A home insurance policy is essential to safeguarding your estate and belongings in case of an emergency. Preparing for a disaster is the best way to stay ready, even if nothing happens. After all, your home is your biggest investment. So whether you’re on the hunt for a new policy because of rising costs or you want to understand your plan better, it’s important to know what’s really covered by insurance and what’s not.

“While insurance won’t prevent accidents from occurring, it can provide a financial safety net when the unexpected happens,” says Steve Wilson, senior underwriting manager at Hippo Insurance—a home insurance company that operates in more than 80% of the continental U.S. 

What does home insurance cover?

Your policy outlines what is and isn’t covered regarding your home and you can find it in the home insurance policy declarations document (here’s an example from Allstate). You’ll get one every year when your policy renews or you get insurance through a new provider. 

You should know the average home insurance rate is about $1,400 a year and most people with a standard $1,000 deductible will pay $123 a month, according to online insurance marketplace The Zebra. Your deductible also comes out of the total amount you get from your insurance company when you make a claim. For instance, if you have a $1,000 deductible and the insured loss is $10,000, you’ll get $9,000 from your insurer. 

Wilson says you should check your policy every year to make sure “coverage amount reflects the total value of [your] home” which is more than just your structure—it’s your stuff.

Your home (dwelling) and other structures

Homeowner’s insurance covers your home (sometimes called a dwelling) up to the replacement cost. So if you have $300,000 dwelling coverage at replacement cost, that’s how much your insurance company will pay to rebuild your home. 

What’s covered

Most policies cover the cost to repair or rebuild your home in case of extreme weather, including:

• Fire
• Hurricane
• Hail
• Lightning

“If you live in an area exposed to these risks” then you should get the right coverage for your home, says Angi Orbann, a product management vice president at Travelers, an insurance company. The costliest claims are due to fire, she says. 

Structures on your property that aren’t specifically your home like fences, detached garages and sheds, are also covered, according to Wilson. Your policy might deal with “other structures” on their own or they might be included in the dwelling portion. 

It’s important to know what it would cost to rebuild if you ended up with a total loss. Other structures are usually covered up to 10% of the dwelling coverage. So with a $300,000 dwelling coverage, other structures would be covered up to $30,000.

To determine how much coverage you need, the Insurance Information Institute suggests multiplying the total square footage of your home by per-square-foot building costs based on where you live. Complete an application or talk to an insurance agent to find out how much insurance coverage you need based on the type of home you have, the materials used, customizations on the home (if any), and any improvements you’ve made, among other things. For instance, if you’ve added crown moldings or hardwood floors, that might increase the dwelling coverage.

What’s not covered

Most standard policies don’t cover damage caused by:

• Floods
• Earthquakes
• Regular wear and tear 

If you need additional coverage for one or more of these factors, you can usually buy that through your insurance provider as a separate policy. You can shop for flood insurance using the National Flood Insurance Program or ask your current or potential homeowners insurance company if they offer it. 

Your personal belongings

Your personal items are what’s inside the home, like furniture, clothes and other keepsakes. 

“Tell your insurance company when you make updates,” Orbann says. Even a new couch or a fancy rug could change your coverage. Also let the company  know when you sell or get rid of something, since that could lower how much coverage you need.

What’s covered

• Furniture (including rugs and lamps)
• Clothes
• Equipment (like bikes, workout tools)
• Most jewelry and art
• Collectibles and valuables
• Electronics
• Indoor plants

Coverage for belongings is typically around 50% to 70% of the dwelling coverage you have on the structure of your home. So a $300,000 structure means you could get at least $150,000 for your stuff.

For most things, you don’t need to prove you own the belongings to claim them. But keep in mind that when you file a claim, and your insurer asks you for a list of what’s been damaged or stolen in your home, they might also ask for proof of ownership. You generally have wide latitude in terms of the proof you provide. It could be a bank statement, receipt, photos of the item, or anything that shows you owned the item you’re claiming. 

It’s a good idea to routinely take photos of your inventory. That way you’re prepared should a catastrophic event happens and you can prove your ownership through those photos. Try to save and file receipts of big purchases as well.

What’s not covered

• Renter’s property
• Some jewelry restrictions
• Limitations or cap on certain items

If you have a property that gets rented out, the belongings in those rooms are not usually covered under a standard policy. 

While most personal belongings are generally covered, not everything is. For instance, boats and motor vehicles aren’t covered in your policy, but those tend to have their own, separate coverage, like car insurance. Most policies are also written in a way that excludes electric bikes and scooters.

Some items have some exclusions, like jewelry, and might only be replaced in specific cases. Since jewelry is a high-ticket item, your policy might only replace the value of the jewelry up to a certain amount. So that means if you have a $20,000 necklace or ring, you may only get $1,500 in the standard payout if it gets lost or stolen. 

Many providers will cover your jewelry while traveling if you set up an endorsement (sometimes called a floater). This adds extra protection to your jewelry that a standard policy won’t cover. The extra cost is minimal or in some cases, there isn’t one. If you have expensive collectibles, antiques or jewelry, a floater or endorsement might be necessary to have everything fully covered.

“It’s always a good idea to review your homeowner’s policy to make sure you’re covered,” Wilson says. That includes any time you make a high-ticket purchase, like a new TV or bed. It should take you anywhere from 10 to 30 minutes to do—maybe less if you review your policy regularly or haven’t had any major updates. 

Liability

Liability covers you against lawsuits for injury or property damage from your home. It also includes damage done by pets. 

“If someone slips and falls or is injured while they’re on your property, you could be held liable,” says Wilson. In 2020, almost 32 million people had an unintentional injury in homes that required medical assistance, according to the National Safety Council. 

What’s covered

If you’re on the hook for payment—whether that’s a medical bill for someone else or someone sues you—it could be financially devastating. Here’s what’s typically included in liability coverage:

• Personal liability (stemming from an accident on your property and you’re found to be at fault) 
• Medical expenses if someone suffered injuries in your home they can get reimbursed by your insurance
• Lost wages because of those injuries
• Death benefits if someone dies as a result of an injury on your property

Most liability limits are around $100,000 for each claim but you can purchase more if you have expensive assets (or a lot of them). Liability claims account for less than 3% of all homeowners insurance claims, according to Experian. The liability portion of homeowner’s insurance goes for about $10 for every $100,000 worth of coverage.

What’s not covered

• Car accidents
• Business-related injuries
• Dog bites or harm caused by neighboring pets (that might be covered in your neighbor’s policy)
• Intentional injury (if you purposely hurt someone on your property, you’re on your own)
• Injuries to others that live in the house (that’s for health insurance)

A standard policy covers friends or visitors in your home. It doesn’t cover your own family inside the home. Usually, if someone gets hurt in your home, their health insurance will pick up the tab and then send a bill to your homeowner’s insurance.

Anything your pet does to you in your home isn’t covered by your homeowner’s insurance policy (although it might be covered by your health insurance). Also, anything the pet does to your home isn’t covered, either.

Alternative living expenses

If your home gets severely damaged or destroyed due to no fault of your own, you might be covered if you have to go to a hotel or find temporary housing for your family through alternative or additional living expenses, or ALE.

What’s covered

Additional living expenses kick in if the damage was caused by a disaster outlined in your policy, like a fire or hurricane. It covers things like:

• Temporary rental costs or hotel stays
• Restaurant meals
• Boarding and related costs to pets
• Laundromat costs
• Mileage
• Storage
• Rent (if you were collecting rent from a tenant that was displaced at the same property)

The amount of coverage for ALE varies by the policy. You might get a lump sum up front or you may need to submit receipts to get reimbursed. 

What’s not covered

There’s a limit to how much coverage you get, ranging anywhere from 10% to 50% of the dwelling limit (i.e. the cost to repair your home in case of a total loss.) 

For example, if your dwelling coverage is $300,000, your insurance might cover up to $150,000 in ALE. It’s also important to know that while you might be covered for, say, restaurant meals, your insurance company might put a cap on the dollar figure for what’s considered a reasonable amount.

There are also some things that aren’t covered, which means you’re on your own if you get displaced. For instance, in areas prone to a lot of flooding or earthquakes, your standard policy might not cover your family’s displacement during repairs to your home during one of these events.

How to file a home insurance claim

If you’re ready to file a claim, contact your agent and they’ll send you the forms to complete and an insurance adjuster will come to your home to assess the damage. 

Depending on the type of damage, you could see more than one payment: one advanced payment and one for any remaining amount of the total settlement. Most policies require claims to be filed within one year of the incident. Sometimes the payments are made to you and sometimes they’re made to a contractor, depending on the type of claim you have and your provider. 

It can take a few days to a few weeks to get your money, depending on your insurance provider. Each state has its own statutes for how long providers can take to pay claims. Your homeowners insurance costs can go up after you make a claim.

If you’re experiencing an issue with your insurance company, you may want to submit a complaint to the Consumer Financial Protection Bureau’s Consumer Complaint Database.