Homeowner’s Insurance Coverage Basics

homeowner's insurance coverage basics

If you are thinking about buying a home, an essential part of that process is deciding which homeowner’s insurance coverage is right for you. But what IS homeowners insurance and what does it cover? Let’s break it down into three main categories – structure, belongings, and liability.


Structure protection is what most people think of when they start thinking about insurance for their homes. This covers the physical makeup of the building – it’s what needs to be rebuilt if part or all of the home is damaged by common causes like fire or smoke, natural disasters (hurricanes, thunderstorms, hail), or internal water damage (burst pipes in the winter, for example). There are even inclusions for less common occurrences: explosions, vandalism, or a plane crashing into your property.

The structure aspect also applies to outbuildings. Garages, perimeter fences, even gazebos can be covered.

Cash Value vs. Replacement Cost

While deciding which policy is right for you, it’s good to note the difference between a cash value policy and a replacement cost policy.

Think of it like this: your home’s value decreases over time because the house ages, similar to a car. A cash value policy will only cover the cost of that house at that lower value. A replacement cost policy takes into consideration anything you’ve done to the home to increase the value, like adding an extra bathroom or remodeling the kitchen. Because it covers a little bit more, replacement cost policies are slightly more expensive.

Homeowner’s Insurance Coverage Does NOT Include…

Flooding and earthquakes are never covered. There are separate policies available for these disasters. Some research into weather patterns and water table or sea levels can help you determine if you would benefit from an additional plan. 


If the structure is the physical makeup of the house, belongings are all the things you’ve put inside it: clothes, furniture, jewelry. These are the things that can be stolen but can also be damaged or destroyed by any of the disasters mentioned above. 

Home Inventory

Most people don’t know offhand the value of all of their possessions – this is why creating a home inventory is so important. Homeowner’s insurance policies generally take a percentage of your house value (this percentage varies policy to policy) and reimburse you that amount to cover whatever belongings you’ve lost. 

A good home inventory helps you see if you have enough in the homeowner’s policy to cover everything you’d lose. If your inventory value is higher than your policy protects, you may consider buying additional insurance.

Homeowner’s Insurance Coverage Does NOT Include…

If you own any valuable items, you can get a personal property endorsement and be fully reimbursed if an item is stolen. Most homeowner’s insurance only covers up to a specific dollar amount for stolen items.


Liability insurance protects you if you, someone in your family, or a third party (from friends to burglars) are injured on the property. It also covers you if your pet injures someone. 

Homeowner’s Insurance Coverage Does NOT Include…

Liability coverage does not cover you or other members of your household (including pets) damaging or destroying your own property.

The Next Step

Now that you’ve seen the breakdown of homeowner’s insurance coverage, take the next step. Gebco  offers some insights on how to choose the right insurance for you.

Still unsure how to start this process? We’d love to help: visit our website (www.gogebco.com) or call our offices for assistance right now: 800-464-3226.