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.
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:
However, you might be able to take out separate insurance policies or add on extra coverage to your standard policy to cover your home against earthquakes or flooding.
→ Take a deeper dive into what is and isn’t covered by home insurance
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.
Coverage type | What it covers |
|---|
Dwelling | Covers the cost of damage to the structure of your house and any attached structures, like your garage or patio |
Other structures | Covers the cost of damage to structures that aren’t attached to your home, such as a guest house or fence |
Personal property | Pays to repair or replace your personal belongings in case of damage or theft |
Additional living expenses | Pays for relocation expenses, restaurant meals, and temporary lodging while your home is being repaired or rebuilt |
Personal liability | Covers you and your assets from expensive lawsuits if you’re held liable for another person’s injury or property damage |
Medical payments | 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 $1,899 a year or $158 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: Insurance companies view pools, trampolines, and certain breeds of dogs as high risk since guests are more likely to get injured while at your home. If you own any of these, you’ll likely see higher rates.
→ Learn about the cost of homeowners insurance in each state
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 |
|---|
HO-1 policy | Homeowners looking for the most limited coverage |
HO-2 policy | Homeowners looking for slightly better coverage than an HO-1 policy |
HO-3 policy | The most common type of policy — designed for homeowners looking to cover their home and belongings from most types of damage or loss |
HO-4 policy | Renters |
HO-5 policy | The second most common type of policy — designed for homeowners looking for the most comprehensive coverage available |
HO-6 policy | Condo owners |
HO-7 policy | Mobile or manufactured homeowners |
HO-8 policy | Homeowners with older or high-risk homes |
→ Visit our homeowners insurance learn center for more tips
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 |
|---|
Actual cash value | Cheapest level of coverage — pays for the depreciated value of your home and belongings |
Replacement cost | Slightly more expensive — pays for the value of your home and belongings without deducting for depreciation |
Extended replacement cost | Even more expensive — increases your policy limits by 20% to 50% |
Guaranteed replacement cost | 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.
→ Learn more about how to file a homeowners insurance claim
Don’t forget about your policy deductible
Before paying you for a claim, your insurance company will require that you meet your policy deductible. This is the amount you’re responsible for paying on each claim before your insurance kicks in.
For example, if your insurance deductible is $2,000 and you file a claim for $10,000 in damage — your claim reimbursement check will total $8,000.
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.
You can shop for homeowners insurance in six easy steps:
Learn about how much coverage you need
Get familiar with home insurance policy lingo
Gather information about your home
Compare home insurance quotes through Policygenius
Choose your policy
Finalize your policy details
→ Learn more about the six steps to buying homeowners insurance
Frequently asked questions
What is the difference between homeowners insurance and mortgage insurance?
Homeowners insurance offers financial protection for the homeowner (aka the borrower of a home loan) in the event of damage to their home or belongings. Meanwhile, mortgage insurance protects the mortgage lender in the event that the borrower doesn’t make their mortgage payments on time. You can learn more with our guide to mortgage insurance vs. homeowners insurance.
What is the difference between homeowners insurance and property insurance?
Property insurance is a catch-all term that includes all different types of personal property protection or liability coverage for property owners. Homeowners insurance is a type of property insurance policy, as is flood insurance, earthquake insurance, and renters insurance.
What if I keep getting denied coverage by insurance companies?
The home insurance industry has been volatile over the last year due to an increase in climate change-related weather events, high construction costs, and a rise in insurance lawsuits. Because of this, many standard home insurance companies have tightened their belt around the types of homes they'll insure. If you're considered high risk due to your home's location, condition, or claims history, you might have a difficult time finding coverage.
In this case, you should look into your state's Fair Access to Insurance Requirements (FAIR) Plan. It's a type of high-risk homeowners insurance for individuals who are unable to find coverage on the standard market. Since FAIR Plans are usually more expensive and have limited protection, they're best saved as a last resort.
How can I save money on home insurance?
How does homeowners insurance work for a condo?
If you own a condo, you’ll need to purchase an HO-6 condo insurance policy. The amount of condo insurance you need generally depends on your HOA’s master policy. Master policies usually include some amount of structural coverage for each individual unit. For that reason, condos generally don’t need as much dwelling coverage as single-family homes.
You might also want to consider purchasing HOA insurance for an added level of protection. HOA insuranceis a type of commercial property insurance that covers the exterior of your condo building and common areas that belong to your homeowners association. You can learn more with our guide to HOA insurance.
