Homeowners insurance: what it covers and what it does not
A standard policy covers your home, belongings and liability, but most policies do not cover flood damage.
Sourced from official pages · Updated September 30, 2026💡 Key takeaways
- A typical policy covers the dwelling, other structures, personal property, loss of use and personal liability.
- Flood is not covered; it needs a separate policy (see the NFIP guide). Earthquake is also commonly excluded.
- Replacement cost pays without subtracting depreciation; actual cash value subtracts it.
- Your mortgage lender usually requires homeowners insurance.
Typical coverages
- Dwelling: the structure of your home.
- Other structures: such as a detached garage or fence.
- Personal property: your belongings.
- Loss of use: living costs if a covered loss makes your home unlivable.
- Personal liability: if someone is injured on your property or you damage someone else’s property.
Important exclusions
Most homeowners policies do not cover flood. Flood insurance is a separate policy — see flood insurance and the NFIP. Other perils such as earthquake are also commonly excluded or need separate coverage; read your policy.
Replacement cost vs actual cash value
A replacement cost policy pays to repair or replace without subtracting for wear and age; an actual cash value policy subtracts depreciation. Ask which applies to your dwelling and your belongings.
Deductibles and limits
Your deductible is what you pay before the insurer pays on a covered claim. Check policy limits and any special limits for items like jewelry. If you have a mortgage, the lender usually requires homeowners insurance.
Reading your policy
Look at the declarations page for limits, deductibles and endorsements. Check special limits for jewelry, electronics and collectibles, and whether water backup or other add-ons apply.
Making a home inventory
- Photograph or video each room.
- List major items with purchase dates and values.
- Store the record off-site or in the cloud.
Lowering your risk and premium
- Improve home security and safety features.
- Ask about discounts for bundling with auto insurance.
- Consider a higher deductible you could afford.
🔤 Key terms
| Term | Meaning |
|---|---|
| Dwelling coverage | Insurance on the home’s structure |
| Personal property | Coverage for belongings |
| Loss of use | Living costs if the home is unlivable |
| Endorsement | An add-on that changes coverage |
| Exclusion | Something the policy does not cover |
Steps to file a claim
- Make the home safe and prevent further damage.
- Document damage with photos.
- Contact your insurer promptly.
- Keep receipts for temporary repairs and living costs.
- Review the settlement carefully.
⚠️ Common mistakes to avoid
- Assuming flood damage is covered.
- Insuring the home for less than the cost to rebuild.
- Not updating coverage after a renovation.
- Ignoring special limits on valuables.
🛠️ Try it yourself
❓ Frequently asked questions
Is flood covered by homeowners insurance?
Generally no; see the flood insurance guide.
What is replacement cost?
Coverage that pays to repair or replace without subtracting for age and wear.
Do I need it if I own my home outright?
It is not always legally required but protects a major asset.
Does my policy cover a home business?
Often limited; ask about business coverage.
📚 Sources
This guide is general information, not financial, tax or legal advice. Rules and limits change; confirm with the sources above or a licensed professional.