What is homeowners insurance?
Homeowners insurance is a form of property insurance that pays for damage to your home and personal belongings from unexpected events, like a fire, weather disaster, or break-in. It also offers financial protection against all of your assets if someone is hurt or their property is damaged and you’re found legally responsible.
Without homeowners insurance, you’d be left paying for repairs or the replacement of your things out of your own pocket. And in the event you’re held liable for an accident on your property, all of your financial assets (home, retirement funds, savings, cars) would be on the line if they take you to court to recoup their losses.
What does homeowners insurance cover?
Also known as hazard insurance, standard home insurance policies cover your home, belongings, and assets from the following types of damage or perils.
Weight of snow or ice
You might also be covered for incidents like dog bites, tree removal, mold, water damage, foundations issues, or roof leaks depending on how the damage occurred and your policy’s coverage levels.
What does homeowners insurance not cover?
Standard home insurance policies won’t cover you for damage caused by any of the following:
Routine wear and tear or age
Intentional acts of arson or vandalism
How does homeowners insurance work?
Home insurance works by paying a monthly or annual premium — aka insurance payment — to your insurance company. Premiums are generally paid directly from you to the insurance company or as part of your monthly mortgage payment.
A standard homeowners insurance policy is made up of the following six coverages, which all cover different things. Each coverage type comes with a limit of liability, or the maximum amount the insurer will pay out for a loss.
What it covers
Covers the cost of damage to the structure of your house and any attached structures, like your garage or patio
Covers the cost of damage to structures that aren’t attached to your home, such as a guest house or fence
Pays to repair or replace your personal belongings in case of damage or theft
Pays for relocation expenses, restaurant meals, and temporary lodging while your home is being repaired or rebuilt
Covers you and your assets from expensive lawsuits if you’re held liable for another person’s injury or property damage
Pays for guests’ medical expenses, regardless of who is at fault
When it comes to personal liability limits, most standard insurers cap coverage at around $500,000 to $1 million. If you need more than that, you might want to consider purchasing an umbrella insurance policy to ensure you're fully protected. Most major insurance providers sell personal umbrella policies. Some even offer generous discounts if you buy umbrella insurance through the same company you have your standard home insurance policy with.
How much does homeowners insurance cost?
The average cost of homeowners insurance in the U.S. is $1,754 a year or $146 a month, according to our analysis of 2022 home insurance rate data from across the country.
Your homeowners insurance company will look at multiple factors when determining the cost of your policy, including:
Location. If you live in an area at high risk of natural disasters or property theft, you’ll likely pay higher rates.
Home construction type. If your home is constructed with materials that are more prone to damage or expensive to replace, like a log home or a house with antique features, that can also increase your home insurance costs.
Age of your home. Older homes generally cost more to insure than newer homes.
Deductible. The higher you set your policy deductible, the lower your home insurance rates will be.
Credit score. The higher your credit score, the lower your rates will be — since insurers see you as less likely to file a claim.
Claims history. The more claims you’ve filed in the past, the more you’ll pay for home insurance.
Risks on your property: You'll be charged higher rates if you own a pool, have a trampoline in your yard, and even if you own certain dog breeds since it increases your guests' risk of injury while at your home.
What are the different types of home insurance policies?
There are several types of homeowners insurance policies designed for everyone from homeowners, to renters, to condo owners, and more. The most common type of home insurance policy is an HO-3 policy — which is designed for homeowners looking to cover their home and belongings from the most common types of damage or loss.
Type of home insurance policy
Who it’s designed for
Homeowners looking for the most limited coverage
Homeowners looking for slightly better coverage than an HO-1 policy
The most common type of policy — designed for homeowners looking to cover their home and belongings from most types of damage or loss
The second most common type of policy — designed for homeowners looking for the most comprehensive coverage available
Mobile or manufactured homeowners
Homeowners with older or high-risk homes
How do homeowners insurance claims work?
When your home or belongings are damaged in a covered incident, you can file a home insurance claim to pay for repairs or their replacement.
Filing a claim is how you put your home insurance policy to work — you’ll show your home insurance company evidence that your home or belongings were damaged or vandalized, and they’ll determine the value of your loss and then reimburse you.
The amount your insurance company reimburses you on a claim will depend on the level of homeowners insurance policy you have.
Coverage level for claims
How it works
Cheapest level of coverage — pays for the depreciated value of your home and belongings
Slightly more expensive — pays for the value of your home and belongings without deducting for depreciation
Even more expensive — increases your policy limits by 20% to 50%
Most expensive level of coverage — pays out whatever it costs to rebuild your home
If your house is damaged in a bad storm, or a guest is injured on your property and files a lawsuit, you can file a claim with your insurance provider who will pay out for the incident if it's covered.
Is homeowners insurance required?
Although homeowners insurance is not required by law, most lenders require proof of homeowners insurance before extending you a loan. If your home is in a high-risk floodplain, your lender may also require you to buy flood insurance.
To give yourself time to compare rates and coverage options, start shopping around for home insurance at least three weeks before your closing date.
Why is homeowners insurance so important?
Homeowners insurance is so important because it provides financial protection against one of your most expensive purchases: your home. It also covers items beyond your home — including your personal belongings and all of your assets should you be sued for damages. And let’s not forget most mortgage companies require you to purchase home insurance before you can even take out a home loan.
How to get homeowners insurance
Homeowners insurance can be purchased through a specific company or through an insurance marketplace like Policygenius that offers policies from multiple companies.
The benefit of shopping through Policygenius is our team of licensed insurance experts will send you quotes from multiple companies to ensure you’ve found the best home insurance company for your needs at the best rates. And the best part? They’ll handle all of the paperwork for you.
Already have a home insurance policy, but looking to see if there's better coverage elsewhere? We can help you with that, too. We'll even cancel your current home insurance policy to take the hassle out of switching insurance companies.