Homeowners Insurance Basics
Understand the six standard coverages in a homeowners policy — Dwelling, Other Structures, Personal Property, Loss of Use, Liability and Medical Payments.
The six standard coverages
Every HO-3 policy — the most common form — has six labelled coverages: A (Dwelling), B (Other Structures), C (Personal Property), D (Loss of Use), E (Liability), and F (Medical Payments to Others).
Replacement cost vs actual cash value
Replacement cost pays to rebuild without depreciation. ACV subtracts depreciation and leaves homeowners underinsured after a total loss. Always request replacement cost on both dwelling and contents when available.
What isn’t covered
Standard policies exclude floods (buy NFIP or private flood), earthquakes (endorsement or standalone), sewer backup (endorsement), and neglected maintenance issues like mold from a slow leak.
Frequently asked questions
How much dwelling coverage do I need?
Enough to fully rebuild at today’s local construction costs — not your market or purchase price. Use a rebuild-cost estimator or ask your agent for a Cost Estimator report.
Bottom line
Understanding homeowners insurance basics is one of the highest-leverage things you can do for your financial future. Bookmark this guide, share it with a friend, and use the calculators linked below to run the math on your own numbers. Money decisions are rarely urgent, but they compound — so a good decision today easily becomes an outsized win a decade from now.
Reader comments (3)
This finally cleared up something my previous advisor kept hand-waving. Bookmarking.
Would love a follow-up piece on how this changes for self-employed households.
Really appreciate that you cited primary sources — most sites don’t.