Homeowners insurance: what it covers and how much it costs

A tree falls through the roof during a heavy storm, your neighbor’s teen drives their family car through your fence, a burglar steals everything but the kitchen sink while you’re on vacation—what now?  

That’s where homeowners insurance comes in. It can be the difference between giving you peace of mind in an emergency or having to cough up your entire rainy day fund. Here’s what a typical policy covers, what it doesn’t, and how much it costs. 

What is homeowners insurance? 

Homeowners insurance protects you financially if your property or belongings are damaged by certain perils. Insurance policies define “perils” as an event that causes damage to your property or belongings. It is considered a “covered event” if it’s listed in your policy. 

After a fire, leak, or other unexpected disaster, filing a claim with your insurance company can help you pay for repairs or to replace your stuff. A homeowners policy will also pay for living expenses if your house becomes temporarily unlivable. 

But what qualifies for reimbursement depends on the type of coverage you get and how much you have. In general, there are two types of homeowners insurance policies—named perils coverage (HO-2) and open perils coverage (HO-5)—and then there’s a third: a hybrid policy (HO-3). 

A broad policy (HO-2) covers losses to your home or belongings caused by a list of named perils, including: 

• Fire 
• Lightning 
• Windstorms 
• Hail 
• Riots 
• Aircraft 
• Cars 
• Smoke 
• Vandalism 
• Explosion 
• Theft 
• Volcanic eruption 
• Falling objects 
• Weight of snow, ice, or sleet 
• Water overflow or discharge from air conditioning, appliances, or plumping 
• Damage from a sudden power surge 

A special policy (HO-3) covers damage to your personal belongings caused by the named perils. But it…