Do I need replacement cost or actual cash value coverage?

Replacement cost — always — for dwelling. For personal property, replacement cost runs about 10% more in premium but doubles your average payout. The difference between a stolen 5-year-old laptop reimbursed at $200 (ACV) vs $1,200 (RC) is exactly what you're paying for.

What's the difference between HO-2, HO-3, and HO-5?

HO-2 is "named perils" — covers only the specific events listed (cheap but narrow). HO-3 is the standard — open perils for the structure, named perils for contents. HO-5 is premium — open perils for both structure and contents, with extended replacement cost. Most homeowners should be on HO-3.

How much liability coverage should I have?

At least $300,000 — and if you have meaningful assets (~$500K+), consider $500K plus a $1M umbrella policy. The premium difference between $100K and $500K liability is typically $30–$60/year. A single dog bite or pool incident lawsuit can easily exceed $100K.

Does homeowners insurance cover flood damage?

No. Flood damage is excluded from every standard homeowners policy in the U.S. and requires a separate NFIP policy or private flood insurance. Even if you're outside a "high-risk" zone, ~25% of flood claims come from low/moderate-risk areas.

Coverage

Homeowners insurance, explained

What every coverage piece does, how the standard HO-3 policy is structured, and the limits worth paying for.

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The 6 standard HO-3 coverages

Coverage	What it pays for	Typical limit	Cost note
Dwelling (Coverage A)	Rebuilding the physical structure of your home after a covered loss.	100% of replacement cost	Primary cost driver
Other structures (Coverage B)	Detached garages, fences, sheds, and gazebos.	10% of dwelling limit	Auto-set by carrier
Personal property (Coverage C)	Furniture, electronics, clothing, and belongings (often at actual cash value).	50–70% of dwelling	Increase for high-value items
Loss of use (Coverage D)	Hotel + meals if your home is uninhabitable while being repaired.	20% of dwelling	Critical in long-rebuild events
Personal liability (Coverage E)	Legal costs and damages if someone is hurt on your property and sues.	$100K – $500K	Cheap to raise to $300K+
Medical payments (Coverage F)	Minor medical bills for guests, regardless of fault.	$1K – $5K	Trivial premium cost

Common policy types

HO-2 (Broad form)

Named perils only — covers a list of specific events like fire, theft, hail. Cheapest, but limited.

Best for: older homes, budget-constrained buyers.

HO-3 (Special form)

The U.S. standard. Open perils on the structure, named perils on contents. Best balance of cost and breadth.

Best for: most owner-occupied single-family homes.

HO-5 (Comprehensive)

Open perils on both structure and contents, with extended replacement cost. Premium tier.

Best for: newer or higher-value homes, families with expensive contents.

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Frequently asked questions

A standard HO-3 policy bundles six coverages: dwelling (your structure), other structures (detached buildings), personal property (your stuff), loss of use (additional living expense), personal liability, and medical payments. It excludes flood and earthquake — those need separate policies.

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