Home Insurance Basics
Coverage Guide
Understand property coverage, liability, deductibles, replacement cost, exclusions, and the protection behind your homeowners policy.
Property Protection
What your homeowners policy covers
A standard homeowners policy is organized into lettered coverage sections. Understanding what each one does helps you know what you are actually protected against — and where gaps may exist.
Coverage A — Dwelling
Your home structure
Covers the physical structure of your home — walls, roof, floors, built-in appliances, and attached structures like a garage.
- Replacement cost vs. actual cash value affects how much you receive after a loss
- Rebuilding cost is different from market value — construction costs, home features, and materials all factor in
- Ordinance or law coverage may be needed if local building codes require upgrades during a rebuild
Coverage B — Other Structures
Detached structures
Covers structures on your property that are not attached to the main home, such as a detached garage, fence, or shed.
- Typically a percentage of your Coverage A limit
- May not cover structures used for business purposes
Coverage C — Personal Property
Your belongings
Covers your furniture, clothing, electronics, and other personal items if they are damaged or stolen.
- Replacement cost vs. actual cash value applies here too
- High-value items like jewelry, art, or collectibles may need a separate endorsement
- Documenting your belongings with photos or a home inventory can help with claims
Coverage D — Loss of Use
Additional living expenses
Covers additional living expenses if your home becomes uninhabitable due to a covered loss — hotel stays, meals, and other costs while repairs are made.
- Subject to a limit and time period
- Only applies when the loss is covered under your policy
Replacement Cost vs. Actual Cash Value
Replacement cost (RCV) pays to replace your damaged property with a new equivalent. Actual cash value (ACV) deducts for depreciation — you receive less because the item was used.
Understanding which type you have — and whether the difference in premium makes sense for your situation — is worth discussing with your agent.
Common Exclusions
Most standard homeowners policies do not cover:
- Flooding from external water sources
- Earthquake damage
- Sewer or drain backup (may be added by endorsement)
- Gradual damage or neglect
- Business activities on the property
Endorsements Worth Knowing
Endorsements modify your base policy to add or expand coverage. Common examples include:
Water backup / sewer backup
Covers damage from backed-up drains or sump pump failure
Scheduled personal property
Adds specific coverage for high-value items
Ordinance or law
Covers code-required upgrades during a rebuild
Roof settlement endorsements
Affects how roof claims are settled — RCV vs. ACV
Liability Protection
Coverage E and F — protecting your financial life
Home insurance is not only about rebuilding your house. The liability sections of your policy can help protect your broader financial life.
Coverage E — Personal Liability
Your legal responsibility
Covers you if someone is injured on your property or if you accidentally cause damage to someone else's property.
- Pays for legal defense costs and settlements up to your policy limit
- Applies to incidents on and off your property in many cases
- Does not cover intentional acts or business-related liability
Coverage F — Medical Payments to Others
Guest medical expenses
Pays for medical expenses if a guest is injured on your property, regardless of fault.
- Typically a smaller limit than Coverage E
- Designed for minor injuries — not major liability claims
- Does not cover injuries to household members
Home insurance and umbrella coverage
Your homeowners liability limit is the foundation. An umbrella policy can provide an additional layer of protection above that limit. Whether an umbrella makes sense depends on your assets, income, and overall financial situation.
Key takeaway
Home insurance is not only about rebuilding your house. Property coverage helps protect the things you own. Liability coverage can help protect your broader financial life.
Understanding both sides of your policy — and how they connect to your overall financial picture — is part of what BCM360™ is designed to help with.
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