A standard homeowners policy is broken into six coverage parts. Understanding each one is the starting point for evaluating whether your policy is right for your situation.
Coverage
What it protects
Coverage A — Dwelling
The structure of your home — walls, roof, foundation, built-in appliances, and attached structures like a garage. This is the most important limit on your policy.
Coverage B — Other Structures
Detached structures on the property — fences, sheds, detached garages, and outbuildings. Typically set at 10% of Coverage A automatically.
Coverage C — Personal Property
Your belongings — furniture, electronics, clothing, and household items. Subject to sublimits for specific categories like jewelry and instruments.
Coverage D — Loss of Use
Additional living expenses if your home becomes uninhabitable after a covered loss — hotel, meals, and temporary housing costs while repairs are made.
Coverage E — Personal Liability
Legal defense and damages if someone is injured on your property or you cause unintentional damage to others. Applies worldwide, not just at home.
Coverage F — Medical Payments
Pays for minor injuries to guests on your property regardless of fault — a goodwill coverage that helps resolve small claims without litigation.
What a standard policy does not cover
Several significant risks are excluded by default and require separate policies or endorsements. Flood damage requires a separate flood policy entirely — it is not covered by any homeowners policy under any circumstances. Earthquake coverage is also excluded. Water backup, sewer backup, service line damage, and sump pump failure are excluded from most standard policies but can be added as endorsements. We cover each of these in detail below.
The Most Important Concept
Insurance to Value: Why Most Homeowners Are Underinsured
The single most important number on a homeowners policy is the dwelling coverage limit — Coverage A. This limit should reflect what it would cost to rebuild your home from the ground up at today’s material and labor prices. This is called replacement cost, and it is not the same as your home’s market value or what you paid for it.
The core distinction
Market value is what your home would sell for. Replacement cost is what it would cost to rebuild it. A home in a hot real estate market might sell for $600,000 but only cost $380,000 to reconstruct. Conversely, a home in a rural area might sell for $200,000 but cost $260,000 to rebuild due to access and materials. Insuring to market value instead of replacement cost means being underinsured either way.
Why homeowners drift into being underinsured
Most homeowners set their Coverage A limit at closing and rarely revisit it. Meanwhile, construction costs change. If your policy hasn’t been reviewed in five or more years, the gap between your insured value and your actual replacement cost may be significant. An agreed value or guaranteed replacement cost endorsement protects against this by committing the carrier to pay the full cost of reconstruction regardless of what the limit says — though these endorsements require the policy to be written at the correct value in the first place.
Why this matters at claim time
A home insured for $280,000 suffers a total loss. Rebuilding costs $390,000. Without an inflation guard or guaranteed replacement cost endorsement, the insured receives the policy limit — leaving a $110,000 gap that comes directly out of pocket. This is one of the most preventable situations in insurance, and it happens because the policy was never updated after the original purchase.
How to know if your Coverage A is right
Most carriers use a reconstruction cost estimator tool during the application process. Your independent agent should run this at every renewal, not just at inception. If your carrier offers an inflation guard endorsement that automatically adjusts your dwelling limit each year, it is worth adding. It does not eliminate the need for a periodic review, but it keeps the limit from falling further behind over time.
Common Gaps
Four Coverage Gaps Most Homeowners Don’t Know They Have
These four endorsements come up on nearly every homeowners policy review we do. None of them are included in a standard policy. All of them are available for a modest annual premium — and all of them cover losses that are surprisingly common.
✕ Not in standard policy
Water & Sewer Backup
Sewage or water that backs up through floor drains, toilets, or other plumbing. Excluded by default. One of the most common and costly water claims in Minnesota.
✓ Available as endorsement
Water & Sewer Backup
Add this endorsement for roughly $50–$150 per year. Coverage for cleanup, structural damage, and personal property loss from backed-up water or sewage.
✕ Not in standard policy
Service Line Coverage
Underground pipes and wires running from the street to your home — water lines, gas lines, electrical conduits, cable, and fiber. If a tree root or ground shift breaks a water line in your front yard, the repair is entirely your cost.
✓ Available as endorsement
Service Line Coverage
Covers repair or replacement of underground service lines. Typically $30–$80 per year. Repairs can cost several thousand dollars depending on depth, material, and length of the line.
✕ Often not in water backup
Sump Pump Failure
The sump pump fails during a heavy rain. The basement floods. Water backup endorsements vary in whether they include sump pump failure — some carriers require a separate endorsement. Read the language carefully.
✓ Available as endorsement
Sump Pump Failure
Covers damage resulting from sump pump failure or overflow. Often bundled with water backup coverage, but confirm specifically. Minnesota basements without this endorsement are significantly exposed during spring thaw and heavy rain events.
✕ Often sublimited or excluded
Power Surge Coverage
A power surge damages electronics, appliances, and HVAC equipment. Standard policies often limit electrical surge losses to a low sublimit — sometimes as little as $500 — or exclude them entirely.
✓ Available as endorsement
Power Surge Coverage
An equipment breakdown or service line endorsement can significantly expand coverage for surge-related losses. With smart home systems, heat pumps, and premium appliances, the exposure from a single surge event can easily reach five figures.
What You Pay Out of Pocket
Homeowners Deductibles in Minnesota: Dollar vs. Percentage
Most Minnesota homeowners policies carry two separate deductibles: an all-other-perils (AOP) deductible that applies to most claims, and a separate wind and hail deductible that applies specifically to storm damage. Understanding the difference matters because wind and hail is the most common cause of homeowners claims in Minnesota.
Dollar deductibles
A dollar deductible works the way most people expect. A $1,000 deductible means you pay $1,000 out of pocket and insurance covers the rest of a covered loss above that threshold. Straightforward and predictable.
Percentage deductibles
A percentage deductible is calculated as a percentage of your home’s insured value — not the claim amount. This is the part that surprises homeowners most at claim time.
How percentage deductibles work in practice
Your home is insured for $400,000. Your wind and hail deductible is 1%. A hail storm causes $14,000 in roof damage. Your deductible is $4,000 — 1% of $400,000 — regardless of the claim size. If your home were insured for $500,000 with the same 1% deductible, your out-of-pocket on the same claim would be $5,000. The deductible scales with your insured value, not with what the storm costs you.
Percentage deductibles transfer meaningful risk back to the homeowner. They are increasingly common in Minnesota as carriers respond to the frequency of hail and wind claims across the state. When comparing policies, verify the wind and hail deductible specifically — it is often different from the AOP deductible and is not always prominently displayed on the declarations page.
High-Value Items
Scheduled Personal Property: When Your Policy’s Sublimits Aren’t Enough
Standard personal property coverage (Coverage C) applies sublimits to specific categories. These sublimits cap what the policy pays for that category regardless of actual loss — even if your total personal property limit is much higher. Common sublimits include jewelry (often $1,500), silverware, firearms, instruments, and cameras.
What scheduling means
Scheduling an item means listing it individually on the policy with an agreed value. The agreed value is what the carrier will pay if the item is lost, stolen, or damaged — with no deductible and broader coverage than the base policy provides. A scheduled engagement ring lost at the gym is covered. An unscheduled ring lost at the gym may fall outside the base policy entirely.
Items worth considering for scheduling
Jewelry over $1,000
Musical instruments
Camera bodies & lenses
Fine art & antiques
Collectibles with appraised value
Furs & high-end clothing
A note on lab-grown diamonds
Lab-grown diamond values have declined significantly as production costs have dropped. Appraisals done at the time of purchase may no longer reflect replacement cost — and in some cases may substantially overstate value. If you have jewelry with lab-grown stones, get a current appraisal before scheduling it. Insuring based on an outdated appraisal means paying premium on value that no longer exists.
Minnesota-Specific
Minnesota Risks That Belong on Every Homeowner’s Radar
Ice Damming
Ice dams form when heat escapes through the roof, melts snow, and the water refreezes at the eaves. Water backs up under shingles and can cause significant interior damage. Ice dam claims are generally covered under the water damage provision of a standard policy, but the ice dam itself — and the root cause of poor insulation or ventilation — is not. Prevention is meaningful: proper attic insulation and ventilation reduces both frequency and severity.
Burst Pipes from Freezing
Water damage from a frozen pipe that bursts is covered — provided the home was properly heated and maintained. If a home was vacant and unheated when pipes froze, coverage may be denied. Vacant home policies have different requirements. For occupied homes, the most common exposure is pipes along exterior walls or in uninsulated spaces like garages. Shutoff valves and knowing where they are matters.
Straight-Line Wind and Hail
Minnesota sits in a corridor where severe thunderstorms with straight-line winds regularly produce damage comparable to a tornado — without the tornado designation that sometimes triggers additional coverage provisions. Hail damage to roofing is the single most common homeowners claim in the state. If your policy carries a percentage deductible for wind and hail, confirm the deductible amount before a storm season, not after.
Storm Chasers After Hail Events
After significant hail events, roofing contractors who follow the storm path — often from out of state — solicit homeowners with free inspections and offers to work directly with insurance. Minnesota law (§325E.66, §326B.811) prohibits contractors from offering to waive your deductible and from signing contracts that give them the right to negotiate your claim. A signed “direction to pay” or assignment-of-benefits contract transfers significant rights to the contractor. Read any roofing contract carefully before signing, and call your agent before you call a contractor.
When You’re Comparing
How to Compare Homeowners Policies in Minnesota
Price is easy to compare. Coverage is harder. Two policies at the same premium can have very different deductibles, sublimits, exclusions, and available endorsements. Here is what actually matters when evaluating quotes side by side.
Coverage A limit vs. replacement cost estimate. The most important number. Confirm the dwelling limit was set using a current reconstruction cost estimate, not a market value figure or a round number.
Wind and hail deductible structure. Dollar or percentage? If percentage, what is the rate and what is it applied to? This single item can create a multi-thousand-dollar difference in your out-of-pocket exposure.
Water backup and sewer backup. Is it included or excluded? If included, does it cover sump pump failure specifically? What is the sublimit?
Service line endorsement availability. Not all carriers offer it. If underground utility line coverage matters to you, confirm it is available before choosing a carrier.
Replacement cost vs. actual cash value on personal property. Replacement cost pays what it costs to buy the item new today. Actual cash value deducts depreciation. The difference on a five-year-old TV or appliance is significant.
Loss of use limit. If your home is uninhabitable for months after a major loss, what does Coverage D actually provide? Check the limit and any time caps.
Carrier financial strength. AM Best rating indicates the carrier’s financial ability to pay claims. A-rated or better is the baseline for a long-term homeowners relationship.
Claims handling. J.D. Power scores and independent reviews of claims experience matter more than branding. An independent agent who places business with multiple carriers can tell you which ones are difficult at claim time.
Common Questions
Frequently Asked Questions
Market value is what your home would sell for on the open market. Replacement cost is what it would cost to rebuild it from scratch at today’s material and labor prices. Homeowners insurance is based on replacement cost — not market value. These numbers can differ significantly depending on your market and how long ago you bought. Insuring to market value instead of replacement cost is one of the most common ways homeowners end up underinsured.
No. Standard homeowners policies in Minnesota exclude water that backs up through drains or sewers. Coverage is available as an endorsement — typically for $50 to $150 per year — and is one of the most commonly overlooked gaps we find on policy reviews. Sump pump failure coverage is often separate and should be confirmed specifically with your carrier.
A percentage deductible is calculated against your home’s insured value — not the claim amount. On a home insured for $400,000 with a 1% wind and hail deductible, your out-of-pocket before insurance pays is $4,000, regardless of whether the claim is $8,000 or $80,000. Many homeowners assume it works like a dollar deductible and are surprised at claim time. This is worth confirming every renewal — not just when you buy.
Service line coverage protects the underground pipes and wires that run from the street to your home — water lines, gas lines, electrical conduits, and fiber or cable lines. Standard homeowners policies do not cover these. If a tree root breaks your water line in your front yard, the excavation, repair, and restoration is your cost entirely without this endorsement. It typically adds $30 to $80 per year and covers a failure that can easily cost $3,000 to $10,000 to repair.
Standard policies cap payouts on specific categories — often $1,500 for jewelry, $2,500 for silverware, and similar sublimits for instruments and cameras. Scheduling an item adds agreed value coverage with no deductible and protection anywhere in the world. Consider scheduling jewelry over $1,000, musical instruments, camera bodies and lenses, fine art, and collectibles. An appraisal is typically required for items over a carrier-specified threshold. Review your scheduled items if values have changed — particularly for jewelry with lab-grown stones, which have declined significantly in replacement value.
Featured Agent
Tom Wertish
President
Tom founded Options Insurance in 2014 and has reviewed hundreds of Minnesota homeowners policies. The gaps covered in this guide — insurance to value, water backup, service lines, percentage deductibles — come up on nearly every new client review. A 30-minute conversation usually identifies at least one coverage issue worth correcting.
