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Homeowners insurance is required by your mortgage lender and provides broad protection, but certain events and damage types are excluded in ways that surprise many homeowners at claim time. Here is a clear breakdown of what a standard policy covers, what it does not, and the extra coverage you may need for the gaps.
Key Takeaways
- A standard HO-3 policy covers four things: your dwelling, your belongings, liability, and loss of use.
- Your dwelling is covered broadly, but your belongings are usually narrower, so check your policy.
- Floods and earthquakes are not covered and need separate policies.
- Insurance covers sudden, accidental damage, not wear and tear or deferred maintenance.
What a Standard HO-3 Policy Covers
Dwelling coverage
This covers the structure of your home, including walls, roof, floors, and built-in appliances, against covered perils. An HO-3 policy covers the dwelling on an open-perils basis, meaning all causes of damage are covered except those specifically excluded. Common covered perils include fire and smoke, wind and hail, lightning, vandalism, theft, falling objects, the weight of ice or snow, and water from a burst pipe or appliance.
Personal property coverage
This covers your belongings, but here is the catch: most HO-3 policies cover personal property on a named-perils basis (only listed causes), while the dwelling gets broader open-perils coverage. That asymmetry surprises many homeowners, so verify your policy. There are also sublimits for high-value items, often around $1,500 to $2,500 for jewelry, $2,500 for firearms or silverware, and just $200 for cash. If you own items worth more than the sublimit, add a floater endorsement to schedule them.
Liability coverage
This covers you if someone is injured on your property or you accidentally damage someone else’s. Standard limits run around $100,000 to $300,000. If you have significant assets, an umbrella policy adds liability protection above your homeowners limit.
Loss of use (additional living expenses)
If a covered loss makes your home uninhabitable, this pays for temporary housing, meals, and other increased living costs during repairs, typically up to 20% to 30% of your dwelling coverage.
What Homeowners Insurance Does Not Cover
Flooding
Standard policies do not cover flood damage from external water: rivers, storm surge, heavy rainfall, and overflowing drainage are excluded. Flood insurance is separate, through FEMA’s National Flood Insurance Program (NFIP) or private insurers. More than 20% of flood claims come from outside high-risk zones, so if you live anywhere near water, check your risk at floodsmart.gov.
Earthquakes
Earthquake damage is excluded from standard policies. Seismically active areas like California, the Pacific Northwest, and the New Madrid zone need a separate earthquake endorsement or policy. In California, the California Earthquake Authority (CEA) is the largest source.
Maintenance and wear and tear
Insurance covers sudden, accidental damage, not the results of deferred maintenance. A roof that slowly degraded over 20 years, a foundation that settled over decades, or an appliance that wore out is not covered. Insurance is not a home warranty.
Sewer backup
Damage from a backed-up sewer or drain is not standard. A sewer backup endorsement, often around $50 to $100 a year, adds it, and it is worth considering in older homes or areas with aging infrastructure.
Home business equipment
Business equipment used at home has limited coverage under a standard policy. If you work from home with expensive gear, a business property endorsement or separate business insurance covers the gap.
How Much Coverage You Need
Your dwelling coverage should equal the cost to rebuild your home, not its market value, which can be higher or lower. Your insurer’s replacement cost estimator helps, and underinsuring is common after years of rising home prices, so review your limit annually. For your belongings, take a home inventory: walk through your home on video, document what you own (most people discover they own far more than they thought), and store the video in the cloud so it survives even if your home does not. Rising premiums make this review even more important, as we cover in our guide on why homeowners insurance is going up.
FAQ
Does homeowners insurance cover floods?
No. Flood damage is excluded and requires separate flood insurance through the NFIP or a private insurer, even outside high-risk zones.
What is the difference between dwelling and personal property coverage?
Dwelling coverage protects the structure on an open-perils basis (all but excluded causes), while personal property is often named-perils (only listed causes) with sublimits for valuables.
Does homeowners insurance cover a worn-out roof?
No. It covers sudden, accidental damage, not gradual wear or deferred maintenance. A roof that aged out over decades is not covered.
How much dwelling coverage do I need?
Enough to rebuild your home at current construction costs, not its market value. Review the amount each year, since rebuilding costs rise.
Bottom Line
A standard policy covers your home, belongings, liability, and loss of use, but excludes floods, earthquakes, wear and tear, and sewer backups. Know the gaps, add endorsements where you need them, insure your home for its rebuild cost rather than market value, and keep a video inventory. To manage the cost, see our guides on your renewal and what to do if your insurer drops you.
This article is for educational and informational purposes only and is not insurance advice. Coverage, limits, and exclusions vary by policy and state. Review your specific policy and confirm details with a licensed insurer or agent.
