Homeowners Insurance, Explained: What You're Actually Buying

Most people buy homeowners insurance once, never read the policy, and discover what it covers at the worst possible moment. Twenty minutes of understanding now prevents five-figure surprises later. Zara, our insurance expert, answers questions on all of it.

The six coverages inside a standard policy

• Dwelling (Coverage A): rebuilding the structure itself — set this to reconstruction cost, not market value.
• Other structures (B): detached garage, fence, shed — usually 10% of dwelling.
• Personal property (C): your stuff, typically 50–70% of dwelling, with sub-limits on jewelry and electronics.
• Loss of use (D): hotel and living costs if the home is uninhabitable after a covered loss.
• Liability (E): lawsuits if someone is injured on your property — most policies start at $100k; more is cheap.
• Medical payments (F): small no-fault medical coverage for guests.

ACV vs. replacement cost — the fine print that matters most

Replacement cost pays what it takes to buy new; actual cash value (ACV) pays new minus depreciation — a 12-year-old roof at ACV pays a fraction of what a new one costs. Insurers increasingly move roofs to ACV schedules quietly at renewal. Check yours.

What standard policies never cover

• Flood — separate policy through NFIP or private flood insurance, and 'flood' includes heavy-rain water intrusion.
• Earthquake — separate policy or endorsement.
• Gradual damage and neglect — slow leaks, mold from deferred maintenance, and wear and tear.
• Sewer backup — cheap endorsement, painful loss without it.

Choosing your deductible

A higher deductible cuts premiums meaningfully, but only pick a number you could actually pay tomorrow. Watch for separate percentage-based wind/hail or hurricane deductibles — 2% of a $500k dwelling is $10,000 before coverage starts.