Homeowners Insurance: What's Covered and What's Not

Roughly 88% of homeowners in the U.S. carry some form of homeowners insurance. This guide explains what a standard policy covers, what it doesn't, and how to get the most value for your premium. (Source: III)

What a Standard Policy Covers

Most homeowners are insured under an HO-3 policy with five core coverage areas:

• Dwelling (Coverage A): Repairs or rebuilds your home's structure if damaged by fire, wind, hail, lightning, or other covered perils.
• Other Structures (Coverage B): Covers detached structures — fences, sheds, detached garages — typically up to 10% of your dwelling limit.
• Personal Property (Coverage C): Reimburses you for furniture, clothing, electronics, and belongings. Usually 50–70% of your dwelling limit.
• Liability (Coverage E): Protects you if someone is injured on your property. The NAIC recommends at least $300,000.
• Additional Living Expenses (Coverage D): Pays for hotel, meals, and other costs if you're displaced during repairs.

What's NOT Covered

• Flood damage — excluded by all standard policies. Requires separate coverage through the NFIP or a private flood insurer. (Source: FEMA)
• Earthquakes — requires a separate policy or endorsement.
• Normal wear and tear — aging roofs, deterioration, and maintenance issues are not insurable.
• Sewer or drain backup — not covered unless you add a water backup endorsement.
• Mold — generally excluded unless it results directly from a covered peril.

Factors That Affect Your Premium

• Location: Proximity to fire stations, flood zones, and severe weather corridors.
• Home age and construction: Older homes with outdated wiring or plumbing cost more to insure.
• Coverage amount and deductible: Higher limits raise premium; higher deductible lowers it.
• Credit score: Homeowners with poor credit pay an average of 137% more. (Source: ValuePenguin, 2024)
• Claims history: Multiple recent claims can trigger rate increases.
• Replacement cost: Rebuilding costs rose ~30% over 5 years to 2024. (Source: III, 2024)

Recent Trends

Average premiums increased 24% between 2021 and 2024. Homeowners are now spending 2.4% of household income on insurance — the highest share on record. Major carriers including State Farm and Allstate have paused new policies in California and Florida due to wildfire and hurricane exposure. (Source: Consumer Federation of America; III)

How to Save

• Compare quotes from multiple providers. Rates for identical coverage can vary by hundreds annually.
• Raise your deductible. Going from $500 to $1,000 can reduce premiums by 10–25%. (Source: III)
• Bundle with auto insurance. Multi-policy discounts of 5–20% are common.
• Improve home security. Monitored alarms and deadbolts qualify for premium credits.
• Review coverage annually. Confirm your dwelling limit keeps pace with local construction costs.