Homeowners Insurance Coverage Types

A home insurance policy is made up of many different types of coverage, including dwelling, personal property, liability and loss of use. Together, they protect you from various kinds of damage and injuries.

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What are the different types of home insurance coverage?

Standard home insurance coverage types include:

• Dwelling coverage: Pays out if the structure of your house, including garages and porches, is damaged or destroyed.
• External structures: Handles claims for structures separate from your home, such as detached garages, decks and fences.
• Personal property: Your belongings, like clothes, furniture and electronics, are protected by this type of coverage.
• Loss of use: Also called “additional living expenses,” this coverage handles extra costs tied to relocating while your house is repaired.
• Liability: Pays out if someone is injured while on your property.
• Medical payments: Covers medical bills related to injuries that happen on your property, regardless of fault.

Optional types of home insurance coverage

You can usually add optional coverages to your home insurance policy, too. Not all home insurers offer the same add-ons, so you may need to shop around to find the ones you want.

Some common types of optional home insurance coverage:

• Water back-up: This add-on pays for damage to your home caused by backed-up sewer lines, drains or sump pumps.
• Service line coverage: Covers damage to water, electric and utility lines that are on your property and are your responsibility.
• Equipment breakdown coverage: Pays to repair or replace major home systems, appliances and more if they’re damaged by something other than normal wear and tear or neglect.
• Scheduled personal property: This optional coverage protects specific belongings, like valuable art, jewelry and collections.
• Identity theft insurance: Covers expenses tied to identity theft, including legal fees and even lost wages.

Home insurance coverage exclusions

Standard homeowners insurance policies usually exclude or won’t cover certain perils or events, including:

• Damage caused by neglect: Home insurance only covers sudden or accidental damage. If the damage could have been prevented by proper maintenance and due diligence, a claim on it would not be covered.
• Mold: Most home insurance policies won’t cover mold damage unless it is caused by a covered peril. For example, if a tree falls through your roof during a storm and then rain falls in and causes mold, it would be covered.
• Earthquake, flood and landslide damage: A standard policy also won’t cover these natural disasters. However, many insurers offer add-on coverage that will protect you from them.
• Damage from pests such as mice, termites and bed bugs: Generally not covered by standard home insurance. Preventing infestation is considered part of a homeowner’s maintenance.
• Certain dog breeds: Not all home insurance companies exclude or refuse to cover certain dog breeds, but many do. Also, excluded breeds can vary from insurer to insurer. If you’re a dog owner, keep this in mind when comparing quotes from home insurance companies.

Perils covered by home insurance coverage

Homeowners insurance coverage usually pays for sudden and accidental damage to your house caused by:

Named perils vs. open perils

A home insurance policy protects you and your home from certain perils. Perils are events that can damage or destroy your house and belongings.

Home insurance policies cover these events on either a “named peril” or “open peril” basis:

• Named peril coverage pays out if an event specifically listed on your policy damages or destroys your home.
• Open peril coverage pays out on all sudden and accidental types of damage except ones that are specifically excluded in your policy.

Open peril policies provide the widest range of coverage, but they also usually cost more than named peril policies.

What are the different types of home insurance policy forms?

While some policy forms may be cheaper, mortgage lenders won’t always approve of their limited coverage. You can get these different types of home insurance policy forms:

HO-1

This policy type is the most basic form of home insurance. It often only covers the home’s structure, but might include the other standard coverages as well. Also, an HO-1 only covers these named perils:

• Fire, lightning and smoke
• Windstorm and hail
• Volcanic eruption
• Theft and vandalism
• Explosion
• Riot or civil unrest
• Vehicle or aircraft

HO-1 policies aren’t popular because mortgage brokers usually require more coverage than this type of policy provides. HO-3 policies tend to be more popular for their greater coverage at a reasonable price.

HO-2

Called a “broad form policy,” an HO-2 covers all the same named perils in an HO-1, but also covers:

• Weight of ice or snow
• Falling objects
• Freezing of HVAC or plumbing systems
• Accidental water or steam discharge
• Artificially generated electrical current

Mortgage companies may still consider an HO-2 insufficient coverage.

HO-3

This is the most popular home insurance policy type. It covers the causes of damage listed in HO-1 and HO-2 policies on an open peril basis. It also usually includes liability, personal property, external structures, loss of use and medical payments coverage.

HO-5

Also called a “comprehensive policy,” the HO-5 offers higher limits for liability and personal property coverage than the HO-3. Another key feature of the HO-5 is that it covers personal property at replacement cost. This means your damaged belongings will be replaced at their cost without depreciation due to age. An HO-5 provides coverage on an open peril basis.

HO-8

An HO-8 policy is tailored for homes 40 years old or more. It is normally used for historic homes where rebuilding costs may exceed the home’s worth. With an HO-8, dwelling and personal property coverage is provided on a named peril basis. It pays out at actual cash value, which means your claim will be paid out factoring in depreciation.