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Homeowners Insurance Guide: What It Covers, How Claims Work and What to Do If You Are Dropped

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Part of our insurance guides. This page explains how a standard homeowners policy is built, where it stops paying, and what your options are when a claim or a renewal letter goes badly. Each section links to a deeper guide.

Key takeaways

  • A standard policy has six parts: dwelling, other structures, personal property, loss of use, personal liability and medical payments to others.
  • Flood and earthquake are excluded from a typical homeowners policy, per the NAIC. Flood cover is a separate policy with its own waiting period.
  • Whether your roof is paid at replacement cost or actual cash value can change the claim check by thousands of dollars.
  • Insurers must give written notice before they non-renew you. The notice period is set by your state, from 30 to 75 days in the three states covered below.

What does homeowners insurance cover?

The California Department of Insurance describes the standard policy as two sections: property coverages A through D and liability coverages E and F. The NAIC lists the same building blocks on its consumer page.

CoverageWhat it pays forTypical limit, per CA DOI
A. DwellingYour house and attached structures, if damaged by a covered perilThe amount you choose; should match rebuild cost
B. Other structuresDetached garage, tool shed and similar"Normally limited to 10% of the coverage A limit"
C. Personal propertyContents and belongings of household membersSpecial lower limits on jewelry, firearms, money and similar
D. Loss of useExtra living costs while the home cannot be lived in"Normally limited to 20 percent of Coverage A"
E. Personal liabilityInjury or damage you or a household member cause to othersSet on your declarations page
F. Medical payments to othersMedical bills for guests hurt on your propertyNot for you or your household

The dwelling limit should be what it costs to rebuild, not what the house would sell for. California's guide says the limit "may have nothing to do with the purchase price or the current market value of your home," because the policy generally does not cover land.

What does a standard homeowners policy not cover?

California's guide lists perils "generally not covered," including flood, earthquake, earth movement, termites, seepage and slow leaks, mold, wear and tear, and losses to a house vacant for 60 days or more. The NAIC adds that water from a leaky pipe or roof is likely covered, but ground water from rain, run-off or snow-melt is not.

Flood is the gap that catches the most people. National Flood Insurance Program policies usually take 30 days to start, with four listed exceptions. Our guide to the flood insurance waiting period walks through the timing.

Will your policy pay to replace an old roof?

That depends on whether your policy pays replacement cost or actual cash value (ACV). The Texas Department of Insurance gives this worked example for a $10,000 roof and a $4,000 deductible:

TDI also warns that as roofs age, some companies switch roof coverage to ACV at renewal. Read does home insurance cover an old roof before the next storm season.

How often do homeowners file claims, and for what?

According to Triple-I, citing ISO data, 5.33 claims were filed per 100 insured homes in 2023, and the average claim paid was $20,062. Wind and hail is the most frequent cause by a wide margin.

Homeowners claims per 100 insured homes per year by cause, 2019 to 2023 average Claims per 100 homes per year Wind and hail 2.80 Water, freezing 1.50 All other 0.88 Fire, lightning 0.23 Theft 0.12
Claim frequency by cause, weighted average 2019 to 2023. Source: Triple-I, citing ISO (excludes Alaska, Texas and Puerto Rico).

Fire claims are rare but large: Triple-I puts the average fire and lightning claim at $88,170 over the same period. Small claims are a different calculation, because they can show up on your claims history report for years. See should you file a small home insurance claim.

What happens if your insurer drops you?

A non-renewal ends your policy at its expiration date. States set the notice the insurer must give:

Our step-by-step guide covers what to do after a home insurance non-renewal, including appeal rights through your state insurance department. If no private insurer will write you, your state may have a FAIR plan, the insurer of last resort.

Mortgage warning: If you have a mortgage and your policy lapses, the NAIC says your lender will likely insure the home itself, at a premium that "might be much higher," with coverage limited to the structure. Federal rules on how that works are in our guide to force-placed home insurance.

Does bundling home and auto change the price?

The NAIC notes that insurers offer lower prices for things like "insuring your home and car with the same company." That is a discount on the bundle, not a promise the bundle is the lowest total. Our guide to bundling home and auto insurance shows how to price both ways.

If you own a home and want to see car insurance quotes that account for it, start here:

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Guides in this section

FAQ

Is homeowners insurance required by law? Your mortgage usually does. The NAIC says most mortgage lenders require insurance for as long as you have a mortgage, with the lender listed as mortgagee.

How much dwelling coverage should I buy? Enough to rebuild the house at current labor and material costs. The NAIC says to insure your home for at least 80 percent of its replacement value.

Does homeowners insurance cover flooding from heavy rain? No. The NAIC says ground water from rain, run-off or snow-melt is not covered by a typical policy. You need a separate flood policy.

What is the difference between cancellation and non-renewal? Cancellation ends a policy before its expiration date; non-renewal ends it at the expiration date, per the Illinois Department of Insurance. The rules and notice periods differ for each.

Are my jewelry and valuables fully covered? Usually not. The NAIC says most policies limit theft of furs or jewelry to $500, and firearms or computers to about $1,000, unless you add a scheduled personal property endorsement.

Sources

This guide is general information, not insurance or legal advice. Coverage depends on your policy wording and your state's rules.