Homeowners insurance guide · reviewed October 15, 2026

Homeowners insurance explained: forms, costs, deductibles, and coverage gaps

Everything that decides how well a homeowners policy pays out: policy forms, rebuild cost, deductibles, roof age, liability, and the gaps you can close with endorsements. Read it, then request a quote for a home in any of our ten service-area states.

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The six parts of a homeowners policy

Nearly every homeowners policy sold in the U.S. follows the same structure, built on standardized forms that insurers then adjust. Knowing the six lettered coverages makes any quote easier to compare.

Coverage	What it pays for	How the limit is usually set
A — Dwelling	The house and attached structures	Estimated rebuild cost
B — Other structures	Detached garage, fence, shed	Often 10% of Coverage A
C — Personal property	Furniture, clothing, electronics	Often 50–70% of Coverage A
D — Loss of use	Hotel, rent, and meals while repairs happen	Often 20–30% of Coverage A
E — Personal liability	Injuries and property damage you cause	Commonly $100,000 to $500,000
F — Medical payments	Small medical bills for guests, regardless of fault	Commonly $1,000 to $5,000

HO-2, HO-3, and HO-5: which form fits

Homeowners forms differ mainly in how they decide what is covered. Named-perils coverage lists the events it pays for; anything not listed is out. Open-perils coverage pays for any sudden, accidental physical loss unless the policy specifically excludes it. That difference determines who has to prove what after a loss.

HO-2 broad form

HO-2 covers both the house and your belongings against a list of named perils, typically including fire, lightning, windstorm, hail, explosion, theft, vandalism, falling objects, the weight of ice and snow, and sudden water discharge from plumbing or appliances. It costs less but leaves you exposed to anything not on the list.

HO-3 special form

HO-3 is the most common homeowners form in the country. The dwelling and other structures are covered on an open-perils basis, while personal property stays on a named-perils list. According to the NAIC's report on 2023 data, HO-3 made up about 77% of the dwelling-fire and owner-occupied homeowners policies counted countrywide, with an average premium of $1,737.

HO-5 comprehensive form

HO-5 extends open-perils protection to personal property and usually settles belongings at replacement cost. It tends to be offered on newer, well-maintained homes and costs more than HO-3. If you own valuable belongings or want fewer arguments over what caused a loss, compare both. See our HO-3 vs. HO-5 comparison.

Two other forms appear in this world: HO-4 for renters and HO-6 for condominium unit owners. HO-8 is a modified form for older homes whose market value is far below rebuild cost.

Dwelling coverage: rebuild cost, not market value

Your dwelling limit should equal what it would cost to rebuild the house from the foundation up with similar materials and quality: demolition, debris removal, permits, labor, and materials. Market value includes the land and local demand. In expensive neighborhoods, rebuild cost can be well below market value; in slower markets or for older custom homes, it can be well above.

Insurers estimate rebuild cost with replacement-cost software that uses square footage, construction type, finishes, and local labor rates. Review that estimate. If it misses a finished basement, a kitchen remodel, or custom millwork, ask for an update.

Extended and guaranteed replacement cost

After a widespread disaster, construction costs can jump. Extended replacement cost adds a cushion, often 25% or 50% above the dwelling limit, if rebuilding costs more than expected. Guaranteed replacement cost, where offered, removes the cap. Both usually require you to insure the home to 100% of the insurer's estimate.

Replacement cost vs. actual cash value

How a loss is settled matters as much as the limit. Replacement cost pays to repair or replace with new materials of like kind and quality. Actual cash value subtracts depreciation. On a 15-year-old roof or a decade-old couch, the gap can be thousands of dollars. Many policies pay actual cash value first and the remaining replacement cost after you complete repairs. Our replacement cost vs. actual cash value guide walks through examples.

Deductibles, including wind and hail

The standard all-perils deductible, often $1,000 to $2,500, applies to most claims. In much of our service area, though, a separate wind or hail deductible applies, set as a percentage of your dwelling limit. Texas, Arkansas, South Dakota, Indiana, and the Plains portions of other states see frequent hail, and percentage deductibles of 1% to 2% are common there. Some coastal Texas policies carry named-storm deductibles as well.

Raising your deductible lowers premium, but run the numbers on a percentage deductible before you accept it. Read more in our wind and hail deductibles guide.

Roof age and condition

The roof is the single most scrutinized feature on a homeowners application in hail and wind country. Insurers ask its age, material, and number of layers, and some inspect it with aerial imagery. Older roofs may push the policy to actual cash value roof settlement, a roof payment schedule, or a cosmetic-damage exclusion for metal roofs. Impact-resistant Class 4 shingles can qualify for discounts in some states. See roof age and home insurance.

Personal liability and medical payments

Liability coverage follows you, not just the house. It pays legal defense and damages if a guest slips on your stairs, your dog bites a neighbor, or your child breaks a window down the street. Limits of $300,000 to $500,000 are common choices; homeowners with significant savings or teenage drivers often add a personal umbrella policy of $1,000,000 or more. Medical payments coverage pays small injury bills for guests without anyone having to prove fault.

Endorsements worth considering

Water backup and sump overflow. Standard forms usually exclude water that backs up through drains or overflows from a sump. This endorsement is inexpensive and important for finished basements.
Service line coverage. Pays to repair buried water, sewer, and utility lines between the street and the house.
Equipment breakdown. Covers mechanical or electrical failure of HVAC systems, water heaters, and appliances.
Ordinance or law. Pays the added cost of bringing a damaged home up to current building codes.
Scheduled personal property. Raises limits for jewelry, art, firearms, and collectibles beyond the sub-limits in Coverage C.
Identity fraud expense. Reimburses costs of restoring your identity.

Townhome and condo owners

If you own a townhome, find out whether you own the exterior walls and roof or whether a homeowners association insures them. Fee-simple townhomes are usually written on a regular homeowners form like HO-3. Condominium units use the HO-6 form, which covers your interior finishes, improvements, belongings, liability, and loss of use, while the association's master policy covers the building shell and common areas.

Read the association's bylaws and master policy summary. If the master policy carries a large deductible, an HO-6 loss assessment coverage endorsement can pay your share of an assessment after a covered loss to common property. Ask, too, whether the master policy is written on a bare-walls or all-in basis, because that decides how much interior coverage you need.

Manufactured and older homes

Manufactured and mobile homes are usually insured on dedicated manufactured-home forms that consider tie-downs, skirting, and the year the home was built. Very old homes whose rebuild cost far exceeds market value are sometimes written on a modified HO-8 form that settles losses at repair cost with common materials rather than full historic replacement.

Flood and earthquake: the two biggest gaps

Standard homeowners forms exclude flood and earth movement. Flood insurance through the National Flood Insurance Program covers up to $250,000 on the building and $100,000 on contents, with private flood policies available for higher limits. NFIP policies typically take 30 days to start, so buy before a storm is on the forecast. FEMA has reported that a substantial share of flood claims come from outside high-risk flood zones.

Earthquake coverage is an endorsement or separate policy with its own deductible, often 10% or more of the dwelling limit. It is most relevant in western Washington, western Oregon, parts of Idaho, and Nevada.

What decides your homeowners premium

Location: weather losses, wildfire exposure, crime, and distance to a fire station and hydrant
Rebuild cost, size, and construction type
Roof age and material; electrical, plumbing, and heating updates
Policy form, limits, deductibles, and endorsements
Your claims history and, in many states, a credit-based insurance score
Protective devices: monitored alarms, water-leak shutoff valves, and sprinklers

Compare real NAIC averages on our homeowners insurance cost by state page.

Practical ways to lower your premium

Bundle home and auto with one insurer when the combined price is lower.
Choose a higher all-perils deductible you can afford to pay.
Replace an aging roof with impact-resistant materials and keep the paperwork.
Install monitored smoke, burglary, and water-leak systems.
Update old wiring, panels, and supply lines.
Review coverage every year so you are not paying for belongings you no longer own, or underinsuring a remodel.

Personal property: sub-limits and a home inventory

Coverage C protects belongings anywhere in the world, but most policies cap certain categories. Jewelry, watches, and furs commonly carry theft sub-limits of a few thousand dollars; firearms, silverware, cash, and collectibles have their own caps. If you own items above those limits, schedule them individually, usually with an appraisal, so they are covered for their full value and often for accidental loss.

A room-by-room home inventory makes a large claim far easier. Walk through the house with your phone recording video, open closets and drawers, and save receipts and serial numbers for electronics and appliances. Store the files in cloud storage, not only on a device in the house.

Loss of use: where you live during repairs

If a covered loss makes your home unlivable, Coverage D pays the additional cost of living elsewhere: rent or hotel bills, higher food costs, extra mileage, and similar expenses above your normal budget. Some policies limit this coverage to a dollar amount, others to a time period. After major disasters, repairs can take many months, so check both the limit and the time cap.

Home-based businesses and side rentals

Homeowners policies offer little coverage for business property and business liability. If you see clients at home, store inventory, or run equipment for a business, ask about a home-business endorsement or a separate business policy. Renting your home or a room on a short-term platform is also typically limited or excluded; disclose it and ask about a home-sharing endorsement.

How claims are handled

Make temporary repairs to prevent more damage, such as tarping a roof or shutting off water, and save the receipts.
Photograph and video the damage before cleanup, and keep damaged items until the adjuster has seen them if possible.
Report the claim promptly; most policies require prompt notice.
Get repair estimates from licensed contractors, and be cautious of anyone who knocks on your door after a storm.
Track additional living expenses and keep every receipt.
If you disagree with the settlement, ask for the explanation in writing and review the appraisal provision in your policy. Your state insurance department can also help.

Your mortgage, escrow, and the declarations page

When you have a mortgage, your lender is listed as mortgagee and is usually paid jointly on dwelling claims. Many homeowners pay premiums through an escrow account, which means a renewal increase can show up as a higher monthly mortgage payment. Each year, read the declarations page: it lists your coverage limits, deductibles, endorsements, and mortgagee, and it is the quickest way to spot underinsurance or a deductible change.

Discounts commonly available

Multi-policy (home and auto) discounts
Protective device credits for monitored alarms and automatic water shutoff
New-home or recently renovated home credits
Impact-resistant roof credits where offered
Claims-free or loyalty discounts
Paperless and paid-in-full discounts

New home purchase timeline

Lenders want proof of homeowners coverage before closing. Start shopping when your offer is accepted, get the inspection report and the seller's disclosure to the insurer, and line up flood coverage early if the home needs it. Schedule the policy to begin on your closing date.

Homeowners quote checklist

Property address, year built, and square footage
Construction type, foundation, and number of stories
Roof age and material, plus dates of electrical, plumbing, and HVAC updates
Pools, trampolines, dogs, wood stoves, and any home business
Current insurer, expiration date, and claims in the last five years
Lender and loan number for the mortgagee clause
Coverage preferences: form, liability limit, deductibles, and endorsements

Request a homeowners insurance quote. We follow up as soon as possible; it can take 1–2 business days. A quote is not a binder.

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Homeowners insurance questions

What does a standard homeowners policy cover?

Most homeowners policies bundle six coverages: the house (Coverage A), detached structures (B), your belongings (C), extra living costs if you must move out during repairs (D), personal liability (E), and medical payments to others (F).

What is the difference between HO-3 and HO-5?

Both cover the house on an open-perils basis. The difference is your belongings: HO-3 covers personal property only for listed perils, while HO-5 covers personal property on an open-perils basis too, usually at replacement cost.

Is homeowners insurance required?

No state law in our service area requires it, but virtually every mortgage lender does. Once a loan is paid off, coverage becomes optional, though most owners keep it.

Does homeowners insurance cover floods?

No. Damage from rising surface water is excluded on standard homeowners forms. Flood coverage is bought separately through the National Flood Insurance Program or a private flood insurer, usually with a 30-day waiting period for NFIP policies.

How much dwelling coverage should I buy?

Enough to rebuild the house at today's labor and material costs. That figure is often different from your purchase price or market value, because land is not rebuilt.

Why does roof age affect my premium?

Roofs are behind a large share of wind and hail claims. Older roofs are more likely to fail and may be settled at actual cash value or on a payment schedule rather than full replacement cost.

What is a percentage wind or hail deductible?

It is a deductible equal to a percentage of your dwelling limit, such as 1% or 2%, that applies only to wind or hail losses. On a $300,000 dwelling limit, a 2% deductible means you pay the first $6,000.

Is a quote the same as coverage?

No. A quote is not a binder. Coverage starts only when the insurance company binds the policy and confirms it in writing.

Premium data: National Association of Insurance Commissioners, Dwelling Fire, Homeowners Owner-Occupied, and Homeowners Tenant and Condominium/Cooperative Unit Owner’s Insurance Report: Data for 2023 (Table 4, HO-3 column).

Reviewed and updated October 15, 2026 · Our research methods