Homeowners Insurance: What is Covered and What is Not Covered

Moving into a new home comes with a big to-do list with everything from changing the locks to giving the inside and outside a good cleaning to meeting your new neighbors.

High on that list is making sure that you have the right homeowner's insurance to protect your investment.

“Finding a good homeowner's insurance policy is one of the most important things you can do when you own a home,” says Moving.com. “This type of coverage should provide financial protection from structural damage due to natural disasters (think: a fire or tornado). In addition, having good homeowner's insurance will provide you with much-needed peace of mind.”

Homeowner's Insurance Does Not Cover Certain Things

Many homeowners, especially first-time homeowners, may be surprised to learn that homeowner's insurance does not cover all things -- with standard policies, for example, not covering flooding, earthquakes, or poor maintenance.

“Damage caused by most disasters is covered but there are exceptions,” says the Insurance Information Institute (III).

Those exceptions, according to the III, include:

• Flood coverage is provided by the federal government’s National Flood Insurance Program, although it is purchased from an insurance agent.
  
  
• Earthquake coverage is available either in the form of an endorsement or as a separate policy.
  
  
• Most maintenance-related problems are the homeowners’ responsibility. Most standard policies do not pay for routine wear and tear of your home.

The Basics of What Homeowners Insurance Covers

The III explains that homeowner's insurance is a package policy that covers both damage to property and liability or legal responsibility for any injuries and property damage caused to other people by policyholders or their families or pets.

The four essential types of coverage provided by homeowners insurance include:

• Coverage for the Structure of the Home: If your home is damaged or destroyed by fire, hurricane, hail, lightning, or other disasters listed in the policy, the insurance company will pay to repair or rebuild the structure. Coverage can also include garages, tool sheds, gazebos, and other structures not attached to the home but on the property.
  
  
• Coverage for Personal Belongings: In a disaster, not only will you need to repair or rebuild your structure, but you will lose personal belongings and your homeowner's policy will cover such items as furniture, clothing, and other personal items lost. The III says that most insurance companies provide personal belongings coverage at 50 to 75 percent of the amount the structure is insured for. Expensive items, such as jewelry, are covered but special endorsements may be needed to get the full coverage of high-value items.
  
  
• Liability Coverage: Your homeowner's insurance also covers you against lawsuits for bodily injury or property damage that policyholders or their family or pets cause to other people. Liability limits can cap at $100,000 so policyholders can seek umbrella insurance or excess liability policies to provide broader coverage with higher liability limits that protect assets.
  
  
• Coverage of Additional Living Expenses: When a disaster strikes and a homeowner can not occupy their residence while it is being repaired or rebuilt, they have to seek additional living arrangements and your homeowner's policy will help cover the cost of living away from home, including help with meals.

The different types of homeowner's policies are standard throughout the country, says the III with individual states and companies offering policies that are slightly different or go by other names such as “standard" or “deluxe."

“The one exception is the state of Texas, where policies vary somewhat from policies in other states. The Texas Insurance Department has detailed information on its various homeowner's policies,” says the III.

The 16 Disasters Covered by a Standard Homeowners Policy

While flooding and earthquakes are special circumstances, the standard homeowner's insurance policy in the U.S. usually covers these 16 disasters or calamities (as always, check with your specific policy for its unique coverage):

• Accidental discharge or overflow of water or steam from within plumbing, heating, air conditioning, automatic fire-protection sprinkler system, or from a household appliance.
• Damage caused by aircraft.
• Damage caused by vehicles.
• Explosion
• Falling object
• Fire or lightning
• Freezing of a plumbing, heating, air conditioning, or automatic fire-protective system, or of a household appliance.
• Riot or civil commotion
• Smoke
• Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning, or automatic fire-protective system.
• Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor, or similar electronic component).
• Theft
• Vandalism or malicious mischief
• Volcanic Eruption
• Weight of ice, snow, or sleet
• Windstorm or hail

The Three Levels of Homeowners Insurance Coverage

A disaster could hit all the homes on your street and each homeowner will receive different compensation depending on the level of their coverage.

The III says that the three coverage options are:

• Actual Cash Value: The policy will pay to replace or rebuild the structure and/or replace possessions minus a deduction for depreciation.
  
  
• Replacement Cost: The policy will pay to replace or rebuild the structure and/or replace possessions without a deduction for depreciation.
  
  
• Guaranteed/Extended Replacement Cost: Guaranteed replacement cost is the highest level of homeowners insurance coverage as it guarantees that a home will be rebuilt or repaired to what it was prior to a disaster even if doing so exceeds the policy limit. Extended replacement costs can offer 20 to 25 percent more than the limit on the policy to rebuild or repair a home to the state it was in prior to a disaster.

Texas Homeowners Insurance Guide to Coverage

Texas has a Consumer Bill of Rights for homeowners and renters insurance.

“The law doesn’t require you to have homeowners insurance. But if you still owe money on your home, your lender will require you to have it. Even though it’s not legally required, homeowners insurance is a good idea because it helps protect your home and other assets,” says the Texas Department of Insurance (TDI).

Most homeowners policies in Texas include these six coverages:

1. Dwelling coverage: Pays if your house is damaged or destroyed by something your policy covers.
   
   
2. Personal property coverage: Pays if your furniture, clothing, and other things you own are stolen, damaged, or destroyed.
   
   
3. Other structures coverage: Pays to repair structures on your property that aren’t attached to your house. This includes detached garages, storage sheds, and fences.
   
   
4. Loss of use coverage: Pays your additional living expenses if you must move while your house is being repaired to fix damages your policy covers. Additional living expenses include rent, food, and other costs you wouldn’t have if you were still in your home.
   
   
5. Personal liability coverage: Pays medical bills, lost wages, and other costs for people that you’re legally responsible for injuring. It also pays if you’re responsible for damaging someone else’s property. It also pays your court costs if you’re sued because of an accident.
   
   
6. Medical payments coverage: Pays the medical bills of people hurt on your property. It also pays for some injuries that happen away from your home – if your dog bites someone at the park, for instance.

TDI says that while all homeowners insurance policies are different the typical policy in Texas covers damages from:

• Fire and lightning
• Sudden and accidental release of water or smoke.
• Explosion
• Theft
• Vandalism, malicious mischief, riot, and civil commotion
• Aircraft and vehicles
• Windstorms, hurricanes, and hail (but not if you live on the Gulf Coast)

TDI says that while all homeowners insurance policies are different the typical policy in Texas does not cover damages from:

• Flooding
• Continuous water leaks. Policies also won’t cover mold removal, except to repair damage caused by a covered risk
• Termites, insects, rats, or mice
• Losses that occur if your house is vacant for the number of days specified by your policy
• Wear and tear
• Earthquakes and earth movement
• Wind or hail to trees and shrubs

The recommendation(s), advice and contents of this material are provided for informational purposes only and do not purport to address every possible legal obligation, hazard, code violation, loss potential or exception to good practice. Dean & Draper Insurance Agency specifically disclaims any warranty or representation that acceptance of any recommendations or advice contained herein will make any premises, property or operation safe or in compliance with any law or regulation. Under no circumstances should this material or your acceptance of any recommendations or advice contained herein be construed as establishing the existence or availability of any insurance coverage with Dean & Draper Insurance Agency. By providing this information to you, Dean & Draper Insurance Agency does not assume (and specifically disclaims) any duty, undertaking or responsibility to you.  The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.