What Does Homeowners Insurance Cover? The Six Buckets, the Perils, and the Exclusions

Ask ten homeowners what their policy covers and nine will say 'the house.' The real answer is six lettered coverages — A through F — each with its own limit, plus a page of exclusions that decides what never gets paid. Knowing what homeowners insurance covers, bucket by bucket, is how you catch a too-low dwelling limit or a missing endorsement before the claim that exposes it.

The six core coverages

The percentages are defaults, not ceilings. Coverage C at 50 percent of a $400,000 dwelling limit means $200,000 of contents coverage — more than most households need, but the sublimits inside it are what bite: theft of jewelry is commonly capped at $1,500 to $2,500 total unless you schedule pieces individually.

Named perils vs open perils

A standard HO-3 policy covers the dwelling on an open perils basis — every cause of loss except what the policy excludes — but covers your belongings only against a list of named perils. An HO-5 extends open perils to contents too, and usually costs only modestly more. The sixteen named perils on most policies:

• Fire or lightning, and smoke damage
• Windstorm and hail
• Explosion, riot, and civil commotion
• Damage from aircraft or vehicles
• Vandalism and malicious mischief
• Theft
• Falling objects
• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water from plumbing or appliances
• Sudden tearing, cracking, or bulging of heating and water systems
• Freezing of plumbing
• Sudden damage from artificially generated electrical current

The exclusions that surprise people

• Flood: rising water from outside is never covered — it needs its own policy. See flood and earthquake insurance.
• Earthquake and earth movement: excluded everywhere; sold as a separate policy or endorsement.
• Sewer and drain backup: excluded unless you add the water-backup endorsement, typically $40 to $100 a year.
• Wear, neglect, and maintenance: a roof that leaks from age is your problem; only sudden damage is covered.
• Mold: covered only when it results from a covered water loss, and usually capped at $5,000 to $10,000.
• Termites, rodents, and pests: always excluded as preventable maintenance.
• Ordinance or law: the cost to rebuild to current code is capped at 10 percent of the dwelling limit unless you buy more.
• Home business equipment: capped around $2,500 on-premises — a real business needs its own policy.

How much of each coverage you actually need

Coverage A should equal the rebuild cost — local construction cost per square foot times your square footage — never the market value, which includes land that cannot burn down. Coverage C deserves a home inventory: walk each room with your phone camera once a year. Coverage E should at least match your net worth, because a judgment above the limit reaches your savings and future wages — and if your assets outrun $500,000, that is what umbrella insurance is for.

Quick Answer

A plain-language tour of the six coverages in a standard home policy, the difference between named and open perils, and the exclusions that surprise people at claim time. This guide explains the formula in plain English, walks a worked example with real numbers, shows the mistakes to avoid, and links the free calculator so you can run your own scenario in under a minute.