The Six Coverages on a Homeowners Policy, Explained

Ask a homeowner what their coverage is and you will get one number — the dwelling limit, the big one on the front page. It is the number the mortgage was written around and the one the agent quoted.

There are five more, and four of them are derived from that first one by a fixed percentage. Which produces the failure this article exists to prevent: a dwelling limit that was set too low, or set correctly in 2014 and never revisited, does not just underinsure the building. It silently underinsures the detached garage, the contents, and the hotel bill, all at once, in exact proportion.

The sixth limit is the one that has nothing to do with the building at all, is not a percentage of anything, is usually far too low, and is the cheapest thing in the policy to fix.

A note before you start. This is general education, not insurance advice. It describes the structure of the ISO Homeowners 3 – Special Form (HO 00 03), the industry-standard form most US homeowners policies are built from — but a critical caveat applies throughout: most large carriers write their own proprietary forms rather than ISO's, so this is a reference point for how coverage is normally organised, not a description of the policy you hold. Where a figure is actual form text this article says so; where it is a market convention published by regulators, it says that instead, because the difference matters. Your declarations page is the only authority on your own limits.

1. The six limits, at a glance

A through D are Section I of the policy — coverage for your property. E and F are Section II — coverage for your responsibility to other people. They are genuinely different kinds of insurance sold in one contract, which is part of why the second half gets so little attention.

2. Coverage A — the dwelling, and the number everything hangs on

Coverage A insures the house and anything attached to it. Not the land, which cannot burn down and is therefore not insured.

The single most consequential thing to understand about Coverage A is that it is not your home's market value. Market value includes land and reflects location, schools, and what a buyer will pay. Coverage A should reflect what it would cost to rebuild the structure — demolition, debris removal, materials, labour, permits, and code compliance — on the lot you already own.

Those two numbers move independently and can diverge sharply in both directions. In an expensive metro, market value often exceeds rebuild cost, because you are paying for location. In a low-cost housing market with high construction costs, rebuild cost can exceed market value substantially — which is the situation that produces underinsurance, because the owner reasons from the price they paid.

Across this site's sourced 50-state dataset, the average rebuild cost is $237 per square foot, from $200 in Mississippi to $330 in Hawaii. An 1,800-square-foot house at the national average is roughly $427,000 to rebuild. Compare that against a median home price of $380,657 nationally and the shape of the problem is visible: in a great many markets, the rebuild figure is the larger of the two.

Getting Coverage A wrong has a second-order effect that is worse than the first. Because B, C and D are percentages of it, a dwelling limit 20% low produces contents coverage 20% low and loss-of-use coverage 20% low, without anything on the declarations page looking wrong.

3. Coverage B — other structures

Everything on the lot that is not attached to the house: a detached garage, a fence, a shed, a driveway, a retaining wall, an in-ground pool, a mailbox.

This is the one percentage that is genuinely written into the standard form. The policy says the limit "will not be more than 10% of the limit of liability that applies to Coverage A," and that language has been unchanged across editions going back decades.

Ten percent is generous for a house with a fence and nothing else, and badly short for a property with a detached garage, a workshop, and two hundred feet of fencing. On a $400,000 dwelling limit, Coverage B is $40,000 — which will not rebuild a detached two-car garage in most markets, let alone the fence as well.

If your lot has real structures on it, this is a limit to raise deliberately rather than accept.

4. Coverage C — personal property, and the two things people get wrong

Coverage C is everything you would take with you if you moved. Furniture, clothing, electronics, kitchenware, tools, books, linens.

The commonly quoted figure is 50% of Coverage A, and it is worth being precise about where that comes from: no edition of the standard form states a Coverage C percentage. The limit is whatever your declarations page shows. The 50% is the market default, and it is well corroborated — NAIC's consumer guide publishes it, as do the New York, North Carolina, and Wisconsin insurance regulators — but it is a convention, not policy language.

Two things routinely surprise people.

It settles at actual cash value by default

The standard form's loss-settlement condition says personal property is settled "at actual cash value at the time of loss but not more than the amount required to repair or replace." Actual cash value means depreciated value. Your ten-year-old sofa is worth what a ten-year-old sofa is worth, not what a new one costs.

There is an endorsement that changes this to replacement cost, and it is one of the highest-value additions available. Whether you have it is a question your declarations page answers.

It carries sub-limits inside it

Your contents limit is a ceiling on everything, and inside it sit per-category caps. The current standard form's figures:

The theft-only distinction is the part consumer write-ups reverse most often. Jewelry destroyed in a fire is covered against your full contents limit; jewelry stolen is capped. That is precisely what scheduling an item buys you — theft coverage above the cap, and usually mysterious disappearance, which the base policy does not cover at all.

Note also that these figures were raised across the board in the current edition of the standard form. A great deal of material online still quotes the previous, lower numbers.

5. Coverage D — loss of use, the one that lasts longest

If the house is unlivable, Coverage D pays the additional cost of living somewhere else. Rent or hotel, restaurant meals above your normal grocery spending, extra commuting, storage, laundry. Not your normal expenses — the increase over them.

This is where the market convention and the ISO program default disagree, and it is worth knowing both.

• NAIC and the state regulators publish 20% of Coverage A as what consumers should expect. New York, North Carolina, Wisconsin and California all say 20%; Texas's regulator says 10 to 20%.
• ISO's own program default for this form family is 30%.

Both figures are defensible and they describe different things: 30% is what the ISO program sets, and 20% is what regulators observe in the actual market, largely because most large carriers write their own forms rather than ISO's. What you should not accept is a bare "30%" presented as universal.

The reason this limit matters more than its size suggests is duration. A serious loss does not mean six weeks in a hotel. Between adjusting, permitting, contractor availability, and the build itself, a full rebuild routinely runs 12 to 18 months, and in a region where a catastrophe damaged thousands of homes simultaneously it runs longer, because every contractor in the area is booked.

At 20% of a $400,000 dwelling limit, Coverage D is $80,000. Over 15 months that is roughly $5,300 a month of additional cost — plausible in much of the country, thin in a high-rent metro where you are also paying a mortgage on the house being rebuilt.

6. Coverage E — personal liability, and why it is the one to fix

Here is the limit that has nothing to do with your building, is not a percentage of anything, and is the most consequential number in the policy after Coverage A.

Coverage E pays when you are legally responsible for someone else's injury or property damage. A guest falls on your steps. Your dog bites someone. Your child breaks a neighbour's window, or something considerably more expensive. It follows you off the property — it is not limited to accidents at your address.

One structural detail worth knowing: legal defence costs are paid on top of the limit, not inside it. A liability policy that defends you does not spend your limit doing so.

The starting figure on a standard policy is commonly $100,000. That figure has not moved with medical costs, wage-loss awards, or judgements, and it is the amount standing between a serious injury on your property and your other assets.

Three reasons this is the best-value fix in the whole policy:

1. It is cheap to raise. Liability claims are rare relative to property claims, so the limit is not what most of your premium is buying. Going from $100,000 to $300,000 or $500,000 typically costs a modest amount annually.
2. It gates the umbrella. Personal umbrella carriers generally require $300,000 to $500,000 of underlying homeowners liability before they will write over it. This is a carrier underwriting requirement rather than a legal rule, and it varies — but a low Coverage E blocks access to the cheapest million dollars of coverage you will ever be offered.
3. Nothing else surfaces it. Every conversation about homeowners insurance is about the dwelling limit. Nobody's mortgage servicer writes to ask whether their liability limit is adequate.

7. Coverage F — medical payments to others

The smallest limit, commonly $1,000, and it does something specific: it pays modest medical bills for someone injured on your property without anyone having to be at fault.

Its purpose is de-escalation. A neighbour trips on your walk, needs stitches, and has a $600 bill. Coverage F pays it, quickly, without a determination of liability and without anyone hiring anyone. The alternative is that a small injury with an unpaid bill becomes a liability claim, which is expensive for everyone including you.

It does not cover you or members of your household — that is what health insurance is for.

8. One fire, all six coverages

Abstractly, six limits is a list. Concretely, they all respond to the same event in different ways, and seeing that is what makes the structure stick.

A kitchen fire in a 1,900-square-foot house insured at $450,000 dwelling. It spreads, the fire service opens the roof, and the house is uninhabitable for eleven months. A visiting neighbour cuts her hand on debris in the driveway the following week.

Coverage A — the house. Structural repair, smoke and water remediation, the roof the fire service opened, and the kitchen. Say $185,000. Well inside the limit, so no coinsurance question arises.

Coverage B — other structures. The detached garage took smoke damage and the fence nearest the house scorched. $14,000. Against a 10% limit of $45,000, comfortable.

Coverage C — personal property. Kitchen contents destroyed; the rest of the house smoke-damaged, which for soft goods often means replaced rather than cleaned. Clothing, linens, upholstery, electronics. $62,000 claimed against a limit of $225,000 at the typical 50%.

But this is where the settlement basis decides the outcome. At replacement cost, the household is paid what it costs to buy those things new today. At actual cash value — the standard form's default — every item is depreciated for age and condition first. On a household of ten-year-old furnishings that difference is routinely tens of thousands of dollars, and it is determined by whether one endorsement is on the policy.

Coverage D — loss of use. Eleven months in a rental at $2,700 a month is $29,700, plus higher food costs, storage for salvaged belongings, and a longer commute. Call it $37,000. Against 20% of Coverage A — $90,000 — this fits. Against a policy that set Coverage D at 10%, it would not.

Note the number that does the work here: the eleven months. Nobody plans for eleven months.

Coverage E — personal liability. The neighbour's hand needs surgery and she is out of work for six weeks. She has medical bills and lost wages, and her own insurer wants its money back. This is the claim with no ceiling in sight, and the one the $100,000 starting limit was never sized for.

Coverage F — medical payments. Had the cut been minor — stitches, one visit, a $700 bill — Coverage F would have paid it without anyone establishing fault, and the liability claim would probably never have existed. That is the entire job of the smallest limit in the policy.

Six limits, one event, and the two that decided how well the household came out of it were the settlement basis on Coverage C and the size of Coverage E — neither of which appears in any conversation about how much dwelling coverage to buy.

9. How to read your own declarations page in ten minutes

Find the declarations page. Every limit above is on it, usually in the first half-page, labelled A through F or by name.

Work down this list:

• Coverage A — is it a rebuild figure or someone's memory of the purchase price? When was it last reviewed? Does it move with an inflation-guard endorsement, and if so, has it kept up?
• Coverage B — do you have structures on the lot worth more than 10% of Coverage A? A detached garage alone usually is.
• Coverage C — is it at the typical half of Coverage A? And does the policy say replacement cost, or does it say actual cash value?
• Coverage D — what percentage is it, and does that fund 12 to 18 months of living somewhere else at your local rents?
• Coverage E — if it starts with a 1 and has five digits, this is your action item.
• Coverage F — worth a glance; rarely worth a conversation.
• Then the endorsements, which are usually a list of form numbers with names: replacement cost on contents, extended or guaranteed replacement cost, ordinance or law, water backup, scheduled personal property.

That last group is where the real differences between two policies of identical limits live, and it is the part of the declarations page people skip entirely.

Frequently asked questions

Why does my policy have six limits instead of one? Because it is really two policies in one contract. Coverages A through D insure your property; E and F insure your responsibility to other people. They respond to completely different events and are underwritten differently, so they carry separate limits.

Is the 50% personal property figure a rule? No. It is the common market default, published by NAIC and several state regulators, but no edition of the standard homeowners form states a Coverage C percentage. Your limit is whatever your declarations page says, and carriers write both above and below 50% routinely.

Which of these percentages is actually in the policy? Only Coverage B's. The standard form states that the other-structures limit "will not be more than 10% of the limit of liability that applies to Coverage A." The personal property and loss-of-use percentages are conventions, not form language.

Should Coverage D be 20% or 30%? Regulators tell consumers to expect 20%, and ISO's own program default is 30%. Both figures are real and they describe different things. What matters more than the label is whether the dollar amount funds 12 to 18 months of living costs at your local rents.

How much liability coverage should I carry? That is a decision about your own assets and risk, not something a website should put a number on. What is worth knowing is that most umbrella carriers require $300,000 to $500,000 underneath them, that raising the limit is unusually cheap, and that $100,000 is where the standard form starts rather than where anyone recommends stopping.

Does an umbrella policy replace Coverage E? No — it sits above it. The umbrella pays after the underlying homeowners liability limit is exhausted, which is why carriers require a minimum underlying limit before writing one.

If my dwelling limit is too low, does that really affect my contents coverage? Yes, and this is the most useful thing in this article. B, C and D are set as percentages of A. Raise or lower Coverage A and three other limits move with it automatically, without anything on the declarations page appearing to change.

What is the difference between Coverage E and Coverage F? Coverage F pays small medical bills without fault being established, to stop a minor injury becoming a claim. Coverage E responds when you are legally responsible, pays far larger amounts, and comes with legal defence on top of the limit.

What to do next

Pull your declarations page and run all six limits through the coverage check calculator. It compares each against what a standard policy carries, tells you which came in low, and flags the liability limit separately — because that one can pass every percentage test and still be the biggest exposure on the page.

• Replacement cost calculator — whether Coverage A would actually rebuild the house, and what the 80% coinsurance rule costs if it wouldn't
• Premium estimator — what your coverage level should cost in your state
• Deductible comparison — what your storm deductible comes to in real dollars
• What homeowners insurance doesn't cover — the exclusions that sit behind all six limits
• How our figures are sourced

This article is general education about how homeowners policies are structured, not insurance advice. It describes the ISO Homeowners 3 – Special Form; most large carriers write their own proprietary forms, and limits, percentages, and endorsement availability vary by carrier and state. Rebuild-cost and home-price averages are computed from this site's own sourced 50-state dataset and are illustrative of scale, not of your property. Your declarations page governs your coverage — take specific questions to a licensed agent in your state.