What Does Homeowners Insurance Cover? A Plain-English Guide

Your home is likely the biggest purchase you'll ever make, and homeowners insurance is what protects it. But many homeowners don't know exactly what their policy covers until they need to file a claim. So, what does homeowners insurance cover? Below, we walk through the six main parts of a standard policy, the gaps that catch people off guard, and how to make sure your coverage fits your home.

The six main parts of a homeowners policy

Most homeowners in Maryland and Virginia carry a standard policy, often called an HO-3. It's divided into six coverages, usually labeled A through F on your declarations page.

Coverage A: Dwelling. This pays to repair or rebuild the structure of your home, including the roof, walls, floors, and built-in features like cabinets and plumbing, after a covered loss such as a fire, windstorm, or hail. Your dwelling limit should reflect what it would cost to rebuild your home, not its market value or what you paid for it.

Coverage B: Other structures. This covers buildings on your property that aren't attached to your house, like a detached garage, shed, or fence. It's typically set at around 10% of your dwelling coverage.

Coverage C: Personal property. This protects your belongings, such as furniture, clothing, electronics, and appliances, whether they're damaged at home or stolen while you're traveling. Many policies limit coverage for high-value items like jewelry, art, or collectibles, so you may need to add extra protection for them.

Coverage D: Loss of use. If a covered loss makes your home unlivable, this pays for additional living expenses, such as a hotel, temporary rental, and meals above your normal costs, while repairs are made.

Coverage E: Personal liability. If someone is injured on your property or you accidentally damage someone else's property, liability coverage helps pay for their costs and your legal defense if you're sued. Most policies start at $100,000, but many homeowners choose $300,000 or more.

Coverage F: Medical payments to others. This pays smaller medical bills for guests who are injured at your home, regardless of fault. It can help resolve minor injuries quickly, without a lawsuit.

What homeowners insurance usually doesn't cover

Knowing the exclusions is just as important as knowing what's covered. Standard policies generally don't cover:

• Flood damage. Flooding from heavy rain, storm surge, or overflowing rivers requires a separate flood policy. This matters in coastal areas and near the Chesapeake Bay, but floods can happen almost anywhere.

• Earthquakes. These typically require a separate endorsement or policy.

• Sewer or drain backup. Water that backs up through drains is often excluded unless you add water backup coverage, which is usually inexpensive.

• Wear and tear. Insurance covers sudden, accidental damage, not aging roofs, slow leaks, or problems caused by poor maintenance.

• Pests and mold. Damage from termites, rodents, and most mold is generally excluded.

• Business activity. If you run a business from home, your equipment and liability may need separate coverage.

Replacement cost vs. actual cash value

How your policy pays out matters as much as what it covers. Replacement cost coverage pays to repair or replace damaged property with new items of similar kind and quality. Actual cash value coverage subtracts depreciation, so you'd receive what an item was worth at the time of the loss. A five-year-old couch, for example, would pay out far less under actual cash value. Replacement cost policies cost a bit more, but they usually provide far better protection.

Understanding your deductible

Your deductible is the amount you pay out of pocket before your insurance kicks in. A higher deductible lowers your premium, but you'll pay more when you file a claim. Some policies also include a separate wind or hurricane deductible, often a percentage of your dwelling coverage rather than a flat dollar amount. If you live near the coast, check your policy for this.

How to choose the right homeowners coverage

A few simple steps can help you avoid being underinsured:

1. Base your dwelling limit on rebuilding costs. Construction costs have risen in recent years, so review this limit every year.

2. Take a home inventory. Photos or video of each room make claims easier and help you choose the right personal property limit.

3. Add endorsements for gaps. Consider water backup coverage, scheduled coverage for valuables, and a flood policy.

4. Consider an umbrella policy. If you have significant savings or assets, an umbrella policy adds extra liability protection on top of your home and auto coverage.

5. Review your policy after major changes. Renovations, additions, and big purchases can all change what you need.

Protect your home with Blu Insurance

Every home is different, and your coverage should be, too. At Blu Insurance Agency, we help Maryland and Virginia homeowners understand their policies, spot coverage gaps, and choose protection that fits their home and budget.

Learn more about our homeowners insurance in Maryland and Virginia, or get a free insurance quote today.

This article is for general information only. Coverage, limits, and exclusions vary by policy and insurer, so review your policy or talk with a licensed agent about your home.