Complete guide to homeowners insurance coverage types, policy forms, costs by home value, and how to choose the right protection. Understand dwelling, liability, and additional coverages.
Home Insurance Coverage Guide: Types, Costs, and How to Choose
Homeowners insurance protects your largest investment and shields you from potentially devastating liability claims. This guide explains every coverage type, policy form, and how to build the right protection for your home and family.
Key Takeaways
Dwelling coverage should equal your home’s full replacement cost, not market value
Standard policies (HO-3) cover most perils but exclude flood and earthquake
Liability coverage of at least $300,000 is recommended; consider an umbrella policy
Replacement cost policies cost more but pay significantly better than actual cash value
Location is the biggest cost factor—Florida and Louisiana pay 2-3x the national average
Understanding Homeowners Policy Types
Policy Forms Explained
Policy Type
Name
What It Covers
Best For
HO-1
Basic Form
10 named perils only
Rarely sold today
HO-2
Broad Form
16 named perils
Budget coverage
HO-3
Special Form
Open perils (dwelling), named perils (contents)
Most homeowners
HO-4
Renters
Personal property + liability
Renters
HO-5
Comprehensive
Open perils for dwelling AND contents
Premium protection
HO-6
Condo
Interior walls, contents, liability
Condo owners
HO-7
Mobile Home
Similar to HO-3 for manufactured homes
Mobile/manufactured homes
HO-8
Older Home
Actual cash value for historic homes
Homes where replacement exceeds market value
Named Perils vs. Open Perils
Coverage Type
How It Works
Burden of Proof
Named Perils
Only covers specifically listed events
You must prove the peril is listed
Open Perils
Covers everything EXCEPT exclusions
Insurer must prove an exclusion applies
HO-3 (most common): Open perils for dwelling, named perils for contents
HO-5 (premium): Open perils for both dwelling and contents
The 6 Coverage Categories
Coverage A: Dwelling
Covers your home’s structure including:
Foundation, walls, roof
Built-in appliances
Attached garage
Permanently installed fixtures
Home Replacement Cost
Recommended Coverage A
Typical Premium Impact
$200,000
$200,000-$220,000
Base rate
$300,000
$300,000-$330,000
+25-35%
$400,000
$400,000-$440,000
+50-65%
$500,000
$500,000-$550,000
+75-90%
$750,000
$750,000-$825,000
+125-150%
$1,000,000+
$1,000,000+
Custom pricing
Important: Coverage A should be 100% of replacement cost. Many insurers offer automatic coverage increases of 2-4% annually to keep pace with construction costs.
Coverage B: Other Structures
Covers detached structures on your property:
Detached garage
Shed, barn, workshop
Fence, gazebo, pergola
In-ground pool, guest house
Driveway, walkways
Default limit: 10% of Coverage A
Coverage A
Default Coverage B
Upgrade Option
$300,000
$30,000
$45,000-$60,000
$400,000
$40,000
$60,000-$80,000
$500,000
$50,000
$75,000-$100,000
When to increase: If you have a pool ($30,000+), detached garage ($20,000+), or significant outbuildings.
Coverage C: Personal Property
Covers your belongings inside and outside the home:
Furniture, appliances, electronics
Clothing, jewelry, collectibles
Items temporarily away from home
Default limit: 50-70% of Coverage A
Coverage A
Default Coverage C
Typical Contents Value
$300,000
$150,000-$210,000
$75,000-$150,000
$400,000
$200,000-$280,000
$100,000-$200,000
$500,000
$250,000-$350,000
$125,000-$250,000
Special limits on valuables:
Item Category
Typical Sub-Limit
Solution
Jewelry, watches
$1,500-$2,500
Scheduled personal property rider
Firearms
$2,500-$5,000
Scheduled rider or separate policy
Electronics
$5,000-$10,000
Usually adequate
Cash
$200-$500
Keep minimal cash at home
Collectibles
$2,500-$5,000
Scheduled rider
Fine art
$2,500-$5,000
Fine arts floater
Silverware
$2,500
Scheduled rider
Business equipment
$2,500-$5,000
Business insurance
Coverage D: Loss of Use / Additional Living Expenses
Pays for temporary housing and increased expenses if your home is uninhabitable due to a covered loss.
Expense Type
Covered?
Hotel/temporary rental
Yes
Restaurant meals (above normal food costs)
Yes
Storage for belongings
Yes
Pet boarding
Usually yes
Moving expenses
Yes
Laundry services
Yes
Default limit: 20-30% of Coverage A or 12-24 months
Coverage A
Coverage D Limit
Practical Coverage
$300,000
$60,000-$90,000
12-18 months typical rental
$400,000
$80,000-$120,000
16-24 months typical rental
$500,000
$100,000-$150,000
20-30 months typical rental
Coverage E: Personal Liability
Protects you when you’re legally responsible for injuring others or damaging their property.
Scenario
Covered Under Liability?
Guest slips on icy walkway
Yes
Your dog bites a neighbor
Yes (breed restrictions may apply)
Child breaks neighbor’s window
Yes
Tree falls on neighbor’s car
Yes
Libel/slander lawsuit
Yes
Car accident
No (auto insurance)
Business activities
No (business insurance)
Intentional acts
No
Recommended coverage levels:
Net Worth
Recommended Coverage E
Consider Umbrella?
Under $100,000
$100,000-$300,000
Optional
$100,000-$500,000
$300,000-$500,000
Yes, $1M
$500,000-$1M
$500,000
Yes, $1-2M
Over $1M
$500,000
Yes, $2M+
Coverage F: Medical Payments to Others
Pays medical bills for guests injured on your property, regardless of fault. Designed to settle small claims without lawsuits.
Feature
Details
Typical limits
$1,000-$5,000 per person
Fault required?
No
Who’s covered
Guests, not household members
Time limit
Usually 3 years from injury
What’s NOT Covered (Standard Exclusions)
Major Exclusions
Exclusion
Why Excluded
Solution
Flood
Catastrophic, correlated losses
NFIP or private flood insurance
Earthquake
Catastrophic, regional losses
Earthquake endorsement/policy
Sewer/drain backup
Common, preventable
Sewer backup endorsement
Mold
Expensive, often maintenance-related
Limited mold coverage endorsement
Ordinance/law
Code upgrades costly
Ordinance or law endorsement
Home business
Commercial exposure
Business insurance
Certain dog breeds
High liability risk
Varies by insurer
Wear and tear
Maintenance, not sudden loss
Not insurable
Intentional damage
Moral hazard
Not insurable
War, nuclear
Uninsurable catastrophes
Not available
Flood Insurance Costs
Flood Zone
Risk Level
Average Annual Premium
Zone X (minimal)
Low
$400-$600
Zone B/C (moderate)
Moderate
$600-$900
Zone A (high)
High
$1,200-$2,500
Zone V (coastal high)
Very High
$2,500-$5,000+
Who needs flood insurance:
Required: Federally-backed mortgage in high-risk zone
Recommended: Anyone in moderate-risk zone
Consider: Even low-risk areas (25% of flood claims come from low-risk zones)
Earthquake Insurance
State
Risk Level
Earthquake Policy Cost
California
Very High
$800-$5,000/year
Alaska
High
$400-$1,500/year
Washington
High
$300-$1,000/year
Oregon
High
$300-$1,000/year
Utah
Moderate
$200-$600/year
Missouri (New Madrid)
Moderate
$150-$400/year
Most other states
Low
$100-$300/year
Note: Earthquake policies typically have high deductibles (10-20% of dwelling coverage).
Home Insurance Costs by Location
State-by-State Average Premiums
Rank
State
Average Premium
vs. National Avg
1
Vermont
$1,162
-51%
2
New Hampshire
$1,189
-50%
3
Utah
$1,203
-49%
4
Wisconsin
$1,245
-48%
5
Oregon
$1,267
-47%
6
Idaho
$1,289
-46%
7
Maine
$1,312
-45%
8
Washington
$1,345
-43%
9
Pennsylvania
$1,378
-42%
10
Ohio
$1,401
-41%
—
National Avg
$2,377
—
41
Texas
$3,234
+36%
42
Mississippi
$3,456
+45%
43
Colorado
$3,567
+50%
44
Kansas
$3,678
+55%
45
Arkansas
$3,789
+59%
46
Nebraska
$4,123
+73%
47
Oklahoma
$4,456
+87%
48
Louisiana
$4,789
+101%
49
Florida
$5,234
+120%
50
Hawaii
$1,398*
-41%*
*Hawaii costs are lower but exclude hurricane coverage, which is very expensive
Why Costs Vary by State
Factor
Impact
High-Cost States
Hurricane exposure
+50-200%
FL, LA, TX coast
Tornado/hail frequency
+30-100%
OK, KS, NE, TX
Wildfire risk
+25-75%
CA, CO, OR
Litigation environment
+15-40%
FL, LA
Construction costs
+10-30%
CA, NY, HI
Insurer competition
±10-20%
Varies
Home Insurance Costs by Home Characteristics
Home Age Impact
Home Age
Premium Impact
Why
New construction
-5-15%
Modern materials, code-compliant
1-10 years
Base rate
Standard risk
11-20 years
+5-10%
Some systems aging
21-40 years
+10-25%
Electrical, plumbing, roof concerns
40+ years
+25-50%
Higher claims frequency
Construction Type
Construction
Fire Resistance
Premium Impact
Brick/stone
Excellent
-5-15%
Stucco
Good
Base rate
Fiber cement siding
Good
Base rate
Wood frame
Fair
+5-10%
Wood siding
Poor
+10-20%
Log home
Poor
+20-40%
Roof Type and Age
Roof Type
Expected Life
Premium Impact
Metal
40-70 years
-5-15%
Tile (clay/concrete)
50-100 years
-5-10%
Slate
75-150 years
-5-10%
Architectural shingles
25-30 years
Base rate
3-tab asphalt
15-20 years
Base rate
Wood shake
20-25 years
+10-25% (fire risk)
Roof Age
Premium Impact
Action Needed
0-5 years
-10-20% discount
Maintain
6-10 years
Base rate
Inspect annually
11-15 years
+5-15%
Plan replacement
16-20 years
+15-30%
Replace soon
20+ years
May be uninsurable
Replace immediately
Distance to Fire Services
Distance to Fire Station
Distance to Hydrant
Premium Impact
Under 5 miles
Under 1,000 ft
Best rates
Under 5 miles
Over 1,000 ft
+5-10%
5-10 miles
Under 1,000 ft
+5-15%
5-10 miles
Over 1,000 ft
+15-25%
Over 10 miles
Any distance
+25-50%
Choosing the Right Coverage Levels
Dwelling Coverage Decision Framework
Question
If Yes
If No
Do you know your home’s replacement cost?
Use that figure
Get a replacement cost estimate
Is your home custom-built or high-end?
Add 10-20% buffer
Standard estimate OK
Has construction cost increased recently?
Review annually
Review every 2-3 years
Do you have an older home with unique features?
Consider HO-8 or guaranteed replacement
Standard HO-3
Recommended Coverage by Situation
Situation
Policy Type
Coverage A
Liability
Additions
Starter home ($200K)
HO-3
$200,000+
$300,000
Sewer backup
Average home ($350K)
HO-3
$350,000+
$300,000-$500,000
Sewer, water backup
Higher-value ($500K+)
HO-3 or HO-5
$500,000+
$500,000 + umbrella
Extended replacement, sewer
Luxury home ($1M+)
HO-5
$1,000,000+
$500,000 + umbrella
Scheduled property, extended
Condo
HO-6
$50,000-$150,000
$300,000
Loss assessment
Historic home
HO-8
Market value
$300,000
Historic restoration
Deductible Selection
Deductible
Annual Savings
Best For
$500
Base rate
Those who can’t afford higher OOP costs
$1,000
5-10% savings
Most homeowners
$2,500
15-25% savings
Those with emergency fund
$5,000
20-35% savings
Self-insuring small losses
% of dwelling (1-5%)
Varies
Often required for wind/hail
Example with $400,000 dwelling coverage:
Deductible Type
Amount
Annual Savings
$1,000 flat
$1,000
Base
$2,500 flat
$2,500
~$200/year
1% of dwelling
$4,000
~$300/year
2% of dwelling
$8,000
~$450/year
Essential Endorsements to Consider
High-Value Additions
Endorsement
What It Does
Typical Cost
Extended Replacement Cost
Pays 25-50% over Coverage A if needed
$50-$150/year
Guaranteed Replacement Cost
Pays full rebuild regardless of limit
$100-$300/year
Water Backup/Sewer
Covers sewer/drain backup damage
$30-$75/year
Scheduled Personal Property
Full coverage for valuables (jewelry, art)
Varies by item value
Home Business
Covers business equipment and liability
$100-$300/year
Identity Theft
Covers recovery expenses
$25-$50/year
Ordinance or Law
Pays for code upgrades during rebuild
$25-$75/year
When Each Endorsement Makes Sense
Endorsement
You Need It If…
Extended replacement
Construction costs are rising rapidly in your area
Guaranteed replacement
You want absolute peace of mind
Water backup
Your home has a basement or older plumbing
Scheduled property
You own jewelry, art, or collectibles over sub-limits
Home business
You work from home with equipment or see clients
Identity theft
You want help recovering from ID theft (convenience)
Ordinance or law
Your home is older and codes have changed significantly
Rule of thumb: If damage exceeds your deductible by less than $1,000-$2,000, consider paying out-of-pocket to avoid rate increases or non-renewal.
Claim Impact on Premiums
Claim Type
Typical Impact
Duration
Weather-related (no-fault)
0-10%
3-5 years
Theft
5-15%
3-5 years
Water damage
10-25%
3-5 years
Fire
10-30%
5 years
Liability claim
15-35%
5-7 years
Multiple claims (any type)
25-50% or non-renewal
Varies
Home Inventory: Your Most Important Preparation
What to Document
Category
Items to Include
Documentation Method
Electronics
TVs, computers, phones, cameras
Serial numbers, receipts
Furniture
All major pieces, approximate value
Photos, purchase info
Clothing
Estimate total value by person
General inventory
Kitchen
Appliances, cookware, dishes
Photos, receipts for high-value
Jewelry/watches
Individual items over $500
Appraisals, photos
Art/collectibles
Each piece with provenance
Appraisals, photos
Tools/equipment
Power tools, lawn equipment
Model numbers, receipts
Sports/hobby
Bikes, golf clubs, instruments
Photos, serial numbers
Storage Best Practices
Method
Pros
Cons
Cloud storage (Google, iCloud)
Automatic backup, accessible anywhere
Subscription cost
Home inventory app
Organized, easy to update
Learning curve
Video walkthrough
Quick, comprehensive
Large file sizes
Spreadsheet
Detailed, searchable
Time-consuming to create
Safe deposit box
Secure, fireproof
Inconvenient access
Recommendation: Video walkthrough stored in cloud + detailed spreadsheet for high-value items + appraisals for valuables.
Frequently Asked Questions
Common questions about home insurance coverage answered below.
Frequently Asked Questions
▸What does standard homeowners insurance cover?
Standard homeowners insurance (HO-3) covers your dwelling, other structures, personal property, liability, and additional living expenses. It protects against fire, theft, vandalism, windstorms, hail, and liability lawsuits. However, it excludes flood, earthquake, normal wear, and maintenance issues.
▸How much homeowners insurance do I need?
You need enough dwelling coverage to rebuild your home completely—not its market value. Calculate replacement cost by multiplying square footage by local construction costs ($150-400/sq ft). A 2,000 sq ft home might need $300,000-$800,000 in dwelling coverage depending on location and construction quality.
▸What's the difference between replacement cost and actual cash value?
Replacement cost pays to replace damaged items with new equivalents. Actual cash value (ACV) deducts depreciation—a 5-year-old roof worth $15,000 new might only pay $8,000 under ACV. Replacement cost policies cost 10-15% more but provide significantly better protection.
▸Does homeowners insurance cover flooding?
No, standard homeowners insurance excludes flood damage. You need separate flood insurance through the National Flood Insurance Program (NFIP) or private insurers. Flood insurance costs $700-1,500/year on average and is required if you have a federally-backed mortgage in a high-risk flood zone.
▸What is liability coverage in homeowners insurance?
Liability coverage pays if someone is injured on your property or you damage someone else’s property. It covers legal defense costs, medical bills, and settlements. Standard policies include $100,000-$300,000, but experts recommend at least $300,000-$500,000, with an umbrella policy for additional protection.
▸How much does homeowners insurance cost?
The national average is $2,377/year for $300,000 in dwelling coverage. Costs vary dramatically by state—from $1,200/year in Vermont to $5,000+/year in Florida and Louisiana. Factors include location, home age, construction type, claims history, and coverage limits.
▸What home insurance discounts are available?
Common discounts include bundling with auto (10-25%), security systems (5-20%), new home (5-15%), claims-free (5-20%), new roof (10-20%), and paying annually (5-10%). Smart home devices, fire sprinklers, and impact-resistant roofing can also reduce premiums significantly.
▸What is an insurance deductible and how does it work?
A deductible is what you pay out-of-pocket before insurance kicks in. If you have a $1,000 deductible and $10,000 in damage, insurance pays $9,000. Higher deductibles (like $2,500) lower premiums 15-25% but increase your costs when filing claims. Some policies have separate, higher deductibles for wind/hail.
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Next Steps
Calculate replacement cost - Get a professional estimate or use online calculators
Review current coverage - Ensure dwelling coverage matches replacement cost
Check for gaps - Do you need flood, earthquake, or sewer backup coverage?
Inventory your belongings - Document everything with photos and receipts
Compare quotes - Shop 5+ insurers every 2-3 years
Ask about discounts - You may be missing savings
Consider umbrella policy - If you have significant assets to protect
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