Most homeowners buy a policy without ever reading what it actually covers. A standard policy protects far more than just the walls of your house, but it also excludes things many buyers assume are included. This article breaks down home insurance coverage into a plain checklist you can run through before you buy.
What does home insurance cover?
A standard homeowners policy bundles several types of coverage into one plan. Knowing what each one actually protects is the first step to understanding home insurance coverage as a whole.
- Dwelling coverage: Pays to repair or rebuild your home’s physical structure after a covered loss.
- Other structures coverage: Covers detached structures like a fence, shed, or detached garage.
- Personal property coverage: Pays to repair or replace your belongings, from furniture to electronics.
- Loss of use coverage: Covers temporary living expenses if your home becomes unlivable after a covered loss.
- Personal liability coverage: Covers legal and medical costs if someone is injured on your property and sues you.
- Medical payments coverage: Covers a guest’s minor medical bills after an injury on your property, regardless of fault.
Named perils vs. open perils: what changes what’s covered
What house insurance covers depends heavily on whether a coverage is written on a named-perils or open-perils basis:
- Open-peril coverage pays for any cause of loss except what’s specifically excluded.
- Named-perils coverage only pays for causes of loss that appear on a specific list.
Most standard policies cover the dwelling on an open-peril basis, but personal property only against named perils. This distinction also determines how much a payout actually covers. The difference between actual cash value and replacement cost coverage changes whether you receive your item’s depreciated value or the cost to buy it new.
What is not covered by a standard homeowners policy
A standard policy has real limits, and assuming otherwise is one of the most common and costly mistakes buyers make.
- Flood damage is never covered by a standard homeowners policy, regardless of the cause. Why flood risk deserves its own policy and how to prepare your home for it matters even if your property sits outside a high-risk zone.
- Earthquake damage requires a separate endorsement or standalone policy in most states.
- Normal wear and tear is excluded, since insurance covers sudden, accidental losses, not gradual deterioration.
- Business equipment or a home-based business usually needs its own coverage beyond standard limits.
