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What does homeowners insurance cover?
The majority of homeowners purchase what’s known as an “HO-3” policy. Authoritative consumer sources confirm that HO-3 typically provides open-perils coverage for your dwelling and other structures, while personal property is covered on a named perils basis. In practice, an HO-3 protects against all causes not excluded, but details vary by insurer and state — especially for roofs, wind/hail, and water losses (Insurance Information Institute; NAIC). These exclusions generally include:
- Earth movement – earthquakes, landslides, or sinkholes
- Water damage – flooding, storm surge and surface water, sewer or drain backup (usually requires an endorsement), or groundwater seepage
- Poor maintenance – neglect, wear and tear, deterioration, or faulty construction/materials
- Social causes – war, nuclear hazard, government ordinance without endorsement, or new building codes
- Intentional loss – damaging the home on purpose to get an insurance payout
Many policies also include clarifying provisions that can affect outcomes, such as anti-concurrent causation language for some excluded perils, mold/fungi sublimits, and animal liability limits; in some states, regulators have restricted breed-based underwriting (e.g., Colorado’s 2024 law curtailing dog-breed discrimination in homeowners insurance — see Colorado Division of Insurance). Trampolines and pools may carry underwriting restrictions or liability requirements, underscoring the importance of reviewing your insurer’s state-specific forms and notices (NAIC).
Under an HO-3 policy, if your home is damaged by a covered cause, the insurer pays up to your limits subject to deductibles and loss-settlement terms. Today, many carriers use age-based or ACV roof settlements unless you add replacement cost, and some apply “cosmetic damage” exclusions that limit payment for aesthetic hail/wind damage. Separate percentage deductibles for wind/hail or hurricanes are common in exposed regions and can be much higher than your all-perils deductible. Verify how your policy handles roofs and special deductibles before buying (III: roof coverage; Texas Department of Insurance; III: hurricane and wind deductibles).
Homeowners insurance covers six core areas
The exclusions listed above dictate when your homeowners insurance will pay out. Within that framework, HO-3 policies organize protection into Coverages A–F: dwelling, other structures, personal property, loss of use/ALE, personal liability, and medical payments. That structure is still standard, but exact terms depend on the insurer’s filed forms and your state (III; NAIC).
- Home or “dwelling” coverage pays to repair or replace your main house if it’s damaged by a covered cause
- Coverage for “other structures” pays to repair or replace other structures, like detached garages, sheds, fences, and guest houses
- Personal property coverage replaces the things inside your home. Note: personal property is the only thing covered on a named perils basis under an HO-3 policy
- Loss of use coverage helps pay for living expenses, like alternate lodging, if you’re displaced from your home while it’s being repaired
- Personal liability insurance covers losses and legal fees if someone outside your family is injured or has belongings damaged while on your property
- Medical payment insurance helps cover medical bills for anyone injured on your property or by your pets
Each coverage has its own limit. Your dwelling (Coverage A) should reflect full reconstruction cost; other limits are often set as percentages of Coverage A. Given code updates and post-disaster demand surge, ask about extended or guaranteed replacement cost and ordinance or law coverage to avoid shortfalls, and check for any separate wind/hail or hurricane deductibles that could change your out-of-pocket costs (NAIC; III).
Optional coverages add extra protection
An HO-3 policy covers all the basics. But depending on your location, home type, and how you use the property, you may need add-ons (“endorsements”) to close gaps. In 2025, high-impact options include water backup/sump overflow endorsements (commonly offering limits such as $5,000–$50,000), service line coverage for buried utilities on your lot, and equipment breakdown/home-systems protection for HVAC and electrical breakdowns (these are excluded in base policies). If you rent all or part of your home through a platform, a home‑sharing/short‑term rental endorsement is often required to avoid business‑use gaps. Availability and terms vary by state and insurer — review policy forms and endorsements carefully (NAIC; The Hartford: Water Backup; American Family: Service Line; III: Home sharing). In wildfire‑exposed areas, some carriers pair mitigation credits with response services; California’s Safer from Wildfires framework reflects this broader push for resilience.
Flood insurance is sold separately
Homeowners insurance does not cover flooding or flood-related damages. Flood protection is purchased separately, either from private insurers or via the National Flood Insurance Program (NFIP) in participating communities. NFIP policies typically have a 30‑day waiting period before coverage begins, with limited exceptions such as policies bought in connection with a loan closing. Standard NFIP limits for most 1–4 family homes are up to $250,000 for building and $100,000 for contents; NFIP does not cover additional living expenses (FEMA). Private flood policies may offer higher limits, different waiting periods, or added features, but lenders will require that any private policy used to satisfy a mortgage requirement meet federal criteria (Fannie Mae).
Whether you need flood insurance depends on location and lender rules. If your mortgaged building is in a Special Flood Hazard Area, federal law generally requires flood insurance for the life of the loan; lenders may accept NFIP or qualifying private flood policies (Interagency Q&As). NFIP pricing now uses property‑specific Risk Rating 2.0, and many communities earn premium discounts (up to 45% in SFHAs) through FEMA’s Community Rating System — ask your agent about your community’s class (FEMA: Risk Rating 2.0; CRS). In Florida’s residual market, many Citizens policyholders must carry separate flood coverage as a condition of their homeowners policy, with requirements phasing in through 2027 (Citizens Property Insurance).
A note on “named peril” policies
Some homeowners insurance policies operate on a “named perils” basis, meaning they only pay out if your home is damaged by a cause specifically listed on the policy. Although HO-3 policies don’t work this way when it comes to your home — instead using exclusion-based coverage — they do use a named perils system when it comes to personal property. Current consumer and carrier materials indicate the standard named-perils list remains in place as of 2025; HO‑5 policies are the primary way to get open‑perils coverage for personal property (NAIC; ISO Homeowners Program). Named peril coverage typically protects your personal property against the following 16 events:
- Fire or lightning
- Windstorm or hail
- Explosion
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- Smoke
- Vandalism or malicious mischief
- Theft
- Volcanic eruption
- Falling object
- Weight of ice, snow, or sleet
- Discharge or overflow of water or steam from plumbing, heating, air conditioning, fire-protective sprinkler system, or household appliance
- Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, air conditioning, or fire-protective system
- Freezing of a plumbing, heating, air conditioning, or fire-protective system, or household appliance
- Sudden and accidental damage from an artificially generated electrical current
*Source: The Insurance Information Institute
What’s next?
To learn more about how homeowners insurance works — and what to look for in your policy — check out our homeowners insurance buyer’s guide. As you compare policies, verify roof loss settlement (replacement cost vs ACV and any cosmetic‑damage limits), whether special wind/hail or hurricane deductibles apply, and if you need add‑ons like water backup, service line, equipment breakdown, or home‑sharing endorsements (III; III; NAIC; III). Keep state context in mind: California is implementing a Sustainable Insurance Strategy to stabilize high‑risk markets (CDI); Florida’s Citizens program phases in a flood‑insurance requirement through 2027 (Citizens). Premiums have risen since 2020, so build a budget with current local quotes and track market signals from BLS CPI and NAIC research. Ready for the next steps? You can start comparing companies and quotes with our in-depth homeowners insurance reviews:
We’ve also vetted homeowners insurance companies on a state-by-state basis. Click on your state for reviews of the top homeowners insurance providers where you live:
