What Is and Isn’t Covered by Homeowner’s Insurance

Homeowner’s insurance is a critical policy that covers the financial fallout related to the destruction of your home and the contents within it. Whether a fire causes a total loss or a thief breaks into your house and steals all your stuff, a homeowner’s insurance policy can pay for replacements, repairs, and rebuilding.

Another crucial area covered by homeowner’s insurance is legal liability. It can pay for legal fees and damage award costs if an injury or property loss results in a lawsuit against you.

This article lists common areas that homeowner’s insurance does and doesn’t protect against.

Related: How Much Is Homeowners Insurance?

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What is covered by home insurance?

1. The home itself

Homeowner’s insurance pays for the repair or rebuild of your home in case of an unexpected event such as a fire, floods, and natural disasters.

If a fire destroys your home and you have nowhere to go, a homeowner’s policy may further pay for additional living expenses such as a hotel stay or rental. The policy also typically covers damages from events such as hailstorms or vandalism.

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2. Contents insurance:

Homeowner’s insurance coverage further protects the items inside your home. If an unexpected fire occurs, you need to rebuild your home and replace your things. This could include furniture, electronics, and more. Homeowner’s insurance also protects these items in the event of a home burglary.

Contents insurance is further divided into replacement-cost coverage and actual cash value coverage. Replacement-cost coverage will provide enough compensation to replace whatever was destroyed or stolen without considering depreciation.

However, actual cash value coverage considers depreciation. Thus, the amount of payment you receive from the theft of your five-year-old television may not be enough to purchase a new one.

3. Liability coverage

Suppose you have guests over, and someone slips on your doorstep. They might face serious injuries, require a hospital visit, and possibly miss work. In this case, they may sue you for damages since your slippery doorstep caused these unfortunate events.

Homeowner’s insurance covers the cost of legal fees and damage awards in this case. It can take the financial brunt on your behalf through its liability coverage.

Related: What does renter’s insurance cover

What is not covered by house insurance?

1. House damage resulting from neglect

Insurance doesn’t cover issues such as “wear and tear” or which result from your own negligence. Common examples include mould or pest infestations. These issues can cause significant damage to your home. However, they’re usually the result of a homeowner’s neglect to take care of their property.

Mould often arises from leaking water. If you, as a homeowner, don’t notice such water damage and mould in time, it’s not the responsibility of your insurance policy to cover the damage. Burst pipes are another area that insurance companies may deem as neglect.

Related: Is a home warranty the same as homeowners insurance

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2. Earthquakes, landslides, and sinkholes

Because some circumstances like earthquakes or landslides can affect a significant number of homeowners at once, insurance carriers are hesitant to cover such events in full.

Instead, some providers have separate policies to cover these extreme events. Especially in earthquake-prone areas like California, earthquake insurance is a standard and essential policy.

3. Sewer backup

Sewer backup can occur when significant rainfall or melting snow, or blockage in the sewer lines causes floods within a home. This can cause significant flood damage to a basement or other areas. Repair costs may be at your own expense or your municipalities, depending on the reason for the backup.

Home insurance policies commonly don’t cover sewage backup, but your insurance provider may cover sewage backup in a separate flood insurance policy.

4. Expensive jewelry or artwork

Although contents insurance covers the stuff inside your home, there are caveats. Costly items like artwork and jewelry usually require a separate insurance policy. Homeowner’s insurance carves these items out as they have an expensive replacement cost and are a target for thieves.

5. Business equipment

If you’re a business owner, your home insurance policy does not cover assets related to your company. If you’re a consultant, for example, and require a home office setup, your home insurance might not cover your setup in case of a fire or burglary. Instead, you would need a business insurance plan.

Homeowner’s insurance is a vital policy to have as a homeowner. It can protect you from financial fallout if your home is damaged or destroyed. It additionally covers situations such as theft and lawsuits. However, it’s important to understand what home insurance doesn’t cover. This way, you can find additional coverage to fill the gaps.

Related: Do I Need Homeowners Insurance and When Should I Buy It?

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