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  • Stephen Gonzalez

Homeowners Insurance: What Is It And How Are You Covered?

Homeowners insurance provides financial protection for your home and other important assets against disasters, theft, and accidents for which you’re liable. Home insurance is also required by most lenders before they'll let you take out a mortgage on a house.

Homeowners insurance coverages explained

A basic homeowners insurance policy includes six coverage provisions that cover the structure of your home, your personal property, additional living expenses, and legal and medical expenses.

Dwelling coverage

Dwelling coverage is the part of your policy that covers the cost of repairing or rebuilding your home if it’s damaged or destroyed by a fire, hurricane, or another disaster listed in your policy. With dwelling coverage, your home’s foundation, roofing, walls, deck, floors, cabinetry, plumbing, water heaters — basically anything that is built into the home is covered up to the limit in your policy.

Other structures coverage

Other structures protection pays to repair or rebuild structures separate from your home, such as a detached garage, guest house, shed, or fence.

Personal property coverage

Homeowners insurance also includes coverage for your personal belongings in your home and anywhere in the world. If someone breaks into your home and steals your valuables, the cost of replacing them is covered; if someone breaks into your hotel room or storage unit and takes your luggage, that is also covered. If a guest is staying in your home, personal property coverage may also cover their belongings if they’re damaged or stolen.

Jewelry, watches, furs, firearms, and other types of expensive valuables have special limits of liability, or sublimits, meaning the insurance company will only pay up to a limited amount — typically $1,500–2,500 depending on the category or class of items. Most insurers give you the option of increasing coverage limits on expensive valuables by opting into a more comprehensive coverage tier or “scheduling” items with a scheduled personal property coverage add-on.

Additional living expenses

Also referred to as loss of use coverage, this policy provision covers any increase in living expenses if your house is damaged in a disaster and you need to live somewhere else while it’s being repaired or rebuilt. Loss of use coverage may cover the cost of rent at your temporary residence, gasoline expenses if you had to flee the region, and the rental value of the property if you were renting it out as a source of income.

According to a standard policy, your additional living expenses are covered for the shortest time required to repair or rebuild your home. If your home is destroyed and you decide to permanently relocate, payments will continue until you’re settled in your new home.

Personal liability coverage

Homeowners insurance also includes personal liability coverage to pay for medical bills, lost wages, and other costs for people that you’re legally responsible for injuring. Events you could be liable for include your dog biting someone or a guest slipping and falling and injuring themselves on your property.

If you’re sued and taken to court because of an accident, liability protection will also cover your legal fees. If you’re responsible for damaging or destroying someone’s property — maybe you accidentally torched your neighbor’s house in a gender reveal party gone wrong — this coverage may cover the rebuild.

You can choose anywhere from $100,000 to $500,000 in personal liability coverage. If you have assets in excess of $500,000 and you’d like more financial security, you can add personal umbrella insurance to your policy. It provides broader liability protection and higher coverage limits than standard homeowners insurance.

Medical payments coverage

Your policy also includes no-fault medical payments coverage which pays out if a guest sustains a minor injury in your home, regardless of who is at fault or liable for the accident. You typically can choose between $1,000 to $5,000 in medical payments coverage.

Additional coverage

Most insurance companies also offer supplemental protection that can modify or enhance your policy coverage, including water backup protection, service line coverage, and equipment breakdown coverage.

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