For most people, their home is their biggest investment. Home insurance protects this investment and provides financial security for you and your family. Understanding what home insurance covers—and what it doesn’t—is essential for every homeowner.
This comprehensive guide will help you understand home insurance basics, coverage options, and how to choose the right policy for your needs.
What Is Home Insurance?
Homeowners insurance is a policy that protects your home and belongings from various perils while also providing liability coverage. In exchange for regular premium payments, your insurance company agrees to pay for covered losses and damages.
Most mortgage lenders require homeowners insurance as a condition of the loan.
Standard Home Insurance Coverage
Dwelling Coverage
This covers the structure of your home, including:
- Walls, roof, and foundation
- Built-in appliances
- Attached structures (garage, deck)
- Permanent fixtures
Dwelling coverage pays to repair or rebuild your home after covered damage.
Other Structures Coverage
This protects detached structures on your property:
- Fences
- Sheds
- Detached garages
- Guest houses
Typically 10% of your dwelling coverage limit.
Personal Property Coverage
This covers your belongings inside and outside your home:
- Furniture
- Electronics
- Clothing
- Appliances
- Jewelry (with limits)
Loss of Use Coverage
If your home becomes uninhabitable due to covered damage, this coverage pays for:
- Temporary housing
- Hotel expenses
- Restaurant meals
- Other additional living expenses
Liability Coverage
This protects you if someone is injured on your property or if you accidentally damage someone else’s property. It covers:
- Legal defense costs
- Medical expenses
- Settlements or judgments
Medical Payments Coverage
This covers minor medical expenses for guests injured on your property, regardless of fault. It’s designed for quick payment without determining liability.
What Home Insurance Typically Covers
Common Covered Perils:
- Fire and smoke damage
- Lightning strikes
- Windstorms and hail
- Theft and vandalism
- Falling objects
- Water damage from plumbing failures
- Weight of ice and snow
- Explosions
- Riots and civil commotion
What Home Insurance Usually Doesn’t Cover
Common Exclusions:
- Flood damage
- Earthquake damage
- Maintenance issues
- Mold (in most cases)
- Pest infestations
- Sewer backups
- Intentional damage
- Government actions
- Nuclear hazards
- War
For excluded perils, you may need separate policies or endorsements.
Types of Home Insurance Policies
HO-3 (Special Form)
The most common policy type. Covers your dwelling against all perils except those specifically excluded. Personal property is covered for named perils only.
HO-5 (Comprehensive Form)
Premium coverage that protects both dwelling and personal property against all perils except exclusions.
HO-4 (Renters Insurance)
Designed for renters. Covers personal property and liability but not the building structure.
HO-6 (Condo Insurance)
For condominium owners. Covers interior walls, personal property, and liability.
HO-8 (Older Home Form)
For older homes where replacement cost exceeds market value.
How Much Home Insurance Do You Need?
Dwelling Coverage
Your dwelling coverage should equal the cost to rebuild your home, not its market value. Consider:
- Local construction costs
- Home size and features
- Custom finishes
- Building code upgrades
Personal Property Coverage
Create a home inventory to estimate the value of your belongings. Consider:
- Furniture and appliances
- Electronics
- Clothing
- Collectibles and valuables
Liability Coverage
Standard policies offer $100,000-$300,000 in liability coverage. Consider higher limits or an umbrella policy if you have significant assets to protect.
Understanding Deductibles
Your deductible is the amount you pay before insurance kicks in. Common deductible options:
- $500
- $1,000
- $2,500
- Percentage deductibles (for specific perils)
Higher deductibles mean lower premiums but more out-of-pocket costs when you file a claim.
Tips for Saving on Home Insurance
- Shop around and compare quotes
- Bundle with auto insurance
- Increase your deductible
- Improve home security (alarms, deadbolts, cameras)
- Install safety devices (smoke detectors, fire extinguishers)
- Maintain good credit
- Stay claims-free
- Ask about discounts (new home, loyalty, professional organizations)
- Review coverage annually
- Consider impact-resistant roofing
Filing a Home Insurance Claim
Steps to Take:
- Document the damage with photos and videos
- Prevent further damage if safe to do so
- Contact your insurance company promptly
- Make a list of damaged items
- Keep receipts for emergency repairs
- Cooperate with the claims adjuster
- Review the settlement offer carefully
- Don’t sign anything you don’t understand
Conclusion
Home insurance is essential protection for your most valuable asset. Take time to understand your coverage, assess your needs, and choose a policy that provides adequate protection. Review your policy annually and update it as your circumstances change.