What Is and Isn’t Covered by Homeowners Insurance?

Properly understanding what is and isn’t covered by homeowners insurance requires policyholders to ask a lot of questions and to read the fine print on their insurance contract—before they purchase a policy. Although every homeowners insurance policy is different, there are some things that almost all insurance policies have in common.

Key takeaways:

  • Most homeowners insurance covers certain basics, but policies vary a great deal, so be sure to read the fine print before you purchase one.
  • Your homeowners insurance coverage may overlap with other types of insurance you hold.
  • All policies have deductibles before coverage of your residence’s structure and the property inside it kicks in.
  • Damage or destruction due to vandalism, fire and certain natural disasters are all usually covered. So is your liability if someone is injured on your property.
  • Certain catastrophes, like flooding or earthquakes, are generally not covered by basic homeowners policies and require specialized insurance.

What Homeowners Insurance Covers

Homeowners insurance typically covers a broad range of possible damages. Your actual, physical dwelling should be covered, as well as some other structures on the property, like a garage, fence, driveway, or shed. However, if you run a business on your property in a separate structure, it is generally not covered by homeowners insurance.

Personal property is typically accounted for in your policy as well. The specific protection for it is sometimes known as contents insurance. Coverage may be limited to certain types of high-value items, such as jewelry or artwork; often, additional coverage is purchased specifically for such assets. So when policy shopping, don’t forget to ask your agent whether you’ll need to get additional coverage to cover your original Van Gogh or that flawless “D” diamond ring.

Replacement Cost vs. Fair Value

Not all insurance policies offer homeowners the replacement cost of the property. Buying coverage for replacement cost helps to bridge the gap caused by inflation and the loss of value when property is no longer new. Otherwise, when you claim a loss, the item in question will be assessed at the current fair market value.

Since some items depreciate quickly, this means you may not get enough money from a claim to replace the items that were lost or damaged. Replacement-cost coverage ensures you’re able to replace the items that were lost with similar items. If having this coverage is important to you, you’ll want to be sure both your home and personal property are covered in this way.

Car Coverage

Most homeowners insurance policies include coverage for personal effects and separate structures on your property. But what happens if your car is broken into while it’s in your driveway or garage? This is where the distinction between your home and auto insurance policies can become a little blurry.

While homeowners insurance won’t cover damage to the auto itself, many policies will provide some coverage for personal items that are stolen from your car. But some of the more comprehensive auto insurance policies may cover this, too. Insurance companies may also limit the coverage available through your policy if the items stolen were purchased exclusively for use in the vehicle.

Fire Coverage

House fires are one of the most common causes of damage to homes, and almost every homeowners insurance policy protects structures and belongings against them. If a home is completely destroyed by fire, most standard policies that cover fire also cover the cost of additional living expenses, such as hotel stays, rentals, or food and restaurant bills.

Natural Disaster Coverage

A wide range of natural disasters is typically covered by your homeowners insurance policy, though not all of them. The typical inclusions for natural disasters include lightning, thunderstorms, hurricanes, and hail. Your policy may also include coverage for smoke damage, damage caused by falling items, or severe winds.

Earthquakes and other natural movements of the earth are not typically covered by insurance policies. If you live in certain regions that are high-risk for these or other types of natural hazards, you’ll want to be sure to inquire about special, separate types of catastrophe insurance, like windstorm or flood insurance.

If your home is at risk of damage from hurricanes, it’s essential that you have enough insurance coverage in place to protect your property. Your standard homeowners policy may not cover all hurricane damage, but you may consider purchasing a hurricane policy that supplies this additional protection. These policies often match the coverage of your homeowners insurance.

Flood Coverage

Flooding caused by an interior problem, like a leaking pipe or an overflowing toilet, is generally covered by homeowners insurance. However, flooding due to external conditions is much the same as earthquakes. Whether the causes are natural (rising rivers, flash floods) or man-related (burst dams, sewer backups), they are not generally covered in basic policies. You can ask your insurance company about adding coverage to your policy, or (more likely) buying separate flood insurance, especially if you live in a region that is prone to flooding. In fact, you may be required to, if you need a mortgage.

Vandalism Coverage

Vandalism is generally covered under an all-risks or all-perils policy unless it is specifically excluded. Vandalism coverage applies to unoccupied homes but not to vacant homes after a certain period of time. An unoccupied home is one that still contains the personal property of the policy owner, even though the property owner is absent.

A vacant home is empty and free of the owner’s personal property. An example of this would be if you were selling your home and moved out, taking all of your belongings and furnishings with you. After a set period of time, vandalism coverage would no longer apply to your policy.

Personal Injury

Most homeowners insurance policies include coverage for injuries incurred on your property where you are liable. This could include something like someone slipping on a patch of ice that’s on your front walk, or falling as a result of a broken step on your porch.

This coverage is usually limited to a certain dollar value, so you definitely want to know how much coverage you have and exactly what’s included. Umbrella insurance can provide additional liability coverage if you think you need it.

What Is a Homeowners Insurance Deductible?

The deductible is the amount the insured party has to pay when a claim is made. You can decrease your insurance costs by increasing the amount of your deductible, meaning you’ll be required to pay more if you ever do have an incident that requires you to make a claim. Keep in mind many mortgage providers require homeowners to carry a certain amount of insurance on their property with a deductible that’s below a specified limit.

Check with your mortgage provider before opting for the lowest possible rate with the highest possible deductible. It might be tempting to go for the lower rate, but if you ever do have to make an insurance claim, you might regret it if you’re responsible for a $10,000 deductible.

The Bottom Line

Your insurance policy’s fine print may not seem like particularly interesting reading material, but it’s better to take the time to thoroughly understand what your insurance policy covers—before you’re stuck in an unfortunate situation and discover you’re not covered for that particular loss or liability. At the end of the day, doing your homework before purchasing a policy could really pay off when you actually need to rely on your homeowners insurance coverage. 

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