In this guide
Homeowners insurance helps pay to repair or rebuild your house, replace your belongings, and cover your legal costs if someone is hurt on your property or you accidentally damage someone else's things. A standard policy is built from six parts, usually labeled Coverage A through F. It does not cover everything: flood, earthquake and normal wear and tear are typically excluded, so it pays to know where the gaps are before you need to file a claim.
Key takeaways
- A typical policy has two halves: property coverage (A–D) and liability coverage (E–F).
- The HO-3 is the most common form for owner-occupied homes. It covers the house against all risks except those it excludes, but covers your belongings only for listed perils.
- Standard policies generally do not cover flood or earthquake damage. Those usually require a separate policy or endorsement.
- Replacement cost coverage pays to rebuild or replace at today's prices. Actual cash value subtracts depreciation, so it usually pays less.
- Limits, forms and rules vary by insurer and by state, so always read your own declarations page.
How homeowners insurance works
You pay a premium, and in return the insurer agrees to pay for certain kinds of losses, up to the limits listed in your policy. When you file a claim, you usually pay a deductible first, and the insurer covers the rest of the approved amount.
Policies are written around "perils," which are the events that cause damage, such as fire, windstorm or theft. Some coverages are "named perils," meaning only the events listed in the policy are covered. Others are "open perils" (sometimes called "all risks"), meaning everything is covered unless the policy specifically excludes it.
If you have a mortgage, your lender will almost always require you to carry homeowners insurance.
The six standard coverages (A–F)
Most homeowners policies in the US are based on standard forms, and they split coverage into Section I (property) and Section II (liability). Here is what each part does.
| Coverage | What it protects | Common example |
|---|---|---|
| A – Dwelling | The house itself and attached structures | Fire damages your kitchen and roof |
| B – Other structures | Structures not attached to the house | A tree falls on your detached garage or fence |
| C – Personal property | Your belongings, at home and often away from home | A burglar takes your laptop and TV |
| D – Loss of use | Extra living costs if a covered loss makes your home unlivable | Hotel and restaurant bills during repairs |
| E – Personal liability | Legal defense and damages if you are responsible for injuring someone or damaging their property | A guest trips on your stairs and sues |
| F – Medical payments to others | Smaller medical bills for guests hurt on your property, regardless of fault | A neighbor's child is hurt on your swing set |
Coverage A: Dwelling
This is the core of the policy. It pays to repair or rebuild the structure of your home after a covered loss. The NAIC notes that your dwelling limit should be high enough to fully rebuild your home. That rebuilding cost is not the same as your home's market value, because market value includes the land, which does not burn down.
Coverage B: Other structures
This covers things like a detached garage, shed, gazebo or fence. According to the Insurance Information Institute (Triple-I), this coverage is generally about 10% of your dwelling limit, though percentages vary by insurer.
Coverage C: Personal property
Your furniture, clothing, electronics and other belongings fall here. Triple-I says personal property coverage is generally 50% to 70% of the dwelling limit. Many policies also cover your belongings when they are away from home, sometimes at a lower limit.
Watch for special dollar limits on certain categories. Jewelry, furs, art, collectibles and silverware often have caps for theft. To insure these items at full value, you may need to add a scheduled personal property endorsement, sometimes called a "floater."
Coverage D: Loss of use
If a fire or other covered event forces you out of your home, this pays the extra costs of living somewhere else, such as a hotel, temporary rental or restaurant meals. It generally covers the difference between your normal costs and your higher temporary costs. Policies set dollar limits, and some also set time limits.
Coverage E: Personal liability
Liability coverage helps pay for legal defense and court awards if you, a family member or even your pet injures someone or damages their property. Triple-I says liability limits generally start at about $100,000. If you have significant savings or assets, you may want to ask about higher limits or an umbrella policy.
Coverage F: Medical payments to others
This is a smaller, no-fault coverage for guests who are injured on your property. It can pay medical bills without anyone having to prove you were at fault. It does not cover you or the people who live in your household.
Good to know: Some insurers and policy forms use different letters for the liability coverages, such as "L" for personal liability and "M" for medical payments. The protection is similar, but always check how your own policy is labeled.
Common policy forms: HO-3 and others
"HO" stands for homeowners, and the number tells you which standard form a policy is based on. Each form covers a different kind of home or uses a different approach to perils. State insurance departments, such as those in West Virginia and Florida, describe these forms in their consumer guides.
| Form | Who it is for | How it covers |
|---|---|---|
| HO-1 (basic) | Homeowners | A short list of named perils, such as fire, windstorm and theft |
| HO-2 (broad) | Homeowners | A longer list of named perils for both house and belongings |
| HO-3 (special) | Homeowners | Open perils for the house; named perils for belongings |
| HO-4 (contents) | Renters | Belongings and liability only, no building coverage |
| HO-5 (comprehensive) | Homeowners | Open perils for both the house and belongings |
| HO-6 (unit owners) | Condo owners | Belongings, liability and the interior of the unit |
| HO-7 (mobile home) | Manufactured homes | Similar to HO-3, adapted for manufactured homes |
| HO-8 (modified) | Some older homes | Named perils, often paying based on common construction rather than exact replacement |
The HO-3 is the most common choice for single-family, owner-occupied homes. The HO-5 offers broader protection for your belongings, but it usually costs more and may not be available for every home. If you rent, the HO-4 is your form; our renters insurance guide explains it in detail.
Not every insurer offers every form, and form numbers and contents can vary by state. Your policy documents are the final word on what you have.
What homeowners insurance usually excludes
Exclusions are the events and situations a policy will not pay for. Triple-I notes that a standard homeowners policy will not pay for damage caused by flood, earthquake or routine wear and tear.
Flood
FEMA states that most homeowners insurance does not cover flood damage. Flood coverage is usually bought separately, most often through the National Flood Insurance Program (NFIP), which is managed by FEMA and sold through participating insurers and agents. Some private insurers also sell flood policies.
As of 2026, FloodSmart, the NFIP's consumer site, says NFIP residential building coverage goes up to $250,000 and contents coverage goes up to $100,000. Building and contents coverage are typically purchased separately.
Watch out: NFIP policies generally take effect 30 days after purchase. There are exceptions, such as coverage bought in connection with a new or changed mortgage. Do not wait until a storm is in the forecast to buy flood insurance.
Earthquake
Earthquake damage is also typically excluded. Depending on where you live, it may be available as an endorsement to your policy or as a separate policy.
Wear, tear and maintenance
Homeowners insurance is for sudden, accidental damage, not for problems that build up slowly. A roof that wears out with age, pipes that corrode over years, or damage caused by poor upkeep is generally not covered. Damage to trees and plants from disease or neglect is also usually excluded.
Other common gaps
- Sewer or drain backup: Often excluded unless you add an endorsement.
- Business activity: Running a business from home may require extra coverage.
- High-value items: Theft limits on jewelry and similar items may be low without a floater.
Actual cash value vs. replacement cost
How your policy values a loss can make a big difference in what you receive after a claim.
- Replacement cost pays to repair or replace damaged property with materials of like kind and quality, at today's prices, minus your deductible.
- Actual cash value (ACV) pays replacement cost minus depreciation. In other words, it accounts for age and wear and tear, so the payout is usually lower.
The Texas Department of Insurance gives a helpful example. Suppose a storm destroys a roof that would cost $10,000 to replace, and the policy has a $4,000 deductible. A replacement cost policy would pay $6,000, no matter how old the roof is. With actual cash value, a 10-year-old roof valued at $7,000 would bring a $3,000 payment, and a 20-year-old roof valued at $4,000 would pay nothing after the deductible.
ACV policies usually cost less up front, but they can leave you paying much more out of pocket after a loss. Some policies use replacement cost for the house but ACV for personal property, or apply ACV to older roofs, so check each part of your coverage.
Tip: Ask whether your policy includes extended replacement cost or an inflation guard. These options can help if building costs rise after a disaster. What is offered, and how much extra it provides, varies by insurer and state.
How to choose the right coverage
- Estimate your rebuilding cost. Base your dwelling limit on what it would cost to rebuild, not on your purchase price or market value.
- Take a home inventory. Photos or a video of your belongings make it easier to set a personal property limit and file a claim.
- Review your liability limit. Consider what you could lose in a lawsuit and whether an umbrella policy makes sense.
- Check your flood and earthquake risk. Decide whether separate coverage is worth it for your area.
- Pick a deductible you can afford. A higher deductible usually lowers your premium, but you pay more when you file a claim.
- Compare quotes. Prices and coverage details often differ from one insurer to the next, so comparing quotes from several insurers can help you find a policy that fits.
If you also need car insurance, you may want to read about bundling home and auto insurance. For questions about rules in your state, talk to a licensed agent or your state insurance department.
Frequently asked questions
Is homeowners insurance required by law?
No state law generally requires homeowners insurance the way most states require car insurance. However, if you have a mortgage, your lender will almost always require it as a condition of the loan.
Does homeowners insurance cover water damage?
It depends on the cause. Sudden and accidental water damage, such as from a burst pipe, is often covered. Flooding from outside, slow leaks and sewer backups are commonly excluded unless you buy separate coverage or an endorsement.
What is the difference between HO-3 and HO-5?
Both cover the house on an open-perils basis. The HO-3 covers your belongings only for named perils, while the HO-5 covers belongings on an open-perils basis too. HO-5 policies usually cost more and may not be available for every home.
Should my dwelling coverage equal my home's market value?
Not necessarily. Your dwelling limit should reflect the cost to rebuild your home. Market value includes the land and local real estate conditions, which can make it higher or lower than the rebuilding cost.
Where can I find which coverages I have?
Your declarations page, usually the first page or two of your policy, lists your policy form, coverage limits, deductibles and any endorsements. If anything is unclear, ask your insurer or agent.
Sources
- Insurance Information Institute – What is covered by standard homeowners insurance?
- NAIC – Homeowners Insurance
- NAIC – What's the difference between actual cash value coverage and replacement cost coverage?
- Texas Department of Insurance – Home insurance policies: Replacement cost or actual cash value?
- West Virginia Offices of the Insurance Commissioner – Policy types
- Florida Office of Insurance Regulation – Homeowners Insurance
- FEMA – Flood Insurance
- FloodSmart (NFIP) – Buy a Flood Insurance Policy
General information only. This guide explains general concepts and is not insurance, legal or financial advice. Rules and prices vary by state and insurer. Check your policy documents and speak to a licensed insurance professional or your state insurance department about your situation.