Home insurance protects one of your most valuable assets—your home—while also covering your belongings and providing financial protection in case of accidents, disasters, or liability claims. Whether you’re a first-time homeowner or reviewing an existing policy, this comprehensive FAQ breaks down everything you need to know in clear, simple language.
What Is Home Insurance?
Home insurance is a type of property insurance that covers damage to your home, personal belongings, and additional structures on your property. It also includes liability protection if someone is injured on your property or if you accidentally cause damage to someone else’s property.
Most mortgage lenders require home insurance as a condition of financing, but even if you own your home outright, coverage is strongly recommended.
What Does Home Insurance Typically Cover?
A standard homeowners policy (HO-3) covers:
Dwelling Coverage
Protects the physical structure of your home—walls, floors, roof, built-in appliances—against covered hazards like fire, windstorms, hail, or vandalism.
Other Structures Coverage
Covers structures not attached to your home, such as garages, sheds, fences, and detached studios.
Personal Property Coverage
Reimburses you for lost, stolen, or damaged belongings like furniture, clothing, electronics, and appliances.
Loss of Use (Additional Living Expenses)
Pays for temporary housing and related expenses if your home becomes uninhabitable due to a covered event.
Personal Liability Coverage
Protects you if you’re sued for injuries or property damage you caused unintentionally.
Medical Payments to Others
Covers minor injuries to guests on your property, regardless of fault.
What Events Are Covered by Home Insurance?
Typically covered hazards include:
- Fire and smoke
- Wind and hail
- Theft and vandalism
- Explosions
- Falling objects
- Water damage from burst pipes
- Damage from vehicles
- Damage from aircraft
Every policy has its own specifics, so reviewing your declarations page is essential.
What Events Are NOT Covered?
Common exclusions include:
- Floods
- Earthquakes
- Sinkholes
- Termite or pest damage
- Mold beyond a certain limit
- Routine wear and tear
- Sewer backups (unless add-on coverage is purchased)
Flood and earthquake coverage must be purchased separately if needed.
How Much Home Insurance Do You Need?
Your coverage should be based on reconstruction cost, not your home’s market value. Reconstruction cost reflects what it would take to rebuild your home today using current labor and material prices.
You should also review:
- The value of your belongings
- Liability limits
- Specific risks in your area
- Potential add-ons like flood insurance, water backup coverage, or extended dwelling protection
What Is a Deductible?
A deductible is the amount you pay before your insurance kicks in during a claim. Common deductible options include $500, $1,000, or 1–2% of your dwelling coverage.
Higher deductibles lower your premium but increase your out-of-pocket cost when filing a claim.
How Are Home Insurance Premiums Calculated?
Insurers base premiums on many factors, such as:
- Your home’s age and construction
- Roof condition and materials
- Crime rates in your area
- Proximity to fire stations/hydrants
- Your credit history (in many states)
- Claims history
- Weather risks (hail, storms, wildfires)
- Coverage amounts and deductible choices
Smart home devices, new roofs, and safety improvements can often reduce your rates.
What Is Replacement Cost vs. Actual Cash Value?
Replacement Cost (RCV)
Pays to replace damaged items with new ones of similar kind and quality, without deducting for depreciation.
Actual Cash Value (ACV)
Pays only what your damaged property is worth today, factoring in depreciation.
Most homeowners prefer RCV because it offers significantly better protection.
Does Home Insurance Cover Water Damage?
It depends on the source.
Covered:
- Burst pipes
- Appliance overflows
- Water heater ruptures
Not covered:
- Floods
- Sewer backups (unless you add that endorsement)
- Gradual leaks or poor maintenance
Water-related claims are among the most common, so knowing your policy details is critical.
Does Home Insurance Cover Roof Damage?
Yes—if the damage is caused by a covered peril such as wind, hail, or falling objects. Aging roofs often receive limited or depreciated coverage, so insurers may require inspection or proof of maintenance.
What Is Liability Coverage and Why Is It Important?
Liability coverage protects you financially if:
- Someone is injured on your property
- Your pet injures someone
- You accidentally damage someone else’s property
It covers legal costs, medical bills, and settlements. Most homeowners carry at least $300,000 in liability protection, though higher limits are recommended for added financial security.
Should You Add Extra Endorsements?
Many homeowners benefit from add-ons, such as:
- Flood insurance
- Earthquake insurance
- Scheduled personal property (for jewelry, art, collectibles)
- Service line coverage
- Water backup and sump pump overflow
- Identity theft protection
These endorsements fill gaps that a standard policy may not cover.
How Do Home Insurance Claims Work?
After submitting a claim, your insurer will:
- Assign a claims adjuster
- Review damages and documentation
- Determine coverage
- Approve (or deny) the claim
- Provide payment or coordinate repairs
Quick reporting and detailed documentation help speed up the process.
How Can You Lower Your Home Insurance Premium?
Consider these strategies:
- Bundle home and auto insurance
- Increase your deductible
- Install security systems or smart home devices
- Replace or reinforce your roof
- Maintain good credit
- Remove high-risk features like aging trampolines or unstable trees
- Shop around for quotes
Small upgrades often lead to significant annual savings.
How Often Should You Review Your Policy?
Review your home insurance policy:
- Annually
- After home renovations
- After purchasing expensive items
- After changes in occupancy (renters, roommates, etc.)
- If your local area experiences new risks
Keeping your policy updated ensures accurate pricing and sufficient coverage.
Final Thoughts
Home insurance provides essential protection for your property, belongings, finances, and peace of mind. Understanding how your policy works—and what it does and does not cover—is the key to choosing the right protection. Use this FAQ as your guide to confidently navigate home insurance and make informed decisions about your coverage.