What Does Homeowners Insurance Cover?

By Bill Lyons | Published on January 11, 2024

This insurance serves as a safety net, offering financial protection in the face of unforeseen events that could damage or destroy your home. Understanding what homeowners insurance covers is essential for any new homeowner, as it provides peace of mind and shields against the financial consequences of unexpected events, from natural disasters to theft or liability claims.

But what does home insurance cover? Keep reading to learn more about homeowners insurance and its benefits.

What Is Homeowners Insurance?

Homeowners insurance is comprehensive financial coverage that shields homeowners from losses arising from various potential risks. In general, it covers damages to the home itself, personal belongings, and liability for injuries or property damage caused to others on the property. When a homeowner purchases an insurance policy, they typically pay a regular premium to the insurance provider. In return, the insurance company agrees to cover the costs associated with covered losses up to the limits specified in the policy. 

The coverage of homeowners insurance can vary, but it generally includes protection against perils such as fire, windstorms, hail, theft, vandalism, and certain types of water damage. It’s important for homeowners to carefully review and understand the terms, conditions, and limitations of their policy. 

In addition to property protection, homeowners insurance often includes liability coverage. This comes into play if someone is injured on the insured property and the homeowner is found legally responsible. Liability coverage can help cover medical expenses, legal fees, and damages awarded in a lawsuit. 

Mortgage lenders often require homeowners insurance as a condition for loan approval. So whether you’re getting a home equity loan or a conventional mortgage, lenders want to ensure that their financial interest in the property is protected, and homeowners insurance provides a crucial layer of security. However, even if you don’t have a lender or your lender doesn’t require insurance, homeowners insurance is still a good idea because it can mitigate financial risks associated with unexpected events. 

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What Does Homeowners Insurance Cover? 

Now that you understand the homeowners insurance definition, it’s crucial to understand what type of coverage you can expect. Homeowners insurance coverage can vary, but in general, homeowners insurance covers the following: 

Dwelling (your home)

The primary aspect of homeowners insurance is dwelling coverage, which protects the physical structure of your home. This includes protection for essential components such as the foundation, walls, roof, flooring, and built-in appliances. 

Dwelling coverage ensures that the costs of repairing or rebuilding these integral parts of your home are covered, helping you restore your residence to its pre-loss condition. 

Attached structures

The attached structures include the additional structures physically connected to your home. This can include a garage, deck, or porch. Whether it’s damages from a storm or an accidental fire, having attached structure coverage means that the associated costs or repair or replacement are included, providing comprehensive coverage for the entire property. 

Personal belongings

Personal belongings coverage protects your possessions within the home. From furniture and clothing to electronics and other valuable items, this coverage ensures that your personal property is protected against covered perils like theft, fire, or natural disasters. Homeowners should inventory their belongings to determine the appropriate coverage limits. 

Liability protection 

Liability protection shields you from financial consequences if someone is injured on your property and you are deemed responsible. This coverage helps with medical expenses, legal fees, and potential damages if a liability lawsuit arises. It protects your assets and provides peace of mind when unforeseen accidents lead to legal action. 

Additional living expenses

Additional living expenses (ALE) coverage comes into play when your home becomes temporarily uninhabitable due to covered perils. This includes reimbursement for expenses related to temporary living arrangements, such as hotel stays, meals, and other necessary costs.

What Is Typically Not Covered by Homeowners Insurance?

While homeowners insurance provides crucial coverage for a range of perils, certain situations and events are typically not covered. Homeowners need to be aware of these exclusions to ensure they have a comprehensive understanding of their policy. Some common items not covered by homeowners insurance include: 

• Termite and pest damage: The cost of repairing damage caused by termites or other pests is typically not covered by homeowners insurance. Preventive measures and addressing infestations are considered part of routine home maintenance. 
• Flood damage: Homeowners insurance typically doesn’t cover damage caused by floods. To protect against flooding, homeowners must purchase a separate flood insurance policy. 
• Some natural disasters: Standard homeowners insurance policies often exclude coverage for damage caused by earthquakes and hurricanes. Homeowners in areas prone to these natural disasters may need to obtain a separate insurance policy to safeguard their property. 
• Damage from neglect: Damage resulting from neglect or lack of maintenance is typically not covered by homeowners insurance. If issues arise due to the homeowner’s failure to address known problems or perform routine maintenance, the resulting damage likely won’t be eligible for coverage. 
• High-risk pet breeds: Certain dog breeds deemed high-risk may not be covered for liability claims related to dog bites or attacks. Homeowners with these pets may need to obtain additional coverage or a separate policy. 
• Coverage for valuable jewelry or artwork: While homeowners insurance provides coverage for personal belongings, there are often limits on the amount of coverage for high-value items like jewelry, artwork, or antiques. If you own valuable items that exceed these limits, you may need to purchase additional coverage to ensure the full value of these possessions is adequately protected. 
• Normal wear and tear: Homeowners insurance doesn’t cover home improvements or repairs required due to normal wear and tear or the gradual deterioration of the home’s structures or systems. Maintenance-related issues are considered the homeowner’s responsibility. If you’re looking for coverage for items that deteriorate due to normal wear and tear, consider getting a home warranty in addition to homeowners insurance. 

How Much Does Homeowners Insurance Cost?

Homeowners insurance costs vary based on where you live, the type of coverage you choose, your credit score, and the home itself. As a general reference, the average cost of homeowners insurance in 2023 is $1,428 per year for $250,000 in dwelling coverage. 

You’ll need to obtain quotes from multiple insurance providers to get a more accurate estimate. This allows you to compare coverage options and prices tailored to your specific needs. Keep in mind that bundling your homeowners insurance with other policies like car insurance may also qualify you for discounts to reduce your overall costs. 

Keep in mind that home appreciation can also influence your insurance cost. As the value of your home increases, the cost to rebuild or replace it also rises, which is often why your insurance costs will increase annually. 

How Much Homeowners Insurance Do I Need?

Determining the right amount of homeowner insurance is a personalized process that depends on various factors, including the property value and rebuilding costs, personal belongings, liability protection needs, risk tolerance, and so forth. 

Consider the current market value of your home and how much it would cost to rebuild it in the event of a total loss. The rebuilding cost may differ from the market value, as it’s influenced by construction costs in your area. However, your dwelling coverage should reflect the true cost of rebuilding your home. 

You should also take stock of your personal belongings and estimate their value. Consider additional coverage for any high-value items that exceed the limits of standard homeowners insurance policies. 

Additionally, while no homeowners expect liability issues, they can happen. If you have significant assets you want to protect in a lawsuit, consider higher liability coverage to help cover legal expenses, medical bills, and damages. 

It’s also beneficial to take into account any unique features of your home or potential risks in your area. For instance, if you live in a flood-prone zone, you may need a separate flood insurance policy. 

Some homeowners may opt for higher deductibles to lower their premiums, while others may prefer lower deductibles for greater financial security. Finding the right balance by considering your personal risk tolerance is crucial. 

Make Sure You Know What Your Home Insurance Covers

Understanding the scope of your homeowners insurance ensures comprehensive protection for your investment. Regularly reviewing your policy and being aware of its coverage limits and exclusions is crucial. 

Homeowners insurance is just one of the costs of owning a home, so you’ll need to budget for it on a yearly basis. Download the Griffin Gold app today to budget and prepare for various homeownership-related expenses. From insurance costs to potential repairs, the app empowers you to manage your finances effectively.

Bill Lyons

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.