What does homeowners insurance actually cover?

A standard homeowners policy covers four main things: damage to the dwelling itself, your personal belongings, liability if someone is hurt on your property, and additional living expenses if you're displaced by a covered loss. It typically protects against fire, wind, theft, and similar perils – but not floods or earthquakes, which need separate policies. Lenders require coverage and usually escrow the premium into your monthly payment. Insure the home for its rebuild cost, which can differ from the market price, and watch your deductible and any special wind or hail deductibles in storm-prone areas. Review coverage limits yearly, since construction costs rise. Bundling with auto and raising your deductible can lower the premium, but don't underinsure the dwelling just to save a little each month.