Does homeowners insurance cover roof leaks?

It depends on what caused the leak. If a covered peril like a fallen tree, hail, or wind damage caused the leak, your policy will cover repairs. However, if the leak results from normal wear and tear, age, or poor maintenance, it won't be covered. This is why regular roof inspections and maintenance are so important—they help you catch problems before they become expensive, uninsured losses.

What's the difference between actual cash value and replacement cost coverage?

Replacement cost coverage pays to replace your damaged property with new items of similar quality, without deducting for depreciation. Actual cash value coverage factors in depreciation, so you'll receive less money—what the item was worth in its used condition. For example, if your five-year-old laptop is stolen, replacement cost might give you $1,200 for a new one, while actual cash value might only give you $400. Replacement cost coverage costs more but provides significantly better protection.

Will my homeowners insurance cover water damage?

Yes and no—it depends entirely on where the water came from. Internal water damage from burst pipes, a malfunctioning water heater, or an overflowing bathtub is typically covered. However, flooding from external sources like heavy rain, overflowing rivers, or storm surge is excluded from standard policies. You'll need separate flood insurance for that. Sewer and drain backups are also commonly excluded unless you purchase an endorsement.

How much liability coverage should I carry on my homeowners policy?

While standard policies often include $100,000 in liability coverage, most insurance experts recommend carrying at least $300,000-$500,000. If you have significant assets to protect or face higher liability risks—like owning a pool, trampoline, or certain dog breeds—consider even higher limits or an umbrella policy. Umbrella policies provide an additional $1-2 million in liability coverage across all your policies for a relatively affordable annual premium, typically $150-$300.

Do I need homeowners insurance if I've paid off my mortgage?

Legally, no—once your mortgage is paid off, no lender requires you to carry coverage. However, dropping homeowners insurance is extremely risky and almost never a good idea. Without coverage, you're personally responsible for rebuilding or repairing your home after a fire, storm, or other disaster, which could easily cost hundreds of thousands of dollars. You're also exposed to liability claims if someone is injured on your property. The relatively small cost of premiums provides irreplaceable financial protection.

What should I do immediately after damage occurs to my home?

First, ensure everyone is safe and mitigate further damage if possible—like covering a hole in the roof with a tarp. Then contact your insurance company immediately to report the claim. Document everything with photos and videos before cleaning up. Keep receipts for emergency repairs and temporary living expenses. Don't make permanent repairs until the adjuster has assessed the damage, unless they're necessary to prevent further loss. The faster you report and document the damage, the smoother your claim process will be.

What Does Homeowners Insurance Cover? 2025 Guide

If you're like most homeowners, your house is probably the biggest investment you'll ever make. But here's what catches people off guard: understanding what your homeowners insurance actually covers can feel like reading a foreign language. You pay premiums every month, but when disaster strikes, will your policy really have your back?

The good news is that a standard homeowners insurance policy provides broader protection than most people realize. The frustrating news? There are also some glaring gaps that could leave you financially exposed. Let's break down exactly what's covered, what's not, and how to make sure you're not caught off guard when you need your coverage most.

The Four Main Coverage Areas in Your Policy

Most homeowners policies follow a standard structure with four main coverage types. Think of these as the pillars holding up your financial protection.

Dwelling coverage is the heavyweight of your policy. This protects the physical structure of your home—walls, roof, built-in appliances, permanently attached fixtures, and even your attached garage. If a fire tears through your kitchen or a fallen tree crashes through your roof, dwelling coverage pays to repair or rebuild. The key here is that your coverage limit should reflect what it would cost to rebuild your home from the ground up, not your home's market value. In hot real estate markets, these numbers can be surprisingly different.

Personal property coverage protects your belongings—furniture, electronics, clothing, appliances, and more. If someone breaks in and steals your laptop, or a pipe bursts and ruins your furniture, this coverage kicks in. Most insurers set this limit at 50-70% of your dwelling coverage. So if your home is insured for $400,000, you might have $200,000-$280,000 available for your stuff. Keep in mind that high-value items like jewelry, art, or collectibles often have sub-limits (typically around $1,000-$2,500) unless you purchase additional coverage through scheduled personal property endorsements.

Liability coverage is the unsung hero of homeowners insurance. This protects you when someone gets hurt on your property or you accidentally damage someone else's property. If your dog bites a neighbor, your kid accidentally breaks a window with a baseball, or a guest slips on your icy walkway and breaks their arm, liability coverage handles medical bills and legal expenses. Standard policies start at $100,000, but that can evaporate fast if you face a serious lawsuit. Most insurance professionals recommend carrying at least $300,000-$500,000 in liability protection.

Loss of use coverage (sometimes called additional living expenses) pays for you to live elsewhere while your home is being repaired after a covered loss. This includes hotel bills, restaurant meals, and other costs above what you'd normally spend. If a kitchen fire forces your family into a hotel for two months while repairs happen, this coverage prevents that from becoming a financial disaster. Typically, this runs about 20-30% of your dwelling coverage and kicks in only for covered perils that make your home temporarily uninhabitable.

What Homeowners Insurance Doesn't Cover

Here's where things get tricky. Standard homeowners policies have significant exclusions that catch people by surprise. Understanding these gaps is just as important as knowing what's covered.

Floods and earthquakes top the list of major exclusions. If water comes from outside your home—whether from an overflowing river, heavy rain, or storm surge—your standard policy won't cover it. You'll need a separate flood insurance policy through the National Flood Insurance Program (NFIP) or a private insurer. The same goes for earthquakes and earth movement like sinkholes, except in Florida and Tennessee where insurers must offer optional sinkhole protection. Given that climate-related disasters have increased tenfold since the 1980s, these exclusions matter more than ever.

Normal wear and tear isn't covered—and this is where homeowners sometimes feel frustrated. That leaking roof that's been deteriorating for years? Not covered. Rusting pipes that finally burst due to age? Probably not covered. Homeowners insurance protects against sudden, unexpected events, not maintenance issues you should have addressed. The same philosophy applies to pest damage and mold. If termites eat through your floor joists or mice chew your wiring, that's on you. Mold coverage is typically limited to about $1,000, and only if it resulted from a covered peril.

Other common exclusions include sewer and drain backups, home-based business liability and equipment (standard coverage for business property tops out around $2,500), vacant homes, and certain dog breeds that insurers consider high-risk. Building code upgrades required during reconstruction may not be fully covered either—if you're rebuilding an older home, bringing it up to current codes could cost significantly more than your policy covers without an ordinance or law endorsement.

Understanding Coverage Limits and Getting Them Right

Having homeowners insurance isn't enough—you need the right amount. Here's the thing most people get wrong: your dwelling coverage should be based on replacement cost, not market value. In expensive real estate markets, your home might sell for $800,000, but rebuilding costs might only be $450,000. Conversely, in areas with high construction costs, the opposite could be true.

Insurance companies use replacement cost estimators to calculate appropriate coverage, but these aren't perfect. Between 2020 and 2022, replacement costs soared by 55% due to post-pandemic inflation and supply chain disruptions. If your coverage hasn't been updated recently, you could be seriously underinsured. Consider inflation guard endorsements that automatically increase your coverage annually to keep pace with construction cost inflation.

For personal property, the standard 50-70% of dwelling coverage works for many people, but not everyone. If you have a modest home filled with expensive furnishings and electronics, you might need to increase this limit. Take inventory of what you own—you'll probably be surprised at how much it all adds up. And remember those sub-limits for valuable items. That $5,000 engagement ring or $3,000 mountain bike might only have $1,500 of coverage unless you specifically schedule them.

What You'll Pay and Why Costs Keep Rising

The average homeowners insurance premium in 2024 ran between $2,110 and $2,424 annually for a policy with $300,000 in dwelling coverage, though this varies wildly by location. If you live in Florida, Louisiana, or Oklahoma, you're paying far more—these states routinely top the list for most expensive homeowners insurance due to hurricane, tornado, and severe weather risks. On the flip side, homeowners in South Dakota, Hawaii, and Vermont enjoy premiums well under $1,000 per year.

Here's the uncomfortable truth: homeowners have seen premiums increase by 24% over the past three years—double the rate of inflation. Climate change drives much of this trend, with natural disaster losses increasing tenfold since the 1980s. Wildfires, flooding, and severe storms are damaging more homes, and insurers are adjusting prices accordingly. Rising construction and material costs compound the problem. When it costs more to rebuild homes, insurers need to charge more to cover that risk.

Making Sure You're Adequately Protected

Don't wait until you need your coverage to discover what you're missing. Review your policy annually, especially after major home improvements or purchases. Ask yourself: Would my coverage rebuild my home at today's construction costs? Does my personal property limit reflect what I actually own? Is my liability coverage enough to protect my assets if I'm sued?

Consider the common exclusions and whether you need additional coverage. If you live in a flood zone or earthquake-prone area, those separate policies aren't optional—they're essential. If you work from home, a business owner's policy or home business endorsement might be necessary. And if you have significant assets to protect, an umbrella policy that provides an extra $1-2 million in liability coverage can offer tremendous peace of mind for relatively little cost.

The bottom line? Homeowners insurance provides critical financial protection for your biggest asset, but only if you understand what you're buying and choose coverage limits that actually match your needs. Take the time to get it right now, and you'll never have to worry about nasty surprises when disaster strikes.

What Does Homeowners Insurance Cover?

Key Takeaways