What Is and Isn't Covered by Homeowners Insurance?
Last updated May 2023
Insurance companies often promote policy features to make their plans seem superior to their competitors’. But most sell roughly the same thing.
Most homeowners policies cover your house against all types of risks except ones that are specifically excluded. This means they’ll pay out for damage caused by fire, windstorms, theft, vandalism, frozen pipes, and accidents. But most don’t protect against harm from floods; sewer and drain backups; earthquakes; termites, pets, or other animals; mold, mildew, dry rot, and wet rot (unless the result of a covered peril such as a water-pipe burst); war; and nuclear accidents and explosions. You can buy additional special coverage for some of these risks.
All policies have deductibles, an amount you have to pay for a loss before the company pays anything. Your premiums will be lower if you take a higher deductible.
Here’s what’s covered, what isn’t, and optional coverages:
Covered: Dwelling (Your Home’s Structure)
This is the bulk of your policy. It pays for repairs to the physical structure of your home—or, in the event of a total loss, for building a replacement—if it’s damaged by a covered hazard. Most policies stipulate repairs be made using the same quality and type of materials as what was lost.
Obtain an accurate estimate of your home’s replacement cost; this will determine your dwelling insurance needs. Buy too little coverage and you’re not fully protected if there’s a total loss; buy too much and you’re paying for insurance you can’t use.
Renter and condominium policies don’t include full coverage for the dwelling itself; that’s the responsibility of the landlord or covered by the condo association’s insurance. Instead, these policies insure the tenant’s belongings and provide liability coverage. Condo owners can buy coverage for damage to portions of the dwelling—such as carpeting, cabinets, and other improvements they have made. Click here for more info.
Not Covered Unless You Pay More: Costs to Replace Many Features of Older Homes
Most policies promise to repair or replace what is damaged, but not with an exact replica. Older homes with ornate woodwork and other expensive-to-recreate features might make the cost of rebuilding the home exceed its market value. Some companies won’t even cover old or historic homes. Others will, but you’ll need a specialty policy. Some companies (Chubb and a few others) specialize in high-value, older, or historic homes.
Even homes that are just 20 or 30 years old might fall into another loophole. Insurance policies stipulate they’ll pay for what was lost, not rebuild it as it should be. That’s a problem if codes for things like plumbing, wiring, or stairway construction have changed since your home was built. Your insurance might not cover the extra cost of rebuilding your home to the standards required by current codes. You can close this loophole by buying “ordinance and law coverage”; some companies include it in their policies for no additional premium; others charge about $50 to more than $100 per year for it.
Not Covered Unless You Pay More: Earthquake Damage
Earthquake coverage usually adds five to 30 percent to the cost of an area homeowners policy (and costs about twice as much for a brick house as for a frame one). Most companies sell earthquake coverage with a 10 to 25 percent deductible: 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. Because the coverage offered by earthquake insurance is so expensive, few homeowners in Washington buy it. Click here for more info.
Covered: Liability (Bodily Injury or Damage to Others’ Property)
This coverage protects you from claims by others for injuries or property damage for which you, your family members, your pets, or hazards on your property are at fault. Under this coverage, your insurance company will hire legal representation to defend you and pay damages if you are found liable. Your policy won’t cover injuries or property damage caused by business pursuits or automobile accidents (the liability coverage in your car insurance policy covers this).
The liability insurance limit for most basic policies is $300,000, but you can purchase additional coverage inexpensively. Most insurers offer increased liability coverage at $500,000 for an additional premium of only $5 to $25 per year—a bargain for increased peace of mind.
Want to protect yourself from claims in excess of $500,000? Consider an “umbrella” policy, which provides liability protection in addition to what your homeowners and automobile insurance provide. Besides protecting you from liability claims, it shields you against suits for libel, slander, defamation of character, false arrest, invasion of privacy, and other claims not usually covered by standard homeowners policies.
Covered: Most Personal Property
Homeowners policies will compensate you for damage to or theft of most kinds of personal property (furniture, clothing, appliances, etc.) owned by you and located on or away from your premises. Policies pay only if the damage was caused by a covered peril, but while your home’s structure is covered for accidental losses, personal property is not. For example, if you accidentally spill paint on your brand-new leather sofa or your flat-screen TV falls off the wall, tough luck.
Not Covered Unless You Pay More: Full Costs to Replace Belongings
Another difference between personal property coverage and coverage on the dwelling structure is in the way reimbursement is calculated. If your roof is damaged, your policy will pay what it takes to fix or replace it (minus your deductible). But personal property is covered at actual cash value—replacement cost minus depreciation. If a bike you bought six years ago for $600 is stolen, you might be reimbursed only $200, not the $800 you’d pay for a comparable new model. If you were to lose several items in a burglary or fire, you’ll probably find your insurance company’s payout appallingly inadequate.
You can get a special provision that covers personal property for full replacement costs; if your bicycle will cost $800 to replace, you’ll get that. This extra coverage usually adds five to 15 percent to the policy cost—although a few companies provide it gratis.
Not Covered Unless You Pay More: Full Value of Jewelry, Computers, Electronics, and Luxuries
All policies limit payouts for certain categories of personal property losses. Typical limits include:
- $1,000 to $10,000 for jewelry, watches, furs, and precious and semiprecious stones.
- $1,000 to $5,000 for computers and smartphones.
- $200 for money, bank notes, precious metals, and coins.
- $1,000 to $1,500 for securities, accounts, deeds, letters of credit, manuscripts, passports, tickets, and stamps.
- $1,000 to $1,500 for boats, including their trailers, furnishings, equipment, and outboard motors.
- $2,000 to $10,000 for firearms.
- $2,500 for property used for business purposes.
Companies sometimes impose similar coverage limits on artwork, antiques, musical instruments, and cameras.
Carefully review policies for any limits that may leave your coverage short. To insure items worth more than these special limits, consider paying to increase the category limit or buying separate coverage.
Covered: Other Structures on Your Property
Standard policies cover detached garages, toolsheds, gazebos, and so on. The coverage does not apply to structures used for business purposes.
Covered: Increased Living Expenses
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.
Not Covered Unless You Pay More: Flood Damage
Homeowners insurance won’t pay for damage caused by water entering the home from outside; you can buy separate flood insurance—obviously, costs depend highly on whether you live in a flood-prone area or on high ground. Ask your insurer for rates or contact the FEMA National Flood Insurance Program.
Not Covered Unless You Pay More: Damage from Sewer, Drain, and Sump Pump Backups
If your basement is finished or is kept dry by a drainage system connected to a sump pump, consider adding coverage for sewer or drain backups. Most companies charge $40 to $200 per year. Many homeowners find that cost reasonable to cover potentially disruptive and expensive cleanup and repairs.
Not Covered Unless You Pay More: Losses from Identity Theft
Some insurers include identity theft coverage in their standard homeowners policies; others push it as an add-on. Although identity theft is a massive problem, we don’t recommend buying extra insurance for it. These policies don’t promise to clear your credit history and record; they merely cover the expenses you incur to do so on your own. Although millions of Americans have had their identities stolen, the damages inflicted are not out-of-pocket, measurable costs, but rather time and effort devoted to fixing it. You can’t buy insurance to cover your free time.
Plus, you may be able to get free protection against identity theft from another source. Many banking institutions, including credit card companies, offer gratis identity theft protection. Also, you already have protection from fraudulent credit card charges—the most common form of identity theft injury—under the federal Fair Credit Billing Act, which stipulates that victims aren’t responsible for fraudulent charges.
Not Covered Unless You Pay More: Sewer and Water Lines, Appliance Breakdowns, and More
Insurers are increasingly offering lousy coverage options for policies we often advise consumers avoid—home warranties, “protection plans” for underground water and sewer lines on your property, service contracts for appliances, and so on. These plans are highly profitable for companies that sell them, but usually terrible deals for consumers.
Not Covered: Damage from Animals and Pests
Pest control services sell protection plans covering damage caused by termites. Click here for ratings and advice for critter control.