A homeowners policy is a standardized document. Most of them are built from industry forms, which means that once you understand the structure, you can read almost any policy and know where to look.
The structure has two halves and six lettered coverages. Learning those letters is the single most useful thing you can do to understand your own policy, because adjusters, agents and your declarations page all use them.
The policy forms
Homeowners policies come in numbered forms. The number tells you how broad the coverage is and what kind of residence it is written for.
| Form | Who it is for |
|---|---|
| HO-1 | Basic named perils, rarely written today |
| HO-2 | Broad form, named perils |
| HO-3 | Special form, the common owner-occupied policy |
| HO-4 | Renters, personal property and liability, no dwelling |
| HO-5 | Comprehensive, the broadest standard form |
| HO-6 | Condominium unit owners |
| HO-7 | Mobile and manufactured homes |
| HO-8 | Older homes, modified coverage |
If you own and live in a single-family home, you almost certainly have an HO-3. It is the most commonly written form. Landlords and non-owner-occupied dwellings use different forms entirely, the dwelling fire forms DP-1 and DP-3, which is why renting out a property you insured as a residence is a conversation to have with your insurer rather than a detail to leave unmentioned.
The six coverages
Section I covers property, and is Coverages A through D. Section II covers liability, and is Coverages E and F.
| Coverage | What it pays for |
|---|---|
| A. Dwelling | The house itself and structures attached to it, including built-in systems such as plumbing, wiring, heating and permanently installed air conditioning |
| B. Other structures | Detached structures on the property: a fence, a shed, a detached garage, a guest cottage |
| C. Personal property | Your belongings, often including belongings away from the property such as items in storage |
| D. Loss of use | Additional living expenses when the home becomes uninhabitable after a covered loss, or when civil authority bars access |
| E. Personal liability | Injury or property damage you or household members cause to others, including in many cases damage caused by pets, plus legal defense costs |
| F. Medical payments to others | Medical bills for someone injured on your property, paid without regard to fault |
Coverage A is the anchor. You set it, ideally at the cost to rebuild the home, which is not the same as its market value and not the same as what you paid for it.
Coverages B, C and D are commonly written as a percentage of Coverage A. The Insurance Information Institute describes conventions of roughly 10 percent of Coverage A for other structures, 50 to 70 percent for personal property, and commonly 20 to 30 percent for loss of use. Treat those as a common convention rather than a rule. The percentages vary by insurer, they are usually adjustable, and your own declarations page is the only authority on what yours actually are.
Coverages E and F work differently. You choose those limits directly rather than deriving them from Coverage A.
Open perils versus named perils
This distinction determines whether a given loss is covered at all, and it is the main reason the HO-3 is written the way it is.
Named perils coverage pays only for causes of loss the policy specifically lists. If the cause is not on the list, there is no coverage. The burden is effectively on you to show the loss came from a listed peril.
Open perils coverage, sometimes called all-risk, pays for any cause of loss the policy does not specifically exclude. The exclusion list becomes the important part of the document.
An HO-3 splits the two:
- The structure, Coverage A and B, is written on an open perils basis.
- Personal property, Coverage C, is written on a named perils basis.
That asymmetry is worth knowing. Your house has broader protection than your belongings do under the same policy. An HO-5 extends open perils to personal property as well, which is one of the main reasons people move to it where it is available.
What a standard policy does not cover
These are the exclusions that account for most of the unpleasant surprises.
Flood. Excluded from standard homeowners policies without exception. Rising water, storm surge and overflowing rivers need separate coverage. This is such a common gap that we cover it separately in flood insurance and the NFIP.
Earthquake. Also excluded from the standard form. Available as a separate policy or an endorsement from many insurers, with terms and deductibles that work quite differently from the rest of the policy.
Wear and tear, and maintenance. Insurance pays for sudden, accidental events. It does not pay to replace things that wore out, rusted, rotted, or failed because they were not maintained. A roof at the end of its service life is a maintenance expense. A roof torn off by a windstorm is a claim.
Mold and pests. Termite damage, insect infestation and rodent damage are generally excluded, as is mold in most circumstances, though some policies include limited mold coverage when it results from a covered water loss.
Sewer and drain backup. Not covered by a typical homeowners policy, and not covered by flood insurance either. Most insurers offer it as an inexpensive endorsement, and it is one of the more commonly recommended additions.
Earth movement, gradual seepage, and neglect round out the standard exclusion list, along with intentional acts.
Sublimits: covered, but only up to a point
Even within Coverage C, certain categories carry their own internal caps that are much lower than your overall personal property limit. Common examples include jewelry, watches and furs, silverware, firearms, cash, and business property kept at home.
Trees, shrubs and plants are a good illustration of how narrow a sublimit can be. The III notes that they are generally covered up to roughly $500 per item, and only for covered perils, not for disease or poor maintenance.
If you own something valuable enough that the sublimit would not replace it, the answer is usually scheduling it, which means listing the item specifically with its own limit, often with a lower deductible or none at all, and frequently with broader coverage than the base policy provides. It typically requires an appraisal or a receipt.
Endorsements that fill the common gaps
An endorsement is an amendment that adds, removes or modifies coverage on the base policy. Availability varies by insurer and by state, but these come up repeatedly:
- Water backup for sewer and drain events
- Extended or guaranteed replacement cost on the dwelling, adding a cushion above your Coverage A limit when rebuilding costs more than expected
- Ordinance or law, which pays the extra cost of rebuilding to current building codes rather than to the standards the house was originally built to
- Scheduled personal property for valuables above the sublimits
- Service line coverage for buried utility lines on your property
- Equipment breakdown for mechanical and electrical systems
- Replacement cost on personal property, since Coverage C is frequently written on an actual cash value basis by default
Read your declarations page
Everything above is the general shape. Your declarations page is the specific truth: your Coverage A limit, the actual percentages applied to B, C and D, your liability limits, your deductible, and any separate wind, hail or hurricane deductible.
Three things are worth verifying today. That your Coverage A reflects what it would cost to rebuild now rather than a figure set years ago. Whether your personal property is settled at replacement cost or actual cash value. And whether a separate percentage deductible applies to storm damage.
Related reading: hurricane, wind and hail deductibles, actual cash value vs replacement cost, and how insurers set your rate.
Coverage, exclusions, endorsements, sublimits and availability vary by insurer, by policy form and by state, and your policy documents control in every case. For questions about your own property, speak with a licensed agent or your state's Department of Insurance. When you are ready, you can request home insurance quotes and get connected with licensed providers who cover your area.