types of policies. However, they offer the most comprehensive coverage, which can be a good investment for homeowners who want peace of mind.

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ALE (Additional Living Expenses) is an essential component of homeowners insurance that helps cover the costs of living away from home if you're forced to leave due to damage from an insured disaster. This coverage can include hotel bills, restaurant meals, and other expenses that exceed your usual living costs while your home is being rebuilt.

ALE has limits, and some policies come with time restrictions, so it's crucial to discuss these details with your agent to understand what's covered and what's not.

If you're forced to move out of your house due to an insured loss, your policy will pay for a furnished apartment or hotel to help you get back on your feet.

Here's a quick rundown of what ALE typically covers:

Homeowners insurance works by requiring you to file a claim and document the damage before receiving a payout. Your payout could vary depending on your coverage and deductibles.

The average cost of homeowners insurance in the U.S. is $1,915 per year, but this can be higher or lower depending on your location and the amount of coverage you buy.

You'll need to have a mortgage to be required by law to have homeowners insurance, but it's still a wise purchase even if you don't have a mortgage. It gives you property and liability coverage, acting as a financial safety net.

Homeowners insurance won't cover intentional damage, such as if you or a family member causes damage on purpose. This includes vandalism, spray painting, or any other deliberate act that harms your home.

Flooding from external sources like heavy rainfall or storm surges is also excluded from coverage. This means if your home is damaged due to a flood, you'll need to purchase separate flood insurance.

Intentional damage, flooding, and government action are just a few things that homeowners insurance won't cover. It's essential to review your policy carefully to understand what's excluded.

Here are some additional things that homeowners insurance typically won't cover:

Keep in mind that some of these exclusions can be covered with separate policies or endorsements. Always review your policy and discuss any concerns with your insurance agent.

Liability Protection is an essential aspect of homeowners insurance that protects you from financial loss in case of lawsuits for bodily injury or property damage caused by you or your family members. This coverage pays for damage caused by your pets, such as ruining someone's property.

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The liability portion of your policy pays for both the cost of defending you in court and any court awards, up to the limit stated in your policy documents. It's crucial to check your policy to understand the specific limits and coverage.

Liability insurance covers bodily injury and property damage to others, with some exceptions, such as criminal acts or harm caused on purpose. It also doesn't pay for injuries or damage from a car accident, as your liability car insurance would cover those.

If you're responsible for injuring someone or damaging their property, liability coverage can help pay your legal fees and any damages you're responsible for, up to your policy limit. For example, if a delivery person slips on your icy sidewalk and breaks their wrist, your liability coverage could pay for their medical bills and lost wages.

The standard liability insurance limit for most basic policies is $300,000, but you can purchase additional coverage inexpensively. Some insurers offer increased liability coverage at $500,000 for an additional premium of only $5 to $25 per year.

Here's a breakdown of typical liability coverage amounts:

Keep in mind that liability insurance won't cover injuries or property damage caused by business pursuits or automobile accidents, as those are covered by your car insurance policy.

Intentional damage is not covered by home insurance. This means if you or a family member causes damage on purpose, you'll have to pay for it yourself.

If your teenager decides to express themselves through spray paint, you won't be able to claim the cost of repainting your house on your insurance. The same goes for any other intentional damage or vandalism.

Home insurance also won't cover intentional damage or injury to someone else. If you intentionally hurt someone or damage their property, you'll be responsible for the consequences.

The personal liability section of your policy only covers accidental property damage or injury, not intentional acts. This means you need to be careful and responsible to avoid costly mistakes.

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Nuclear Hazards can be a major concern for homeowners, but surprisingly, your standard homeowners insurance policy may not cover it. This exclusion refers to any nuclear reaction, radiation, or radioactive contamination — whether intentional or not.

If a nuclear event were to occur, your insurance policy would likely exclude damage caused by the nuclear reaction itself. However, fire damage resulting from the nuclear hazard would be covered.

This means that if a nuclear accident were to happen in your area, your insurance policy would not cover the damage caused by the nuclear radiation, but it would cover any fire damage that results from the accident.

For another approach, see: Does Homeowners Insurance Cover Fire Damage

Government action can be a significant exception to homeowners insurance coverage. If a governmental or public authority damages or destroys your house or belongings, your insurance won't pay to replace it.

Insurance companies often have exclusions in place to provide more robust coverage. Pools and trampolines are a good example of this.

Homeowners insurance policies typically exclude damage caused by intentional acts, such as vandalism or damage caused by a family member. This means if your teenager spray paints your house, insurance won't pay to return the home to its original color.

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Floods from external sources like heavy rainfall or storm surges are also not covered, but you can buy separate flood insurance. Earthquakes, landslides, and sinkholes are also excluded, as well as damage caused by government action, including war.

Homeowners insurance won't pay for damage due to wear and tear or neglect, such as a slow leak that develops over time. Nuclear hazards are also excluded.

In addition to these exclusions, homeowners insurance typically doesn't cover damage caused by animals, including rats, termites, bees, bats, bed bugs, or other infestations, except under rare circumstances.

Here are some common exclusions to be aware of:

It's essential to review your policy carefully to understand what is and isn't covered. Many insurers offer additional coverage options for specific risks, such as flood insurance or earthquake insurance.

Wear and tear is a common reason for denied insurance claims. This refers to your failure to maintain your property, which can lead to damage.

If you neglect to fix a leaky pipe, it can cause wood rot in your kitchen fixtures and floorboards. Your insurer might deny your claim citing the neglect exclusion.

Routine maintenance issues are generally not covered under homeowners insurance. This means you're responsible for fixing things like a leaky faucet or a clogged drain.

However, if a plumbing malfunction causes a leak and residual mold growth inside your walls, your insurer might cover the damage. This is because they can't prove neglect led to the loss.

Mold or Wet Rot can be a costly and frustrating issue for homeowners. Mold that's caused by long-term leaking, poor home maintenance, or naturally occurring flooding is unlikely to be covered by homeowners insurance.

If you've been neglecting your home's maintenance, you might not be surprised to hear that mold damage isn't covered. However, if a sudden and unexpected problem like a burst pipe causes the mold, your insurance company might cover the damage if you report it right away.

In general, homeowners insurance won't cover mold that's a result of homeowner negligence.

Curious to learn more? Check out: Does Homeowners Insurance Cover Mold from Roof Leak

Flooding can be a devastating experience for homeowners, and it's essential to understand what's covered and what's not under your insurance policy.

Homeowners insurance typically doesn't cover water damage caused by natural flooding, rain, sewer line backups, or sump pump failures.

Water that seeps up from the ground and damages your home's foundation is also not covered.

However, if a burst pipe or a defunct water heater causes water damage, you're likely to be covered for repairs.

In some cases, if a house fire or explosion is directly caused by one of these excluded types of water damage, you may still be covered for repairs.

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Earthquake damage is not typically covered under a standard homeowners policy, but you can add it for an extra cost. Earthquake coverage usually adds five to 30 percent to the cost of an area homeowners policy.

For example, if you buy earthquake coverage, it might cost about twice as much for a brick house as for a frame one. This can be a significant additional expense.

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The coverage offered by earthquake insurance is often thin, with a deductible of 10 to 25 percent. This means if you buy $500,000 of coverage with a 15 percent deductible, you have to pay for the first $75,000 of damage out of your own pocket.

As a result, few people buy earthquake insurance, especially in areas with low risk of damage.

Utility Company Power Surges can be a real headache for homeowners. Your policy won't cover power surge damage or outages caused by your utility company or anything that originates off of your property.

If a power failure is caused by a short-circuit on your property, which then leads to a fire, that would be covered by your insurance policy.

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Some homeowners insurance policies may not cover the full cost to replace certain features of your home, especially if they're old or historic. This can be a problem if you have ornate woodwork or other expensive-to-recreate features.

For example, if you live in an older home with unique features that are difficult to replicate, your insurance policy might not cover the full cost to rebuild them. You might need a specialty policy or add-on coverage to protect these features.

Guaranteed replacement cost coverage is the most comprehensive option, paying the full cost to repair or replace your home after a covered loss, even if it goes above your policy limits.

Extended replacement cost coverage will pay more than the face value of your dwelling coverage, up to a specified limit, if that's what it takes to fix your home.

Functional replacement cost coverage pays to fix your home with materials that are similar but possibly cheaper.

Replacement cost coverage pays to repair your home with materials of "like kind and quality", so plaster walls can be replaced with plaster.

Here's a rough breakdown of the options:

Keep in mind that these options may have different policy limits and requirements, so it's essential to review your policy details carefully.

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Increased Living Expenses are a crucial part of homeowners insurance that can help you cover additional costs when you're forced to live elsewhere due to damage from an insured disaster.

Additional living expenses, also known as loss of use coverage, can pay for hotel bills, restaurant meals, and other costs above your usual living expenses while your home is being rebuilt or repaired.

Some policies will pay for a furnished apartment or hotel if your family is forced to move out of your house due to an insured loss. This can be a lifesaver if you're unable to live in your home for an extended period.

You'll likely be eligible for loss of use coverage as long as your home is undergoing repairs for a covered claim. However, if your home's damage is from a disaster that isn't covered, such as a flood, your insurer won't pay your additional living expenses.

Here are some examples of what loss of use coverage might cover:

Identity theft is a massive problem, but homeowners insurance may not cover the costs of fixing it. These policies don't promise to clear your credit history and record.

You can't buy insurance to cover your free time, which is often the biggest expense when dealing with identity theft. Millions of Americans have had their identities stolen, but the damages inflicted are not out-of-pocket, measurable costs.

Many banking institutions, including credit card companies, offer free identity theft protection.

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Home Business Liability can be a significant concern for homeowners who also run a business from their home. Homeowners insurance does not extend personal liability coverage to home businesses.

If you operate a home daycare or pet boarding operation, you may be surprised to learn that your homeowners insurance policy does not provide adequate coverage. Policies also have limited coverage for business property, typically around $2,500.

This can leave you vulnerable to financial losses in the event of a business-related accident or property damage. Whether cannabis is covered by your home insurance policy varies greatly depending on the policy, insurance company, and your state of residence.

Growing trees, plants, or shrubs for profit is another area where homeowners insurance often falls short.

Consider reading: Home Care Business Insurance