Homeowners Insurance 101

Understanding your homeowners insurance policy is the first step toward getting the coverage you paid for when disaster strikes.

What Homeowners Insurance Covers

A standard homeowners insurance policy (HO-3) covers your home structure, personal belongings, liability, and additional living expenses if you are displaced. However, standard policies typically exclude flooding and earthquakes.

Understanding Your Deductible

Your deductible is the amount you pay out of pocket before insurance kicks in. Many coastal states have a separate, higher hurricane or wind deductible -- often 1-5% of your home value rather than a flat dollar amount.

Example: If your home is worth $400,000 and you have a 2% hurricane deductible, you pay the first $8,000 of any hurricane-related damage before insurance pays anything.

Replacement Cost vs. Actual Cash Value

Replacement Cost Value (RCV) policies pay to replace damaged property with new items. Actual Cash Value (ACV) policies subtract depreciation -- so a 10-year-old roof may only pay out a fraction of replacement cost. Always verify which your policy uses.

Common Exclusions to Know

Flood damage (requires separate NFIP or private flood policy)
Earth movement / earthquakes
Normal wear and tear
Mold from long-term neglect (vs. sudden water damage)
Business property or equipment

Review Your Policy Annually

Construction costs rise every year. Make sure your dwelling coverage keeps pace with what it would actually cost to rebuild. Consider extended replacement cost endorsements for extra protection.