What a Homeowners Policy Really Covers (and What It Doesn’t)

As an insurance agency owner, one of the questions I hear most often is: “What does my homeowners policy actually cover?”

It’s a fair question because after all, your home is likely one of your biggest investments, and your insurance policy is supposed to protect it. But like most contracts, it comes with details, exclusions, and limitations that can be confusing.

Let’s break it down in plain English.

The Big Picture: What’s Covered

At its core, a standard homeowners policy provides protection for three key things:

Your House (Dwelling Coverage) This is the foundation of the policy, and it covers the physical structure of your home if it’s damaged by a “covered peril.”

Covered perils usually include things like fire, windstorms, hail, theft, and vandalism. For example, if a tree falls on your roof during a storm, your policy will step in to pay for repairs.

Your Stuff (Personal Property Coverage) Everything inside your home including furniture, clothing, electronics, even pots and pans falls under personal property coverage. If your TV is stolen or your furniture is ruined in a fire, this part of your policy reimburses you. Most policies cover your belongings not just at home but sometimes even outside it. (Yes, if your laptop is stolen from your car, you may have coverage.)

Liability Coverage This is the protection many people overlook, but it’s one of the most important. If someone slips and falls on your icy walkway and decides to sue, your liability coverage helps cover legal expenses, medical bills, and settlements. Think of it as your shield against unexpected accidents.

Additional Living Expenses (ALE) If your home becomes uninhabitable after a covered loss, such as a fire, you’ll need a place to stay. ALE pays for things like hotel bills, meals, or even renting another home while yours is being repaired.

Where Coverage Ends: Common Exclusions

Here’s where people often get tripped up. A homeowners policy doesn’t cover everything. Some of the most common exclusions include:

• Floods: Damage from flooding isn’t covered under standard homeowners insurance. If you live anywhere near water, you’ll want to look into separate flood insurance.

• Earthquakes: Just like floods, earthquakes require their own policies or add-on coverage.

• Wear and Tear: Your policy isn’t a maintenance plan. If your roof leaks because it’s 25 years old, that’s considered normal wear and tear and not a covered loss.

• Neglect: If you ignore a problem and it causes damage, your claim could be denied. For example, if you never fix that leaky pipe and it eventually bursts, damaging your floors, the insurance company may say no.

• High-Value Items: Jewelry, art, collectibles, and expensive electronics often have limits on how much is covered. A $20,000 engagement ring may only be insured for $1,500 unless you add special coverage.

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Real-World Examples

To bring this to life, here are a few scenarios I’ve seen over the years:

• A homeowner’s basement flooded during a heavy storm. They thought their homeowners policy would cover it but since the damage was from rising water (flooding), it wasn’t. A separate flood policy would have been needed.

• Another client had their laptop stolen while traveling. Even though the theft happened outside their home, their personal property coverage helped replace it.

• A dog bite claim came up, liability coverage kicked in, covering medical bills and legal fees. Without it, the homeowner would have been on the hook personally.

  
  

What You Can Do

Insurance isn’t one-size-fits-all. Every family, every home, and every situation is different. Here are a few quick tips:

• Review your policy every year. Life changes so should your coverage.

• Make a home inventory. Document your belongings with photos or a video. It makes claims smoother.

• Ask about endorsements. If you have expensive jewelry, a home office, or a finished basement, you may need extra coverage.

• Don’t wait until after a loss. That’s the worst time to discover a gap in coverage.

The bottom line? Your homeowners policy is a powerful tool to protect your home, belongings, and financial security but only if you understand what’s in it and where it falls short.

As an insurance professional, I see my role as more than selling policies. It’s about making sure you’re informed, confident, and protected. Whether you’re a first-time homeowner or have lived in your house for decades, it pays to ask questions and keep your coverage up to date.

And while this post is purely informational, if you’d ever like a second opinion on your current coverage, I’d be happy to take a look. Sometimes a quick review uncovers gaps you didn’t even know existed and peace of mind is worth it.