Homeowners insurance is mandatory for mortgaged properties and essential for all homeowners — yet most people don't know what their policy covers until they file a claim and discover the gaps.
What standard HO-3 policies cover
| Coverage type | What it covers | Typical limit |
|---|---|---|
| Dwelling | Physical structure of home | Replacement cost of home |
| Other structures | Detached garage, fence, shed | 10% of dwelling coverage |
| Personal property | Belongings inside the home | 50–70% of dwelling |
| Loss of use | Temporary housing if uninhabitable | 20–30% of dwelling |
| Liability | Injuries on property, personal liability | $100,000–$300,000 |
| Medical payments | Minor injuries to guests | $1,000–$5,000 |
What standard policies DON'T cover
- Floods: Zero coverage. Requires separate NFIP or private flood policy. 90% of US natural disasters involve flooding. Average flood claim: $52,000.
- Earthquakes: Not included in standard policies. California, Pacific Northwest, New Madrid fault zone residents need separate earthquake coverage.
- Sewer backup: Usually excluded unless you add a rider ($50–$100/year).
- Home business equipment: Coverage for business property typically capped at $2,500.
- High-value items: Jewelry, art, collectibles usually capped at $1,500–$2,500 total — need separate scheduled personal property endorsement.
Replacement cost vs actual cash value
Actual cash value (ACV): pays depreciated value of items. A 5-year-old couch destroyed in a fire pays $200 (current market). Replacement cost value (RCV): pays to replace at current market price. The $200 ACV couch gets $800 replacement cost coverage. Always buy RCV — the premium difference ($50–$150/year) is trivial vs the payout difference in a claim.
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About the author
Enrique 'Kike' Faúndez is an Information Systems and Management Control Engineer from Universidad de Chile, with master’s degrees in Finance from Universidad de Chile and Industrial Engineering from Pontificia Universidad Católica de Chile. He has 15+ years of experience in regulated financial services across finance, operations, and digital product development. He founded CashControlly in Santiago, Chile, with the conviction that personal financial control should not be a privilege, but an accessible and well-designed tool.
- Master's in Finance, Universidad de Chile
- Master's in Industrial Engineering, Pontificia Universidad Católica de Chile
- Information Systems and Management Control Engineer, Universidad de Chile
- AI and ITIL certifications
- 15+ years in regulated financial services
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