Your home is likely your largest asset. Homeowners insurance is designed to protect it — but the fine print matters. Many policyholders are surprised to discover what's excluded when they file a claim. Here's what a standard homeowners policy actually covers, and where you may need additional protection.
What a Standard Policy Covers
A standard HO-3 homeowners policy (the most common type) provides coverage in four key areas:
- Dwelling coverage: Repairs or rebuilds your home's structure if damaged by a covered peril — fire, windstorm, hail, lightning, vandalism, and more.
- Personal property: Covers furniture, electronics, clothing, and belongings inside your home.
- Liability protection: Pays for legal defense and damages if someone is injured on your property.
- Additional living expenses (ALE): Covers hotel stays and meals if your home becomes uninhabitable after a covered loss.
What's NOT Covered
Standard policies have notable exclusions that catch homeowners off guard:
- Flood damage — requires a separate flood insurance policy (through FEMA's NFIP or a private insurer)
- Earthquake damage — requires a separate earthquake endorsement or policy
- Sewer backup — often excluded unless you add a water backup rider
- High-value items — jewelry, art, and collectibles above standard limits need scheduled endorsements
- Business equipment at home — home-based business property has limited or no coverage
Replacement Cost vs. Actual Cash Value
Pay close attention to whether your policy pays replacement cost value (RCV) or actual cash value (ACV). ACV deducts depreciation — meaning a 10-year-old roof gets paid out at a fraction of what a new roof costs. RCV pays to replace at today's prices, which is almost always worth the small premium increase.
Review Your Coverage Annually
Home values, renovation projects, and new purchases all change your coverage needs. Valorin Insurance can review your current policy and identify gaps before a loss occurs. Contact us for a free homeowners insurance review.