What does a home insurance policy actually cover, and what does it leave out?

One policy, six coverages. TDI says home policies combine several types of coverage into one, and that most Texas policies include six. Dwelling coverage pays if your house is damaged or destroyed by something your policy covers. Personal property coverage pays if your furniture, clothing and other things you own are stolen, damaged or destroyed. Other structures coverage pays to repair structures that are not attached to your house. That takes in detached garages, sheds and fences. Additional living expenses coverage pays if you have to move while your house is being repaired. It covers rent, food and other costs you would not have at home. Personal liability coverage pays medical bills, lost wages and other costs for people you are legally responsible for injuring. It also pays your court costs if you are sued. Medical payments coverage pays the medical bills of people hurt on your property [1].

What it pays for, and what it does not. TDI prints the two lists side by side. Most policies cover damage from fire and lightning. Also the sudden and accidental release of water or smoke. Also explosion, theft, vandalism, riot and civil commotion. Also aircraft and vehicles. And windstorm, hurricane and hail — but not if you live on the Gulf Coast. Most policies do not cover flooding. Nor a continuous water leak. Nor mould removal, except to repair damage caused by a covered risk. Nor termites, insects, rats or mice. Nor losses while your house is vacant beyond the days your policy allows. Nor wear and tear. Nor earthquakes or earth movement. Nor wind and hail damage to trees and shrubs. TDI adds that coverages vary by company, so read your policy or talk to your agent to be sure [1].

The one line that changes the size of a cheque. A home policy pays either replacement cost or actual cash value. Here is TDI's own example. A roof was bought 10 years ago. A new roof costs $10,000 today. Replacement cost pays at today's prices, so with a $2,000 deductible the company pays $8,000. Actual cash value pays replacement cost minus depreciation. The same roof might be valued at $7,000, so the company pays $5,000 after the deductible. Your own share is $5,000 instead of $2,000 [1].

Two limits sit over all of it. The deductible is the part of a claim you pay yourself, and you might have a different one for each coverage. And each coverage has a dollar limit. TDI says most companies require you to insure your house for at least 80% of its replacement cost, and some require 100%. Personal property is usually a share of the dwelling limit. TDI's example is a $100,000 house with property covered at 20%, which is $20,000. Policies also limit what they pay for things like jewellery and art [1]. One gap has its own section in the same guide. Most home policies do not cover flood damage. A lender requires flood cover in a designated flood zone. And TDI notes most flood policies have a 30-day waiting period, so it is not something to buy as a storm comes in [2].

Read the «What risks does a home policy cover?» and «Replacement cost vs. actual cash value coverage» sections of the TDI home insurance guide, then compare them with your own policy's covered-perils and valuation clauses. These are Texas examples; other states set their own rules.