How does homeowners insurance decide what to cover?

Homeowners insurance coverage is determined primarily by the type of policy you purchase and the specific perils listed in it. Most standard policies use either an open perils approach, which covers everything except what is explicitly excluded, or a named perils approach, which only covers events specifically listed in the policy, such as fire, theft, windstorm, or vandalism. When a claim is filed, the insurer investigates to confirm the damage was caused by a covered peril, that the loss wasn't due to neglect or intentional acts, and that the claim falls within your coverage limits and deductible terms. Insurers also consider depreciation versus replacement cost depending on your policy type, and they may deny claims for damage from floods or earthquakes, which typically require separate policies.