What Does Homeowners Insurance Cover?

Buying a home is one of the biggest financial decisions you’ll ever make—and protecting that investment is essential. That’s where homeowners insurance comes in. If you’re new to the world of real estate, the terminology, coverage options, and policy structure might feel overwhelming. This beginner’s guide breaks it down so you can better understand what homeowners insurance typically covers, what it doesn't, and how to make sure you're adequately protected.

Homeowners insurance is a type of property insurance that provides financial protection against damage to your home and personal belongings, as well as liability coverage if someone is injured on your property. It's not just a smart move—it’s often a requirement. Most mortgage lenders mandate homeowners insurance as a condition for loan approval.

Homeowners insurance policies generally come with a package of coverages designed to protect your property and financial well-being. These typically include:

This protects the physical structure of your home—walls, roof, foundation, and built-in appliances—against covered perils like fire, hail, windstorms, and vandalism. If a storm damages your roof or a fire ravages your kitchen, dwelling coverage helps pay for repairs or rebuilding.

This covers structures on your property that aren't attached to your home, such as detached garages, sheds, fences, and guest houses. Typically, this coverage is set at a percentage of your dwelling coverage (usually around 10%).

Personal property coverage protects your belongings—furniture, electronics, clothing, kitchenware, and more—if they're stolen or damaged by a covered peril. Some high-value items like jewelry, fine art, or collectibles may require additional riders for full coverage.

If your home becomes uninhabitable due to a covered incident, this part of your policy helps pay for temporary living expenses. That includes hotel stays, meals, and other increased living costs while your home is being repaired or rebuilt.

If someone is injured on your property—say a guest trips on a loose step—or you accidentally cause damage to someone else’s property, liability coverage helps pay for legal expenses, medical bills, and settlement costs. This often extends beyond your property, such as if your dog bites someone at the park.

Separate from liability coverage, this helps pay for minor medical expenses if a guest is injured on your property, regardless of fault. It’s intended for small claims and goodwill gestures.

Most standard homeowners insurance policies (like the HO-3 policy, the most common type) cover damage from the following perils:

• Fire and smoke
• Lightning strikes
• Windstorms and hail
• Theft and vandalism
• Explosions
• Damage caused by aircraft or vehicles
• Falling objects
• Weight of snow or ice
• Water damage from burst pipes or overflow

It’s important to read your policy carefully or talk with your insurance agent to confirm what perils are included.

Just as important as knowing what’s included is understanding what your homeowners insurance won’t cover. Standard exclusions typically include:

• Floods: You’ll need separate flood insurance through the National Flood Insurance Program (NFIP) or a private insurer.
  
  
• Earthquakes and sinkholes: These often require additional coverage or specialized policies.
  
  
• Normal wear and tear: Insurance doesn’t cover routine maintenance issues or gradual deterioration.
  
  
• Pest infestations: Damage caused by termites, rodents, or other pests is not usually covered.
  
  
• High-value items exceeding limits: Your policy may have coverage limits for valuables like jewelry, artwork, or antiques, which means you may need to “schedule” those items separately.

Negligence or intentional damage: Insurance won’t cover issues arising from neglect or deliberate actions.

You can tailor your homeowners insurance with endorsements or riders that offer extra protection for specific risks. Common examples include:

• Scheduled personal property: For expensive items like engagement rings, designer handbags, or fine art.
  
  
• Sewer or drain backup coverage: Helps pay for damage caused by water backing up into your home.
  
  
• Identity theft protection: Covers expenses related to restoring your identity.
  
  
• Home business coverage: For people who work from home and need protection for business equipment.

A good rule of thumb is to have enough dwelling coverage to completely rebuild your home at current construction costs. This isn’t the same as your home’s market value—it’s based on labor, materials, and local building codes. For personal property, many policies offer a default limit of 50%–70% of your dwelling coverage.

Review your policy regularly to ensure your coverage keeps up with home improvements, inflation, and changes in your personal assets.

When selecting your policy, make sure you understand how claims are paid out:

• Actual Cash Value (ACV): Pays out the depreciated value of the damaged item.
• Replacement Cost: Covers the cost to replace the item with a new one of similar quality, without depreciation.

While ACV policies may have lower premiums, they also provide less compensation after a loss. Most homeowners opt for replacement cost coverage for greater financial protection.

Bundle policies: Consider combining your homeowners and auto insurance for a multi-policy discount.

1. Increase your deductible: A higher deductible can lower your premium but be sure you can afford the out-of-pocket cost if you need to file a claim.
   
   
2. Take inventory: Create a home inventory of your belongings with photos, receipts, and descriptions. This simplifies the claims process and ensures you’re properly insured.
   
   
3. Work with a local expert: Agents familiar with your region can help identify risk factors—like flood zones or high-crime areas—and ensure you get the right coverage.

When buying a home in Bergen County, NJ, having the right professionals by your side is just as important as having the right insurance. The Kolsky Team, top-tier real estate experts in Bergen County, offers unparalleled local insight and hands-on support throughout your homebuying journey.

If you’re navigating your first home purchase, relocating to the area, or investing in a luxury property, The Kolsky Team ensures every detail is handled with care—from inspections to insurance considerations and beyond.

Ready to find your dream home in Bergen County? Let The Kolsky Team guide you with confidence, knowledge, and dedication. Visit thekolskyteam.com today to start your homeownership journey with trusted local professionals by your side.