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The six standard coverages
| Coverage | What it pays for | Typical limit |
|---|---|---|
| A – Dwelling | The house and attached structures such as a garage or deck | Set to estimated rebuilding cost |
| B – Other structures | Detached garages, fences, sheds, guest houses | Usually 10% of Coverage A |
| C – Personal property | Your belongings, at home and (usually with a lower limit) away from home | Usually 50%–70% of Coverage A |
| D – Loss of use | Extra living costs while your home is uninhabitable | Often 20% of Coverage A |
| E – Personal liability | Injuries or damage you cause to others, including legal defense | At least $100,000 |
| F – Medical payments | Guests’ minor medical bills regardless of fault (not your household) | At least $1,000 |
Source: Washington OIC homeowner guide (2025); Maryland Insurance Administration guide.
Belongings taken outside the home are often limited to about 10% of the personal property limit. Liability cover typically excludes business activities, intentional harm and most vehicle-related claims.
Policy forms: HO-3, HO-5 and others
| Form | Who it’s for | How it covers |
|---|---|---|
| HO-2 (Broad) | Homeowners wanting a cheaper policy | Named perils only, such as fire, windstorm, hail, theft and vandalism |
| HO-3 (Special) | Most homeowners | House covered for all perils except those excluded; belongings for named perils |
| HO-5 (Comprehensive) | Owners wanting the broadest cover | House and belongings covered for all perils except those excluded |
| HO-4 | Renters | Belongings and liability only |
| HO-6 | Condo owners | Interior, improvements, belongings and liability; see condo insurance |
| HO-8 / modified | Older homes that are expensive to rebuild | Restores with common modern materials rather than original quality |
“Open perils” (all risks except exclusions) is broader than “named perils” because the insurer must show a loss is excluded rather than you showing it’s listed. The Maryland Insurance Administration notes the price difference between the two is often small, so it’s worth asking for both quotes.
How claims are valued
- Replacement cost: pays to repair or replace with similar materials and quality, without deducting depreciation. Most dwelling coverage works this way.
- Actual cash value (ACV): replacement cost minus depreciation. Many policies settle belongings at ACV unless you buy replacement cost on contents. In hail-prone regions, some insurers now pay only ACV on older roofs.
- Extended replacement cost: pays above your dwelling limit, typically by 20% to 25%, if rebuilding costs more than expected after a disaster.
- Guaranteed replacement cost: pays the full cost to rebuild with no percentage cap. It’s less common.
Example: The Maryland Insurance Administration describes a $1,500 sofa, 10 years old and 50% depreciated. A replacement cost policy first pays $750 (the ACV). When you buy a $2,000 replacement and send the receipt, it pays the remaining $1,250. Insurers may require notice that you intend to replace within a set period, sometimes 180 days.
Common exclusions
- Flood, including storm surge. Buy separately through the NFIP or a private insurer.
- Earthquake and earth movement. Available as a separate policy or endorsement.
- Sewer or drain backup and sump pump overflow. Usually only with an endorsement.
- Wear and tear, neglect, mold from long-term leaks, and pests.
- Business property and business liability if you work from home.
- Vehicles (covered by auto insurance) and roommates’ belongings.
Natural disaster gaps are covered in detail in our flood, wildfire and earthquake guide.
Sublimits on valuables
Standard policies cap payouts for certain categories, especially for theft. The Maryland guide gives typical examples of $1,500 for jewelry and furs, $500 for securities and $100 for cash. Washington’s guide adds cameras, art, silver, firearms and stamp collections to the list. If you own valuable items, schedule them on a rider or floater, which usually also covers loss and breakage.
How to set your limits
- Dwelling: get a rebuilding-cost estimate from your insurer or a contractor. Update it after renovations and when construction costs rise.
- Personal property: make a room-by-room inventory and check that the limit covers it. Choose replacement cost on contents if you can.
- Liability: $100,000 is a minimum. Many owners choose $300,000 to $500,000, with an umbrella policy above that if they have significant assets.
- Add-ons: consider water backup, extended replacement cost and ordinance-or-law cover (to meet newer building codes when you rebuild).
Frequently asked questions
What is the difference between HO-3 and HO-5?
HO-3 covers your house for all perils except exclusions but your belongings only for named perils. HO-5 covers both on an open-perils basis, so it’s broader and usually more expensive.
Should my dwelling coverage equal my home’s market value?
No. It should match the cost to rebuild, which can be higher or lower than market value because market value includes land.
Does homeowners insurance cover water damage?
Sudden, accidental water damage such as a burst pipe is usually covered. Flooding, gradual leaks and sewer backup usually aren’t without separate cover.
What is loss of use coverage?
It pays the extra cost of living elsewhere, such as rent and meals, while your home is being repaired after a covered loss. It’s often 20% of your dwelling limit.
Is jewelry covered by homeowners insurance?
Yes, but usually with a low sublimit for theft, such as $1,500. Scheduling valuable items gives full coverage for their appraised value.
Sources
- Washington Office of the Insurance Commissioner – Homeowner insurance guide (2025)
- Maryland Insurance Administration – Consumer guide to homeowners insurance
- Insurify – Extended replacement cost explained
- Insurify – Home insurance price projections 2026
- FEMA – Your NFIP flood insurance decision (Oct 2024)
- California Earthquake Authority – Earthquake insurance policies
- J.D. Power – 2026 U.S. Home Insurance Study (Business Wire, Sept 2026)
Insurance prices, discounts and rules change often and vary by state. Figures were checked in October 2026; confirm details with the insurer or your state insurance department.