Coverage Guide
What Does Home Insurance Cover?
Updated 26 March 2026
A standard HO-3 homeowners policy provides six coverage types, each protecting a different aspect of your home and finances. Understanding what each covers, what it excludes, and how to set the right limits prevents the most common underinsurance mistakes.
Dwelling Coverage
Covers the physical structure of your home
Coverage A pays to repair or rebuild the main structure of your home if it is damaged or destroyed by a covered peril. This includes the walls, roof, floors, built-in appliances, and attached structures like a garage. The limit should equal the full replacement cost of your home, not its market value. Most HO-3 policies cover your dwelling on an open-perils basis, meaning all causes of loss are covered unless specifically excluded.
What is covered
- ✓Walls, foundation, roof, and framing
- ✓Built-in appliances (oven, dishwasher, HVAC)
- ✓Attached garage or deck
- ✓Permanently installed flooring, cabinets, and fixtures
What is excluded
- ✗Flood damage (requires separate NFIP or private flood policy)
- ✗Earthquake damage (requires a separate earthquake endorsement or policy)
- ✗Gradual deterioration, rot, or neglected maintenance
- ✗Intentional damage
Pro tip
Set Coverage A equal to your home's estimated replacement cost per square foot, not the listing price. Use $100 to $200 per square foot as a rough guide, or request a replacement cost estimator from your insurer.
Other Structures
Covers detached structures on your property
Coverage B automatically applies to detached garages, fences, sheds, swimming pools, and other structures not physically connected to your home. The standard limit is 10% of your Coverage A dwelling limit. If you have a large detached workshop or pool house, the standard limit may be inadequate and you may need to increase it with your insurer.
What is covered
- ✓Detached garage or carport
- ✓Garden shed or greenhouse
- ✓Swimming pool structure (not the pool contents)
- ✓Boundary fences and retaining walls
What is excluded
- ✗Structures used for commercial purposes
- ✗Rented-out structures
- ✗Flood or earthquake damage (same as Coverage A)
Pro tip
Review the value of your outbuildings. If your detached garage alone is worth $40,000 and your dwelling is $300,000, the default 10% ($30,000) may leave you underinsured.
Personal Property
Covers your belongings inside the home
Coverage C reimburses you for personal belongings that are stolen, damaged, or destroyed by a covered peril. This includes furniture, clothing, electronics, tools, and most household goods. Coverage applies whether the loss occurs at home or elsewhere (e.g., a laptop stolen from your car). The standard limit is 50 to 70% of your dwelling coverage. Most policies default to actual cash value (ACV), which deducts depreciation. Upgrading to replacement cost value (RCV) for personal property costs more but pays the full cost to buy new items.
What is covered
- ✓Furniture, appliances not built in
- ✓Clothing and jewellery (within sub-limits)
- ✓Electronics and computers
- ✓Bicycles and sporting equipment (within limits)
- ✓Items stored off-premises (e.g., in a storage unit)
What is excluded
- ✗Motor vehicles (covered by auto insurance)
- ✗Pets
- ✗Business equipment above minimal limits
- ✗High-value items above scheduled limits without a rider
Pro tip
Jewellery, fine art, firearms, and collectibles have sub-limits under standard Coverage C (often $1,500 to $2,500 per category). Schedule high-value items separately with an itemised endorsement for full replacement cost protection.
Additional Living Expenses
Pays for temporary housing if your home is uninhabitable
Coverage D (also called Loss of Use) reimburses you for reasonable additional living expenses when your home is made uninhabitable by a covered loss. This includes hotel stays, restaurant meals above your normal food budget, laundry costs, and temporary rental fees. Coverage continues until your home is repaired or for the policy limit period, whichever comes first. The standard limit is 20 to 30% of your dwelling coverage.
What is covered
- ✓Hotel or temporary rental accommodation
- ✓Meals above your normal household food budget
- ✓Additional transport costs due to displacement
- ✓Storage fees for personal property during repairs
- ✓Pet boarding if your temporary accommodation does not allow pets
What is excluded
- ✗Expenses you would have incurred anyway (e.g., normal grocery spending)
- ✗Costs incurred due to an excluded peril (e.g., flood without flood insurance)
- ✗Expenses that exceed what is reasonable for your lifestyle
Pro tip
In high cost-of-living cities, hotel and rental rates can quickly exhaust a 20% ALE limit. Ask your insurer about increasing Coverage D to 30% or adding a time-based limit rather than a dollar limit.
Personal Liability
Protects you if someone is injured on your property
Coverage E pays for legal defence costs and damages if you are found legally responsible for bodily injury or property damage to others. This applies to incidents on your property (e.g., a visitor slipping on your icy driveway) and in some cases to incidents away from home. The standard limit is $100,000, but most insurance professionals recommend at least $300,000. An umbrella policy extends this coverage to $1 million or more.
What is covered
- ✓Legal defence costs regardless of outcome
- ✓Settlements or judgements up to your policy limit
- ✓Dog bite claims in most states
- ✓Accidental damage caused by you or household members to others' property
What is excluded
- ✗Intentional acts
- ✗Business-related liability (needs a separate commercial policy)
- ✗Automobile-related injuries (covered by auto insurance)
- ✗Damage to your own property
Pro tip
Consider an umbrella policy if your net worth exceeds $300,000 or if you have a pool, trampoline, or dog that insurers consider higher-liability features. A $1 million umbrella typically costs $150 to $300 per year.
Medical Payments to Others
No-fault medical coverage for guests injured on your property
Coverage F pays for minor medical bills for guests who are injured on your property, regardless of fault. It is designed to resolve small claims quickly without litigation. Standard limits are $1,000 to $5,000. This is a goodwill coverage. It does not apply to household residents or injuries covered by workers' compensation.
What is covered
- ✓Emergency room visits for injured guests
- ✓Ambulance fees
- ✓X-rays and diagnostics following an accident on your property
- ✓Minor surgical procedures
What is excluded
- ✗Medical expenses for residents of your household
- ✗Injuries from business activities on the premises
- ✗Injuries caused intentionally
Pro tip
Coverage F limits are low and should not be confused with your liability coverage. It is primarily useful for quick resolution of minor incidents without involving attorneys.
Common Gaps and Exclusions
Flood
Standard home insurance never covers flood damage. Flood insurance must be purchased separately through the National Flood Insurance Program (NFIP) or private flood carriers. Even if you are not in a designated flood zone, flooding from heavy rain, storm surge, or overflowing rivers can occur anywhere.
Earthquake
Earthquake damage is excluded in all standard US home insurance policies. If you live in California, the Pacific Northwest, the New Madrid Seismic Zone, or other seismically active areas, a separate earthquake policy or endorsement is essential.
Sewer and drain backup
Water backing up from a sewer or drain is typically excluded from standard policies. This is one of the most common uncovered losses. A water backup endorsement costs $50 to $150 per year and covers cleanup and repair of sewer backup damage.
Mould from neglect
Mould resulting from a sudden covered event (like a burst pipe) may be covered. But mould that developed due to long-term neglect, poor ventilation, or slow leaks is excluded. Insurance covers sudden and accidental damage, not maintenance failures.
Routine wear and tear
Home insurance is not a home warranty. Replacing an ageing roof, a worn water heater, or faded paint is the homeowner's responsibility. Coverage only applies to sudden and accidental damage, not gradual deterioration.
High-value personal property above sub-limits
Jewellery, watches, fine art, furs, collectibles, musical instruments, and firearms all have category sub-limits under standard Coverage C. If your engagement ring is worth $8,000 and the sub-limit is $1,500, you need a scheduled personal property endorsement to be fully protected.
Recommended Coverage Limits at a Glance
| Coverage | Default amount | Recommended minimum | Common mistake |
|---|---|---|---|
| A - Dwelling | Insurer estimate | Full replacement cost | Insuring for market value, not rebuild cost |
| B - Other structures | 10% of Coverage A | Actual value of detached structures | Underinsuring a large detached garage or pool house |
| C - Personal property | 50% of Coverage A | Replacement cost value, not actual cash value | Defaulting to ACV, which deducts depreciation |
| D - Loss of use | 20% of Coverage A | At least 30% in high-cost areas | Underestimating temporary rental costs in expensive cities |
| E - Liability | $100,000 | $300,000 minimum; $1M+ with umbrella | Leaving minimum $100,000 limit when net worth is far higher |
| F - Medical payments | $1,000 | $5,000 | Confusing this with liability coverage |
What does coverage cost?
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