What Does Homeowners Insurance Cover? Rebuilding, Liability and Claims

Homeowners insurance commonly combines coverage for the dwelling, personal property, additional living expenses and personal liability. It is not a home maintenance contract and does not cover every disaster.

1. Dwelling Coverage

Dwelling coverage may pay for structural damage from covered causes such as fire, wind or hail. Policies can cover named causes or all causes except exclusions; check the contract.

2. Other Structures and Personal Property

Detached garages, fences and sheds are generally other structures. Furniture, clothing and appliances are personal property. Each has its own limit, and some belongings may be valued at actual cash value.

3. When a Home Is Uninhabitable

If a covered loss makes the home uninhabitable, loss of use or additional living expense coverage may pay reasonable additional lodging and meal costs, subject to limits on amount, time and necessity.

4. Liability and Guest Medical Payments

Personal liability may address injuries or property damage for which an insured is legally responsible. Medical payments may cover some smaller guest medical expenses. Business activities, auto accidents and intentional acts generally require other coverage.

5. Replacement Cost and Actual Cash Value

Replacement cost generally pays to repair or replace with similar materials without first deducting depreciation. Actual cash value generally deducts age and wear. Rebuilding cost differs from the market value of real estate and excludes the value of land.

6. Deductibles

A deductible is the insured's share of a covered property loss. Wind, hail or hurricane deductibles may be a percentage of the dwelling limit rather than a fixed amount. Confirm that you can afford it.

7. Common Exclusions and Limits

Flood, earthquake, wear, pests, mold, poor maintenance and sewer backup are often excluded or limited and may require separate insurance or endorsements. Jewelry, art, cash, collectibles and home-office equipment often have special limits.

8. How Much Dwelling Coverage?

Base the limit on rebuilding costs rather than the home's sale price. After additions, renovations, roof work, valuable purchases or increases in labor and material costs, notify the insurer and review limits and options such as ordinance or law coverage.

9. After a Loss

Protect people and prevent further damage. Photograph or film the damage, save temporary repair and extra living expense receipts, promptly report the claim and prepare an inventory. Before discarding important damaged items or starting major permanent repairs, check with the insurer.

10. Compare Policies

Compare the same dwelling limits, valuation, deductibles, liability limits and endorsements, not just annual premium. Check roof settlement, special deductibles, valuables, water damage and temporary housing limits.

This is general education, not legal, construction valuation or individual insurance advice. The issued policy, endorsements and applicable law govern coverage and claims.