What Home Insurance Covers — and What It Doesn't

Home insurance covers six things, lettered A to F: the dwelling, other structures, personal property, loss of use, personal liability and medical payments to others. On the HO-3 form the dwelling is insured against any cause of loss the policy does not exclude. Your belongings are insured against 16 named causes, and nothing else.

Everything below is read off the Homeowners 3 – Special Form, edition HO 00 03 05 11 — the Insurance Services Office standard form, as filed and published by the Maine Bureau of Insurance, that most American homeowners policies are built from. This article is the peril-by-peril companion to our guide to how home insurance works and what it costs.

What does a standard HO-3 policy cover?

Six coverages, split into a property half and a liability half. The National Association of Insurance Commissioners' Consumer's Guide to Home Insurance sets out the limits customarily attached to each.

Quoted wording: ISO form HO 00 03 05 11. Descriptions and typical limits: NAIC, A Consumer's Guide to Home Insurance, Table 2, 2022.

Only one of those percentages is in the form. The HO-3 caps Coverage B at "10% of the limit of liability that applies to Coverage A"; Coverage C and D carry whatever the declarations page shows, and 50% and 20% are NAIC's customary defaults, not a promise the form makes.

Why is the house covered for more causes of loss than the sofa?

Because the HO-3 uses two triggers. For Coverages A and B: "We insure against direct physical loss" — no list, everything not carved out. For Coverage C: "direct physical loss ... caused by any of the following perils," then a list.

There are 16, in this order: fire or lightning; windstorm or hail; explosion; riot or civil commotion; aircraft; vehicles; smoke; vandalism or malicious mischief; theft; falling objects; weight of ice, snow or sleet; accidental discharge or overflow of water or steam; sudden and accidental tearing apart, cracking, burning or bulging of a heating, air conditioning, sprinkler or water-heating system; freezing; sudden and accidental damage from artificially generated electrical current; and volcanic eruption.

Some arrive pre-shrunk. The electrical peril excludes "loss to tubes, transistors, electronic components or circuitry that is a part of appliances, fixtures, computers, home entertainment units"; windstorm does not reach rain-damaged contents unless wind first opened the roof or a wall.

What does an HO-3 exclude outright?

Nine things, in Section I – Exclusions — and the lead-in does more work than the list: these losses are excluded "regardless of any other cause or event contributing concurrently or in any sequence to the loss."

That clause is the reason a hurricane claim can be half paid. Wind is covered. The Water exclusion names "flood, surface water, waves ... all whether or not driven by wind, including storm surge." When both act on the same house, the concurrent-causation wording keeps the surge portion excluded rather than letting the covered peril pull it back in.

The nine: ordinance or law, earth movement (earthquake, landslide, mudflow, subsidence, sinkhole), water (flood, sewer or drain backup, sump overflow, groundwater), power failure originating off the premises, neglect to "use all reasonable means to save and preserve property at and after the time of a loss", war, nuclear hazard, intentional loss and governmental action. Fire, explosion and theft that follow an earth movement or water event are pulled back into coverage; nothing else is.

A second list applies only to the dwelling: weather conditions combining with an excluded cause, acts or decisions of any person or body, and faulty design, workmanship, materials or maintenance. Deferred maintenance is not a covered peril anywhere in the form.

Flood is the expensive absence. NAIC's consumer page on flood insurance states that most homeowners and renters policies do not cover the flood peril, that a National Flood Insurance Program policy covers up to $250,000 of damage to a home's structure with contents coverage available up to $100,000 for an additional premium, and that a 30-day waiting period normally applies. The Insurance Information Institute's flood insurance facts page, citing NFIP data analysed by Aon, puts the average paid NFIP loss from Hurricane Helene in September 2024 at $40,709 across 43,700 paid losses — the sum a homeowners policy alone does not reach. Catastrophe losses on that scale feed straight into why home insurance premiums rise.

Which losses does the dwelling section carve out before you reach the exclusions?

The ones people are most likely to actually have. Coverage A's own Perils Insured Against section carries a second carve-out list, ahead of Section I – Exclusions.

It removes wear and tear, marring and deterioration; mechanical breakdown, latent defect and inherent vice; smog, rust, corrosion and dry rot; settling, shrinking, bulging or expansion of foundations, walls, floors, roofs or ceilings; birds, rodents and insects; nesting, infestation or waste products of any animal; and animals owned or kept by an insured. Mold, fungus and wet rot are excluded unless hidden inside walls, ceilings or floors and caused by an accidental water discharge. Vandalism drops out "if the dwelling has been vacant for more than 60 consecutive days immediately before the loss." Freezing is covered only if reasonable care was used to maintain heat or to drain the system.

The "all risks" reputation survives, but the practical shape is narrower: the form pays for sudden accidents, not for the slow failure of a building.

How much jewellery, cash and electronics does Coverage C actually pay for?

Far less than the Coverage C limit. The list is called Special Limits of Liability, and most summaries miss one thing: several caps apply only to loss by theft, and the rest apply to every peril.

Figures: ISO form HO 00 03 05 11, Section I – Property Coverages, Coverage C.3.

A burglary that takes $20,000 of jewellery is settled at $1,500 under this form. A house fire that destroys the same $20,000 is not capped by that line at all — the special limit is written "for loss by theft of jewelry, watches, furs, precious and semiprecious stones," so fire damage falls under the ordinary Coverage C limit. The widely repeated claim that a homeowners policy "only covers $1,500 of jewellery" is true for one peril and wrong for the rest.

The amounts are specific to the form edition. The 1991 edition of the same ISO form set the theft limit for jewellery, watches and furs at $1,000, firearms at $2,000 and securities at $1,000 — each $500 lower than the 2011 edition. Money stayed at $200 across both, twenty years apart. The declarations page and the endorsements attached to it govern.

What happens if the dwelling limit is below 80% of the rebuild cost?

The settlement basis changes, and it changes on partial losses, not just total ones. The HO-3's Loss Settlement condition pays buildings at replacement cost only if "the amount of insurance in this policy on the damaged building is 80% or more of the full replacement cost of the building immediately before the loss." Below that, the insurer pays the greater of actual cash value or a proportion: insurance carried, divided by 80% of full replacement cost.

Worked example, not a quote. A house with a full replacement cost of $500,000 is insured for $300,000. Eighty per cent of $500,000 is $400,000, so the proportion is $300,000 ÷ $400,000, or 75%. On a $100,000 kitchen fire the replacement-cost calculation pays $75,000, with the $300,000 limit nowhere near exhausted. NAIC puts the same warning plainly: if dwelling coverage "drops below 80% of the full replacement cost of your home, your insurance company may reduce the amount that it will pay on a claim."

Personal property is settled differently again: the same condition pays contents, carpeting, household appliances and outdoor equipment "at actual cash value at the time of loss but not more than the amount required to repair or replace." That is why the difference between replacement cost and actual cash value decides what a contents cheque is worth.

Where this breaks and who it is wrong for

• Your policy may not be an unmodified ISO form. Insurers file their own wording as well as the ISO forms; sublimits, section numbers and carve-outs can differ from everything above.
• Endorsements rewrite the base form. Personal property replacement cost, water backup, ordinance or law and inflation guard all change the outcomes above. NAIC names the scheduled personal property endorsement, or personal article floater, as the route for items "whose value might be greater than the normal limits in your homeowners policy."
• State law can override form wording. State statutes, regulations and court decisions limit how clauses such as anti-concurrent causation apply.
• Condo and renter policies are different documents. NAIC describes the tenants form as insuring personal property, and the condo unit owners form as adding walls, floors and ceilings.
• Coastal homes may buy wind separately. NAIC notes that policies in coastal areas often exclude windstorm and hail.
• This describes a published form, not your contract. Only the declarations page, the form edition and the attached endorsements decide what a policy covers.