What Does Homeowners Insurance Cover?

Buying a house comes with a lot of important to-dos, and if you have a mortgage, homeowners insurance is one of them. As you get ready to collect the keys, securing a policy protects your home and belongings and gives you practical peace of mind.

Understanding what homeowners insurance is, what it covers, and how much you need can feel like a big task. We’ll walk you through the essentials step-by-step so you can move from confusion to confidence. 

What is homeowners insurance?

Homeowners insurance is a type of property coverage that protects both your home and your belongings from unexpected damage or loss. It also includes liability protection if someone is injured on your property.

Most mortgage lenders require homeowners insurance before approving a loan to safeguard their investment and yours. Think of homeowners' insurance as a safety net: if a fire, storm, or theft happens, your policy helps cover the cost of repairs, replacements, or even legal expenses. It’s a core part of responsible homeownership, providing security and peace of mind as you settle into your new place.

How does homeowners insurance work?

Homeowners insurance is a financial agreement between you and your insurance company. You pay a regular fee, called a premium, and in return, the company agrees to cover certain losses as outlined in your policy.

When damage or loss occurs, you file a claim. An insurance adjuster assesses the situation, and before coverage kicks in, you’ll pay a deductible, which is the set amount you’re responsible for out of pocket.

For example, with a $1,000 deductible, if a storm causes $10,000 in roof damage, you’d pay the first $1,000 and your insurer would cover the remaining $9,000 (up to your coverage limits). Opting for a higher deductible usually lowers your premium, but it’s important to choose an amount you can realistically afford in an emergency.

What does homeowners insurance cover?

A standard homeowners insurance policy, often referred to as an HO-3 policy, typically combines several forms of protection into one package. While the specifics vary by provider, most policies include the following key coverages:

Dwelling coverage

The foundation of your home insurance policy is dwelling coverage, which protects the physical structure of your home, like the foundation, roof, walls, and attached features such as a deck or garage. If your home is damaged by a covered event, like fire, wind, or lightning, dwelling coverage helps pay for repairs or rebuilding, up to your dwelling limit—the maximum amount your policy will pay to restore your home. It’s important to ensure this limit reflects the full cost to replace your home, not just its market value.

Other structures coverage

When you want to extend protection to structures on your property that are not attached to your main home, consider other dwelling cover. Also known as Coverage B: Other Structures, other structures coverage includes detached garages, fences, sheds, or guesthouses. Coverage is usually set at a percentage of your dwelling limit, often around 10%.

Personal property coverage

To protect the belongings inside your home, from furniture and electronics to clothing and kitchenware, you’ll need personal property coverage. If items are stolen, destroyed, or damaged by a covered event, this coverage helps pay for replacements. Coverage is typically 50% to 70% of your dwelling limit.

Loss of use coverage

Also known as additional living expenses (ALE), loss of use coverage helps pay for costs if your home becomes uninhabitable due to a covered loss. It can cover hotel bills, temporary rent, meals, and other living expenses until your home is repaired.

Personal liability coverage

Personal liability coverage is a standard part of most homeowners insurance policies. When accidental bodily injury or property damage to someone else occurs, either on your property or elsewhere (subject to exclusions), personal liability coverage provides financial protection. Say someone trips and falls on your property, and you're found legally responsible. Liability coverage can help pay for medical bills, legal defense, and settlements. The coverage may even extend to situations where your pet causes injury to a neighbor.

Medical payments coverage

In addition to personal liability coverage, homeowners insurance can also cover smaller medical expenses for guests injured on your property, regardless of fault. Medical payments coverage is designed to resolve minor incidents quickly without escalating into larger liability claims.

What does homeowners insurance not cover?

While homeowners insurance provides broad protection, it doesn’t cover every possible risk. Knowing these exclusions helps you identify gaps and decide if additional coverage is necessary. Common exclusions in a standard policy include:

Floods

Damage caused by flooding, from heavy rain, storm surges, or overflowing rivers, is not covered by a standard homeowners insurance policy. To protect against this risk, you can purchase separate flood insurance through the National Flood Insurance Program (NFIP) or from a private insurer.

Earthquakes and ground movement

Events like earthquakes, sinkholes, and landslides are excluded from standard homeowners insurance coverage. In high-risk areas, separate earthquake insurance is often recommended.

Maintenance issues

Homeowners insurance is designed for sudden, accidental events, not routine upkeep. Damage caused by neglect, mold, pest infestations, or general wear and tear is generally not covered. 

Sewer backup

Water damage from backed-up sewers or drains is typically excluded from standard homeowners insurance policies. However, many insurers offer an optional endorsement you can add to your policy.

High-value items

Standard home insurance policies limit coverage for expensive items like jewelry, fine art, or collectibles. To fully protect these valuables, you may need a special endorsement, often called a floater or rider.

Home-based businesses

If you run a business from your home, standard homeowners insurance may not cover business-related property or liability. Separate business insurance may be required for full protection.

2025 Zillow research showed that a slight majority of buyers (56%) reported purchasing at least one type of disaster insurance coverage in addition to their policy.  43% of first-time buyers purchased flood insurance, the number one supplemental policy, although percentages varied depending on the area of the U.S. in which the house was purchased. 

How much does homeowners insurance cost?

The cost of homeowners insurance varies significantly based on your circumstances. On average, U.S. homeowners pay an average of over $2,800 per year, but your premium may fall above or below that range depending on several factors.

Insurers typically consider the following when determining your rate:

• Location: Homes in areas prone to hurricanes, tornadoes, wildfires, or other natural disasters generally cost more to insure.
• Home’s age and construction: Older homes or those built with less durable materials may have higher premiums.
• Replacement cost: The estimated cost to rebuild your home is a primary driver of insurance rates.
• Claims history: Filing multiple claims in the past can increase your premiums.
• Credit score: In many states, insurers use credit-based insurance scores to assess risk.
• Deductible amount: Choosing a higher deductible usually lowers your premium, though it means paying more out of pocket if you file a claim.
• Proximity to fire services: Being close to a fire department or hydrant can reduce costs.

How much homeowners insurance coverage do I need?

Choosing the right amount of coverage means striking a balance between full protection and a premium you can afford. Here’s a breakdown of how to think about each type of coverage:

Dwelling coverage

Your dwelling coverage should be enough to completely rebuild your home from the ground up. This is called the replacement cost, not the market value. Market value includes the land, which doesn’t need to be insured. You can get a home valuation from a professional appraiser, or get a rough estimate of your home’s value with Zillow’s Zestimate®.

Personal property coverage

Take inventory of the belongings in your home and determine a value for each of your possessions. Go room by room and list your possessions, noting their estimated value. This will help you decide if the standard 50-70% of dwelling coverage is enough or if you need to increase it. For high-value items, consider purchasing extra coverage.

Liability coverage

Most experts recommend at least $300,000 to $500,000 in liability coverage. However, if your assets (including savings, investments, and property) exceed this amount, you may want to consider a higher limit or purchase a separate umbrella policy for added protection.

Why is homeowners insurance important?

Most homebuyers will need homeowners insurance coverage in order to secure financing for a new home.* By knowing what a standard home insurance policy covers, where you may need extra protection, and how much coverage to carry, you can feel confident in your decisions and protect your investment. 

*Zillow Home Loans; an equal housing lender. NMLS #10287