The six coverages in a homeowners policy, A through F

A standard homeowners policy has six lettered coverages. Coverages A through D are Section I, the property half: A is the house, B is other structures on the lot, C is your belongings and D is the cost of living elsewhere while a covered loss makes the house unlivable. Coverages E and F are Section II, the liability half: E is personal liability and F is medical payments to others. Each has its own limit on your declarations page, and a loss under one rarely draws down another.

This guide follows the ISO HO-3 (form HO 00 03 05 11, the May 2011 edition published by the Insurance Services Office) because most U.S. policies are modeled on it. Your insurer's form and your state's amendatory endorsements may differ, so check your own policy for the wording that governs.

The six coverages at a glance

Coverage A: the dwelling

Coverage A insures the house on the residence premises and anything attached to it, including an attached garage or deck, along with materials and supplies stored on or next to the property for construction or repair. Land is not covered. If a fire destroys the house, the land is still yours, and the insurer is paying for the structure only.

For the dwelling, the HO-3 covers direct physical loss from any cause the policy does not exclude, which is why it is called an open-perils form. The exclusions are the real boundary; they are covered in what homeowners insurance doesn't cover.

The Coverage A limit does the most work in your policy. The form pays full replacement cost only if you carry insurance equal to at least 80% of the building's replacement cost at the time of loss. Below that, you receive the greater of actual cash value or a proportion of the loss, measured against 80% of replacement cost. Pick a limit from a rebuilding estimate, not a market price. See Dwelling coverage (Coverage A) explained, How much dwelling coverage do I need? and the How much homeowners insurance do I need?.

Coverage B: other structures

Coverage B applies to structures on the premises that are set apart from the dwelling by clear space, and the form treats a structure connected to the house only by a fence or utility line as set apart. It does not cover land, structures rented to someone who is not a tenant of the dwelling (a private garage is the exception), structures from which a business is conducted, or structures used to store business property. The ISO form limits Coverage B to no more than 10% of Coverage A, and using it does not reduce Coverage A. If you have a detached workshop, guest house or expensive fence line, ask whether the declarations raise that limit. More in Other structures coverage (Coverage B): fences, sheds and garages.

Coverage C: personal property

Coverage C protects personal property owned or used by an insured anywhere in the world, so a laptop stolen from a hotel room is a Coverage C claim. After a loss and at your request, it can also cover other people's belongings on the part of the premises you occupy, and a guest's or residence employee's property in any residence you occupy.

Unlike the dwelling, belongings are insured against 16 named perils on the HO-3, including fire, windstorm or hail, theft, vandalism, and accidental discharge of water from a plumbing or appliance system. The difference is explained in named perils vs open perils coverage. The form also settles personal property at actual cash value unless you buy a replacement cost endorsement.

The HO-3 builds in dollar sublimits for categories insurers see as high-value or easily lost. These are "special limits of liability", and they sit inside your Coverage C limit rather than adding to it:

ISO's newer 2022 forms raise several of these limits (jewelry theft to $2,000 and money to $300, for example), but they are only starting to reach policyholders: North Carolina's version takes effect June 1, 2027. Your declarations page and policy jacket show which edition you have.

Two other limits catch people. Property usually kept at another residence of yours, or in self-storage, is capped at the greater of 10% of Coverage C or $1,000. And a student's belongings are covered for theft at the residence where the student lives to attend school only if the student has been there within the previous 90 days. Items you want covered beyond these limits go on a scheduled personal property endorsement (scheduling jewelry, art and valuables). The full treatment is in Personal property coverage (Coverage C) explained.

Coverage D: loss of use

When a covered loss makes your home unfit to live in, Coverage D pays the necessary increase in living expenses so your household can maintain its normal standard of living. The key words are "increase" and "normal". If you spend $600 a month on groceries and the hotel stay forces $1,100 of restaurant meals, the claim is the $500 difference, not the whole $1,100. Payment is for the shortest time needed to repair or replace the damage or, if you relocate permanently, to settle elsewhere.

One limit covers three things: additional living expenses, fair rental value if you rent part of the home to others, and civil authority. The civil-authority piece applies when authorities bar you from your home because of damage to neighboring premises by an insured peril, and the form pays it for no more than two weeks. Coverage D does not pay for the cancellation of a lease, and its time periods are not cut short by the policy expiring. See loss of use and additional living expenses.

Coverage E: personal liability

Coverage E responds when someone sues you, or makes a claim, for bodily injury or property damage caused by an "occurrence". The insurer pays damages you are legally liable for, up to the limit, and defends you at its own expense even if the suit is groundless, false or fraudulent. Its duty to defend ends when it has paid out the limit in a judgment or settlement. Defense costs and some related expenses are paid in addition to the limit under the form's Additional Coverages.

The HO-3 excludes liability from motor vehicles, aircraft and most watercraft, business activities, professional services, expected or intended injury, and injury to you or a resident of your household, among other things. Insurers commonly offer limits from $100,000 to $500,000, and an umbrella policy can add more. See Personal liability coverage (Coverage E) explained and umbrella insurance for homeowners: what it adds and where it stops.

Coverage F: medical payments to others

Coverage F pays necessary medical expenses of people hurt on your property with your permission, or hurt off it by your activities, your residence employee or your animal, no matter who was at fault. Expenses must be incurred or medically ascertained within three years of the accident. It does not apply to you or to regular residents of your household. The limit applies per person per accident and is usually small, which makes it a way to settle minor injuries without a liability claim. See Medical payments to others (Coverage F) explained.

The extras inside the policy

Several smaller coverages are written into the HO-3 and do not need a letter:

Say your Coverage A limit is $400,000. The form caps Coverage B at $40,000, ordinance or law at $40,000 on top of the dwelling limit, and all your trees and shrubs at $20,000. If your insurer sets Coverage C at 50% of Coverage A and Coverage D at 20%, which are assumptions for this example rather than standard figures, you would have $200,000 for belongings and $80,000 for living costs. Raising Coverage A raises everything pegged to it, which is why an out-of-date dwelling limit quietly weakens the whole policy. See the additional coverages hiding in your policy and ordinance or law coverage: paying to rebuild to code.

Questions to ask your agent

1. Is my Coverage A based on a current rebuilding estimate, and does an extended replacement cost option exist?
2. What are my Coverage B, C and D limits as percentages of A, and can I raise them?
3. Are my belongings settled at replacement cost or actual cash value?
4. Which special limits matter for what I own: jewelry, firearms, collections, a home office?
5. What are my Coverage E and F limits, and would an umbrella policy fit?

Key takeaways

• Coverages A through D insure the property; E and F insure you against claims by others. Each has its own limit on the declarations page.
• On the HO-3, the dwelling and other structures are covered for any cause not excluded; belongings are covered only for 16 named perils.
• Coverage B is capped at 10% of Coverage A in the ISO form, and special limits such as $1,500 for stolen jewelry sit inside Coverage C rather than adding to it.
• Loss of use pays the added cost of living elsewhere, not your full spending; the ISO form sets no time cap, only the Coverage D dollar limit, but check whether your insurer's form adds one.
• Many of the dollar limits scale with Coverage A, so keeping it current protects more than the building.