What Does A Standard Homeowners Insurance Policy Cover?

There are probably not many things of more financial value to homeowners like you than the property you own. Thus, it’s critical to have a thorough understanding of the ins-and-outs of your home insurance coverage, and how it protects your home and your important belongings.

However, this type of insurance policy can be complicated. In fact, a typical homeowners insurance policy can be up to 25 pages long, and that’s not including any special endorsements that may have been added. While not many people really care to read through all these details – other than an insurance agent – this is actually an extremely important document for you to scrutinize.

While the best way for you to get personalized advice and analysis of your current homeowners policy is to talk one-on-one with a knowledgeable, local insurance professional, like Gilbert, our team is glad to provide a concise and general overview of what the standard home insurance policy typically covers.

The Five Coverage Areas of a Standard Homeowners Insurance Policy

The majority of homeowners today have a standard home insurance policy, called an HO-3 Special Form. This insurance option provides you with an excellent balance between having broad coverage for your home and belongings and paying an affordable premium for this level of protection.

Let’s take a closer look at the five key coverage areas in an HO-3:

The Five Coverage Areas of a Standard Homeowners Insurance Policy
Structure of Your Home Other Structures Personal Belongings Loss of Use Personal Liability

Home Insurance Coverage Area #1: The Structure of Your Home

Where to Find It in Your Policy

The structure of your home is the most significant asset insured by your homeowners policy, so the majority of carriers put this coverage front and center in your documents. Look for the terms “Coverage A” and/or “Dwelling Coverage” which will identify the part of your policy that details out what property your insurer will cover and what property they will not cover.

Understanding Dwelling Protection Coverage

The property that is typically covered under Dwelling Coverage includes your home and any attached structures (like a garage or solar panels). In addition, if you are renovating or adding on to your home, any materials and supplies on your property that are being used in connection with this construction are also covered, as is wall-to-wall carpeting that is fastened to your dwelling. An HO-3 is what’s called an “exclusion policy,” which means that this property will be covered for all perils except those specifically excluded in the policy. Most insurers will cover the risk and pay to repair or rebuild your home and other structures if damaged or destroyed by the most common homeowner perils, including fire, hurricane, hail, and lightning.

Dwelling Protection Limits & Exclusions

This is likely to be the lengthiest part of the Coverage A section. It is also perhaps the most critical to spend time on as it clarifies the losses that your standard homeowners insurance is not going to protect against. Property damage caused by flooding, earthquake, nuclear accidents, inherent vice, wear-and-tear, basement water seepage, sewer and drain back-up, and sump pump overflow are common exclusions. There are also often limitations on coverage for damage caused by insects and vermin. Finally, there are some types of property that your standard home insurance will not cover, whether or not they are attached to your dwelling, like satellite dish antennas and their systems.

Home Insurance Coverage Area #2: Other Structures

Where to Find It in Your Policy

Following close on the heels of your Coverage A details is the portion of your policy called “Coverage B” and/or “Other Structures Protection.” This section should explain what detached structures are covered by your homeowners insurance.

Understanding Other Structures Coverage

Other Structures Protection generally refers to property that is separated from your home by a clear space or attached by only a fence, utility line, or similar connection. This may include a detached garage, tool shed or gazebo. This coverage area should also include any construction materials and supplies that are at your residence for use in connection with these other structures. In addition, beloved backyard structures, like a pool, hot tub, playset, fire pits, etc., may be covered under Other Structures Protection. Insurers will often help pay to repair this type of property if damaged by a peril that’s not specifically excluded from your policy. For example, if a tree falls and tears your pool’s liner, the home insurance company may cover it. Whereas damage caused to the pool’s foundation as a result of the owner letting the water freeze probably will not be covered. It’s wise to discuss your backyard amenities with your local agent who can help you determine if you have the coverage you need to protect their value.

Other Structures Limits and Exclusions

Detached structures are covered for the same perils that your home is protected against. However, it’s important to know that the coverage limit for all other structures combined is only 10 percent of the coverage limit you have on your entire dwelling. For example, if you have dwelling coverage of $300,000 to protect your house and attached structures, then you have $30,000 in coverage for other structures that are not part of your home. Please note that this coverage is built into the policy and cannot be removed even if you do not have any other structures.

Home Insurance Coverage Area #3: Your Personal Belongings

Where to Find it in Your Policy

You should find the coverage for your personal belongings under the heading “Coverage C” and/or “Personal Property Protection.” In this section, your insurer should detail out the items that will be covered if ruined, the specific amount of coverage for each type of thing, and what perils you can make a claim against.

Understanding Personal Property Coverage

Personal Property Protection covers all of your personal items, like furniture, clothes, sports equipment, appliances, and virtually anything that you, the insured, owns or uses anywhere in the world, from loss or ruin. Items stored off-premises are also included. Trees, plants, and shrubs are also typically covered under this portion of your homeowners insurance unless they are diseased or have been poorly maintained, and generally only for about $500 per item and more limited coverage. Your Personal Property Protection may even cover business property that’s at your home and gets ruined, but typically up to a lesser limit.

However, it’s essential to understand that the perils coverage for your belongings works quite differently from the perils coverage for your dwelling. In a standard homeowners policy, Personal Property Protection coverage is based on “named” perils, which means that your things have to be destroyed by something that is explicitly listed in your policy to be claimed. The most common named perils include:

  • Fire
  • Lightning
  • Hail or Windstorm
  • Damage caused by aircraft
  • Explosions
  • Riots or civil disturbances
  • Smoke damage
  • Damage caused by vehicles
  • Theft
  • Vandalism
  • Falling objects
  • Volcanic eruption
  • Damage from the weight of snow, ice, or sleet
  • Water damage from plumbing, heating, or air conditioning overflow
  • Water heater cracking, tearing, and burning
  • Damage from electrical current
  • Pipes freezing

If your belongings are damaged or destroyed by anything not listed in your policy as a named peril, then you will most likely have to take care of the cost of repairs or replacement of these items out of your own pocket.

Personal Property Limits & Exclusions

In a standard homeowners policy, the coverage limit for your personal property typically is 50% of the coverage limit on your entire dwelling. This means that if you have dwelling coverage of $300,000 to protect your house and attached structures, then your policy probably includes Personal Property Coverage of $150,000. But even if your Personal Property Coverage seems pretty high, it may not be enough. In most cases, Gilbert recommends that our clients purchase a Personal Property Replacement Cost Endorsement. This endorsement, which only adds a small amount to your premium, usually increases your total Personal Property Coverage limit to 70% of your dwelling coverage. It also changes the valuation at the time of your personal property loss from a depreciated basis to a replacement cost basis. This provides most homeowners with ample protection for all of their belongings.

However, the standard Personal Property Coverage also typically limits the reimbursement amount on valuable possessions, such as jewelry, silverware, collectibles, and antiques, if they are stolen or accidentally broken. So, you might want to consider a Scheduled Personal Property Endorsement to ensure that any items like these that you possess would be replaced at their full value with broadened coverage.

Home Insurance Coverage Area #4: Loss of Use of Your Home

Where to Find it in Your Policy

You will most likely find this coverage area listed under “Additional Protection” and/or as “Additional Living Expenses.” This portion of your insurance policy should explain what costs your insurer will reimburse you for should you need to move out of your home after an insured disaster.

Understanding Additional Living Expenses Coverage

Additional Living Expenses pays for the costs associated with relocating your family while your home is being repaired or rebuilt as a result of a covered peril. This coverage applies whether you choose to move to a rental home, apartment, hotel, or bring a mobile home onto your property. However, it’s critical to understand that reimbursement is limited to only the expenses that are above and beyond what you would normally spend. Additional Living Expenses also may provide reimbursement for things that you now require at your home as a result of a loss. For example, you may need to rent a generator for power if your electrical system was damaged by a covered loss. Additional Living Expenses also covers any increased costs associated with moving out of your home, like higher meals, transportation or utilities expenses. In addition, if you own a two-family house and lease one side of your home, then this coverage will pay you for lost rent in the event your home becomes unlivable for your tenant due to a covered event.

Additional Living Expenses Limits & Exclusions

The Additional Living Expenses coverage limit is typically set at 20% of the coverage limit on your entire dwelling. So, say you have dwelling coverage of $300,000 to protect your house and attached structures, then you will have $60,000 in coverage for additional living expenses, which is usually sufficient protection but can be increased. What is most important to know is that your insurer will only reimburse you for these costs if a loss makes your residence uninhabitable. In addition, you will only receive payment for the difference between your normal living expenses and any reasonable increase that you may have as a result of being relocated while your home is being repaired. Also, carriers will typically set a limit for how long they will pay for your additional living expenses, whether it’s a certain number of months, or how much time is usual and customary to repair or replace your property, or, if you decide to relocate permanently, their estimate of time for your family to settle elsewhere.

Home Insurance Coverage Area #5: Your Personal Liability

Where to Find it in Your Policy

This coverage is generally in an entirely different section than the other four key coverage areas. So, flip through your policy docs until you get to either something labeled “Coverage E” or “Personal Liability and Medical Payments.”

Understanding Personal Liability Coverage

Your basic homeowners policy includes fairly broad liability protection for you and any family members in your household. This coverage typically pays for the cost of defense against claims of negligence for bodily injury or property damage to others as long as the actions were not intentional. Any court awards will also be covered under Personal Liability up to the limit stated in your policy documents. For example, if you’re playing golf and the club slips out of your hand, hitting and injuring someone, any associated legal fees and judgments against you will be covered under your standard home insurance policy, as will more common claims like a slip and fall on your walkway. This portion of your policy also provides Guest Medical Protection or Medical Payments coverage. So, if a friend or neighbor is injured at your home, it does not matter if you were negligent or not, he or she can simply submit medical bills directly to your insurance company. This way, you can both avoid the expense of legal proceedings and the stress of a liability claims process.

Personal Liability Limits & Exclusions

Unlike the other coverage areas, Personal Liability & Guest Medical Protection are not based on a percentage of your dwelling coverage. Rather, this coverage pays for the cost of your defense in court and any court awards up to the stated limits in your policy, which generally start around $100K and can go up to a max of $1M. However, some individuals and families may want to consider even higher liability limits than what the standard homeowners policy can provide. You may want to talk to your insurance professional about whether or not personal umbrella insurance would be a good fit for you. A standard policy also will not cover false arrest or claims that you or a family member committed slander or defamation. Since many carriers offer these additional coverages and more, in a “broadening endorsement” for not much additional cost, you may want to discuss the value of investing in this extra liability protection with your agent.

We hope that this overview has given you a clearer understanding of what is covered by a standard home insurance policy, and some of the things that are not. However, believe it or not, we have barely scratched the surface of the details in your insurance documents. For example, we have not gone over the meaning of any riders that may have been added to your policy or your carrier’s specific policies and procedures. If it’s been awhile since you’ve had an individualized review of your homeowners policy, we encourage you to set up a meeting with an experienced insurance professional.

When you choose to become a client of Gilbert Insurance, our team will examine each and every coverage area in your homeowners policy to determine whether or not you have purchased enough protection for your unique property and everything in it. In addition, we will review with you some of the perils that your insurer may have excluded and help you decide whether you should purchase additional insurance when available to close these gaps in coverage.

Our team works hard to make sure that you are not under- or over-insured and that you’re not paying too much for your policy. Most important, though, we want to ensure that you understand how your insurance is set up to protect your most important assets.

If you’re looking for great service, price, and protection from your insurance partner, then please contact Gilbert Insurance. We are ready to assist you with all of your home insurance needs.