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UNDERSTANDING YOUR COVERAGE
What Is Homeowners Insurance?
A homeowners insurance policy is a safety net that helps pay to repair or rebuild your home and replace your belongings if they are damaged by covered events, including fires, storms, lightning, or theft. It also helps out when you are held responsible for someone else’s injuries on your property. Because every policy is a legally binding contract, it’s important to understand what your policy does and doesn’t cover so you can make informed decisions about your protection.
Key Parts of a Home Insurance Policy
There are six types of coverage that make up the foundation of a standard home insurance policy. Each addresses a different part of your property or personal liability.
Coverage A
Dwelling
Helps pay for loss or damage to the physical structure of your home caused by perils such as fire, windstorm, hail, lightning, and theft. It can typically cover the cost of repairing or rebuilding your home up to the policy’s limits.
Coverage b
Other Structures
Safeguards other structures on your property, such as a detached garage, shed, or fence. It typically pays for damage to these structures caused by covered risks up to policy limits. Some structures like swimming pools may have their own exclusions.
Coverage c
Personal Property
Insures your personal belongings, such as furniture, appliances, clothing, and electronics, if they are damaged, destroyed, or lost because of a covered peril. For high-value jewelry or art, scheduling can offer increased protection for appraised items.
Coverage d
Additional Living Expenses
If your home becomes uninhabitable because of a covered loss, this part of your policy may help pay for living expenses while your home is under repair, including temporary housing, meals, and more.
Coverage E
Personal Liability
Helps cover legal expenses when you’re legally responsible for someone’s injuries or property damage at your house. It may help cover defense fees, damages, and settlement costs. It may even apply in some situations that happen away from your home.
Coverage F
Medical Payments
Can pay for small medical bills if someone is injured at your home to reduce the potential for a costlier lawsuit later.
What causes of loss or damage does home insurance cover?
If you have a standard HO3 policy, the structure of your home (Coverage A) and other structures on your property (Coverage B) are typically insured on an open-perils or all-risk basis. That means almost all events and types of loss or damage are covered except those the policy explicitly excludes.
Personal property (Coverage C) is usually covered on a named-perils basis, meaning it only covers losses or events listed in your policy. That usually includes damage caused by:
• Fire, smoke, or lightning.
• Windstorm or hail.
• Explosions.
• Riot or civil commotion.
• Aircraft or vehicles
• Theft and vandalism.
• Falling objects
• Weight of ice, snow, or sleet.
• Water damage from household appliances or plumbing.
• Power surges.
• Volcanic eruption.
• Catastrophic ground cover collapse.
Homeowners Insurance Exclusions
No policy, even the robust ones, will cover every instance of loss or damage—it would be too cost prohibitive for homeowners and too difficult to standardize for insurers. That’s why homeowners policies typically strike a balance between coverage and affordability.
What does home insurance typically exclude?
Exclusions are specific perils, environmental events, or types of loss that are not covered by your policy. For example, an open-perils policy typically won’t cover loss or damage to the home, other structures, or personal property from:
• Earthquakes, landslides, and sinkholes.
• Flood waters.
• Water backup or discharge from sewers or drains.
• Water seepage that starts below the surface of the ground.
• Off-premises power failure.
• Wear-and-tear, mechanical defect, or lack of maintenance.
• War or nuclear hazards.
• Intentional acts.
• Governmental action.
• Windstorm or hail damage to exterior paint in some regions.
While standard home insurance is designed to protect you from a wide variety of sudden and accidental losses, understanding these boundaries early helps you identify where you might need to add optional coverages to protect your property.
When does a home need flood or earthquake insurance?
Determining whether a property requires separate catastrophe insurance refers to evaluating regional hazard maps, historical weather patterns, and specific mortgage lender underwriting requirements. Standard home insurance policies explicitly exclude damage caused by earthquakes and flood waters. If a home is located in a designated flood zone, along a vulnerable coastline, or near a seismic fault line, securing dedicated flood insurance and earthquake coverage can help prevent out-of-pocket losses after a natural disaster.
Choosing Your Coverage Limits
The actual dollar amount your insurance pays out depends on your policy limits—that is, the maximum that will be paid for a covered loss or claim. Whether you have replacement cost value coverage or actual cash value coverage also determines your total financial protection.
What is the difference between replacement cost (RCV) and actual cash value (ACV)?
The primary difference between replacement cost value coverage (RCV) and actual cash value coverage (ACV) is whether an insurance carrier subtracts physical depreciation for age and wear before finalizing a claim payout.
Replacement cost value provides the full dollar amount it takes to buy a brand-new version of an item or rebuild a home at today’s current retail and construction prices. Actual cash value only pays what the property is worth in its current, used condition—meaning how old and worn the items were before the damage happened has a significant impact on the total payout.
This choice is particularly critical when it comes to the roof. In wind-prone and coastal states, ACV coverage is the norm. If a storm destroys a 10-year-old roof, a competitor’s ACV policy might only pay for a fraction of the cost, leaving the homeowner to pay thousands of dollars out of pocket just to get a contractor to start work. SageSure stands apart by offering true Replacement Cost Value (RCV) roof coverage, ensuring homeowners receive a check that actually covers the real-world cost of a brand-new roof.
How much is enough insurance to rebuild the home after a total loss?
Dwelling coverage limits are structural replacement cost estimates based entirely on the local cost of construction materials and labor required to rebuild the home. Real estate market value reflects fluid variables like land value, school districts, and neighborhood buyer demand, which shift completely independently of raw building costs. To ensure a policyholder has adequate funds to rebuild after a covered total loss, the insurance limit must reflect today’s actual contractor pricing rather than the property’s current real estate market value.
Ensuring sufficient rebuilding coverage is the result of maintaining an accurate, updated replacement cost assessment that accounts for local building cost inflation and localized labor shortages. Many property owners find themselves underinsured because their limits fail to keep pace with skyrocketing material prices along coastal regions. Selecting an insurance provider that uses precise, localized underwriting valuation tools ensures your dwelling limit is aligned with real-world construction data rather than generic industry averages.
What is the 80% rule for home insurance—and why does SageSure require 100%?
The 80% rule is an industry underwriting clause that requires homeowners to insure the dwelling for at least 80% of its total replacement cost—or the amount needed to rebuild the home from the ground up at today’s prices with similar materials. This threshold must be met to receive full claim payouts for partial losses.
However, SageSure does not subscribe to the 80% rule. We require properties to be insured to 100% of their replacement cost because we want homeowners to have the appropriate coverage to rebuild their home after a total loss. Underinsurance is one of the primary reasons homeowners don’t rebuild after a major loss event.
What Homeowners Are Saying
Axel D.
Excellent service with online payments. No wait time, friendly agent.
Theron E.
They took the time to answer my questions thoroughly and make sure I understand my options. It’s clear that they truly care about providing excellent service.
Lowering Your Homeowners Insurance Costs
Your home insurance costs depend on many factors, including the location of your home, the home’s age, construction, and square footage; the limits, deductibles, and coverages you choose; your insurance score, and your claims history. While some of these variables are fixed, you can take control of your premiums with these money-saving tips.
Ways to reduce home insurance costs without reducing coverage
These tried-and-true methods can help control the cost of home insurance—without sacrificing coverage:
• Adjust deductibles.
• Make your home more resilient to extreme weather.
• Install smart hazard-detection technology.
• Meet certain wind mitigation standards.
• Make wildfire mitigation updates (if you’re in California).
These updates can have an outsize impact. For example, raising a standard property deductible from $1,000 to $2,500 can reduce the base premium by 10% to 15% depending on the region. Wildfire mitigation credits in California can reduce wildfire premiums by 40–45%.
Homeowners Policy Forms: HO1 vs. HO3 vs. HO5
Different policy types offer different amounts of protection for your home.
LIMITED COVERAGE
HO1: Basic Form
RELIABLE Coverage
HO3: Special Form
ROBUST COVERAGE
HO5: Comprehensive Form
HOMEOWNERS POLICY TYPES
HO1: The Basic Form
An HO1 policy is the most restrictive property insurance baseline. It only covers your dwelling and personal property against a rigid, specific list of 10 named perils (such as fire, lightning, and smoke). If a loss occurs from an unlisted event, the financial burden falls entirely on the homeowner. Because of its massive protection gaps, this form is rarely used today.
HO3: The Special Form
An HO3 homeowners insurance policy is the gold standard of property protection and is the foundational baseline for most options on the market today. Typical HO3 homeowners policy is usually offered on an open-perils basis, which means it may cover any cause of loss or damage to the home except for the perils listed as exclusions in the policy.
HO5: The Comprehensive Form
An HO5 policy is the most robust homeowners form. It upgrades personal property coverage from a named perils baseline to open perils protection. This means both the physical house and personal belongings are protected against most unforeseen events. It is typically used for high-value homes.
MORE INSIGHTS
Homeowners Insurance FAQs
How do I get a home insurance quote from SageSure?
Type in your address here to find one of our producer partners in your state for a personalized quoting and buying experience.
Is homeowners insurance required?
While federal and state laws generally do not require homeowners insurance, some states or local jurisdictions in high-risk areas do have mandatory requirements or regulations related to insurance coverage for certain natural disasters like floods or earthquakes. Insurance requirements vary by location, which you can find on your state’s insurance department.
Additionally, if you have a mortgage on your home, your lender will often require you to have homeowners insurance as part of the loan agreement. This requirement protects the lender’s financial interest in your home in case of damage or loss.
How does a named-storm deductible work in catastrophe-exposed coastal states?
Unlike a standard flat dollar deductible (like $1,000) applied to everyday home claims, a named-storm deductible is typically structured as a percentage (ranging from 1% to 10%) of your home’s total dwelling coverage limit. It only triggers when structural damage is explicitly caused by a storm officially named or classified by the National Hurricane Center. For example, if your home is insured for $300,000 with a 2% named-storm deductible, your out-of-pocket obligation for hurricane wind damage would be $6,000.
Is a surplus lines homeowners insurance policy safe and reliable?
Yes. Surplus lines insurance (also referred to as non-admitted insurance) is a highly regulated, vital financial safety net designed to provide secure protection for properties facing unique or elevated risks that standard carriers decline to underwrite. Surplus lines carriers possess massive capital reserves and are backed by global reinsurance networks, allowing them to offer customized, highly stable coverage parameters in volatile, catastrophe-prone regions where traditional coverage options are completely unavailable.
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