Homeowners insurance

Homeowners insurance protects your home, belongings, and financial liability in a single policy. It covers damage to your home from fire, wind, and other disasters, plus liability if someone is injured on your property.

56 steps across 12 sections

1. HO-3: Special Form (Most Common)

  • Covers 79% of single-family homes — the standard policy
  • Open-peril coverage for dwelling Covers your home's structure against all causes of damage EXCEPT those specifically excluded (fire, wind, hail, lightning, theft, vandalism, and many more are covered)
  • Named-peril coverage for personal property Belongings are only covered for 16 specifically listed perils
  • Best balance of coverage and cost for most homeowners

2. HO-5: Comprehensive Form

  • Open-peril coverage for BOTH dwelling and personal property — broader than HO-3
  • Personal property covered against all risks unless specifically excluded
  • Costs 5-10% more than HO-3 but significantly better protection for belongings
  • Ideal for homeowners with valuable possessions
  • Not available in all states or from all insurers

3. HO-6: Condo Insurance

  • Designed specifically for condominium owners
  • Covers the interior of your unit (walls-in), personal property, and liability
  • The condo association's master policy covers the building's exterior and common areas
  • Lower premiums since you're not insuring the building structure
  • Typical cost: $400-800/year

4. Other Policy Types

  • HO-1 (Basic) Named-perils only for both dwelling and property — very limited, rarely sold
  • HO-2 (Broad) Named-perils for dwelling with slightly broader list than HO-1
  • HO-4 (Renters) See Topic 294
  • HO-7 (Mobile Home) For manufactured/mobile homes
  • HO-8 (Older Home) For homes where replacement cost exceeds market value (historic homes)

5. Coverage A: Dwelling

  • Pays to repair or rebuild your home's structure and attached structures (garage, deck, porch)
  • Should equal the full replacement cost of rebuilding your home (NOT market value or purchase price)
  • Replacement cost = materials + labor to rebuild from the ground up
  • Most policies include an inflation guard that automatically increases dwelling coverage 2-4% annually

6. Coverage B: Other Structures (typically 10% of Coverage A)

  • Covers structures not attached to your home: detached garage, shed, fence, pool, guest house
  • Standard limit is 10% of your dwelling coverage (e.g., $30,000 if dwelling is $300,000)
  • Can be increased for larger detached structures

7. Coverage C: Personal Property (typically 50-70% of Coverage A)

  • Covers your belongings: furniture, electronics, clothing, appliances, kitchenware
  • Standard limit is 50-70% of dwelling coverage
  • Sub-limits apply to high-value categories:
  • Jewelry: $1,000-2,500
  • Cash/currency: $200
  • Firearms: $2,500
  • Electronics: $2,500-5,000
  • Silverware: $2,500
  • Schedule a personal property floater/endorsement for items exceeding sub-limits

8. Coverage D: Loss of Use / Additional Living Expenses (typically 20-30% of Coverage A)

  • Pays for temporary living expenses if your home is uninhabitable after a covered loss
  • Covers: hotel bills, restaurant meals (above normal food costs), temporary rental, laundry, storage
  • Typically limited to 20-30% of dwelling coverage or 12-24 months
  • Covers the difference between your normal expenses and increased costs

9. Coverage E: Personal Liability (typically $100,000-$300,000)

  • Protects you if someone is injured on your property and you're found legally responsible
  • Also covers damage you cause to others' property
  • Pays legal defense costs, settlements, and judgments
  • Standard limit: $100,000 — most experts recommend increasing to at least $300,000-$500,000
  • Consider an umbrella policy ($1M+) for additional liability protection

10. Coverage F: Medical Payments to Others (typically $1,000-$5,000)

  • Pays medical bills for guests injured on your property regardless of fault
  • Small limit ($1,000-$5,000) meant to handle minor injuries without a lawsuit
  • Does NOT cover injuries to household members

11. Standard Exclusions

  • Flood damage Requires separate flood insurance (NFIP or private). Even a few inches of floodwater can cause $25,000+ in damage
  • Earthquake damage Requires separate earthquake policy or endorsement
  • Sewer/drain backup Requires an optional endorsement ($40-100/year) — highly recommended
  • Mold Limited or excluded; some policies offer endorsement coverage
  • Sinkholes Excluded in most states (Florida requires coverage offer)

12. Maintenance-Related Exclusions

  • Gradual wear and tear Roof aging, paint peeling, appliance breakdowns
  • Pest damage Termites, rodents, insects
  • Foundation settling/cracking Normal settling over time
  • Neglect Damage resulting from failure to maintain the property

Common Mistakes

  • Insuring for market value instead of replacement cost
  • Skipping flood insurance
  • Not updating coverage after renovations
  • Ignoring sub-limits on valuables
  • Choosing ACV over replacement cost for personal property

Pro Tips

  • Review your policy every year
  • Raise your deductible to $2,500
  • Bundle home + auto
  • Maintain your home
  • Get an umbrella policy

Sources

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