Home Insurance

What Does Homeowners Insurance Cover? The 6 Parts of a Policy

By Aritz Boveda · Published October 21, 2026
Fact-checked against primary sources on October 21, 2026

A standard homeowners policy covers six things: the house itself, other structures on the property, your belongings, extra living costs if you can’t stay at home, your legal liability if someone is hurt, and small medical bills for guests. It does not cover floods, earthquakes or normal wear and tear. Most U.S. homeowners have an HO-3 policy, the most common form, which covers the house against any cause of loss not specifically excluded and your belongings against a list of named perils.

The six coverages

Policies label these with letters. The amounts on your declarations page (the summary page of the policy) tell you how much each one pays.

Percentages vary by insurer and state. Read your own declarations page rather than relying on typical figures.

Coverage A: insure the cost to rebuild, not the market price

Your dwelling limit should match what it would cost to rebuild the house today, not what it would sell for. Market value includes the land, which doesn’t burn down, and rebuild costs depend on labor, materials and local building codes.

Many policies also require you to insure at least 80% of the replacement cost (some require 90% or 100%). Fall below that and the insurer can pay only part of even a small claim, so check your policy’s insurance-to-value clause.

If construction costs have risen since you bought the policy, you may be underinsured. Ask your insurer whether your policy includes extended replacement cost (pays a set percentage above your limit) or an inflation adjustment.

Replacement cost vs. actual cash value

This choice matters most for belongings:

• Replacement cost pays what it costs to buy a new equivalent item.
• Actual cash value pays replacement cost minus depreciation. A five-year-old sofa might be worth a fraction of what a new one costs.

Replacement cost coverage costs more but pays much more after a loss.

What a standard policy usually excludes

• Flood. Water from outside rising onto the property, including storm surge, is excluded. You need separate flood insurance. See flood insurance explained.
• Earthquake and earth movement. Available as a separate policy or endorsement.
• Wear, tear and neglect. A roof that fails from age, or slow leaks you ignored, generally aren’t covered.
• Sewer and drain backup. Often excluded unless you add an endorsement.
• Pests and mold in most cases.
• High-value items above sub-limits. Jewelry, art and collectibles often have low limits for theft unless you schedule them separately.
• Home business equipment and liability, which may need a business policy or endorsement.

Deductibles, including percentage deductibles

The deductible is what you pay before insurance pays. Most are a flat dollar amount, but in areas exposed to hurricanes, wind or hail, policies often have a percentage deductible for those events, calculated on your dwelling limit.

Example: a 2% wind deductible on a $300,000 dwelling limit means you pay the first $6,000 of a wind claim, not the $1,000 you might expect.

How to check your own policy in 10 minutes

1. Find your declarations page (your insurer’s app or your lender can send it).
2. Compare Coverage A with a rebuild-cost estimate, not your purchase price.
3. Check whether personal property is replacement cost or actual cash value.
4. Look for wind, hail or hurricane deductibles and calculate them in dollars.
5. Confirm liability coverage is enough for your assets. Many owners add an umbrella policy.
6. Ask about water backup and flood if you have a basement or live near water.