Homeowners Insurance Guide

Homeowners insurance protects your house, your belongings and your finances if something goes wrong. Mortgage lenders usually require it, and even without a mortgage it is one of the most important policies a homeowner can have.

What a standard homeowners policy covers

• Dwelling: the structure of your home, such as walls, roof and built-in appliances.
• Other structures: detached garages, sheds and fences.
• Personal property: furniture, clothing, electronics and other belongings, at home or while traveling.
• Loss of use: extra living expenses, such as a hotel, if your home becomes unlivable after a covered loss.
• Personal liability: injuries or property damage you or your family cause to others.
• Medical payments to others: small medical bills for guests injured on your property, regardless of fault.

What is usually not covered

• Flood damage: requires a separate flood policy, for example through the National Flood Insurance Program (NFIP) or a private insurer.
• Earthquakes: require separate coverage or an endorsement.
• Wear and tear, mold and pests: maintenance issues are excluded.
• High-value items: jewelry, art and collectibles often have low limits unless you add a rider.

Replacement cost vs. actual cash value

A replacement cost policy pays what it costs to rebuild or replace items at today’s prices. An actual cash value policy subtracts depreciation, so you receive less for older items. Replacement cost coverage costs more but usually provides much better protection.

How much coverage do you need?

Your dwelling coverage should reflect the cost to rebuild your home, not its market value or purchase price. Construction costs, local labor prices and building codes all matter. Review your limits every year, especially after renovations.

Tips to save on homeowners insurance

• Bundle home and auto insurance with the same company.
• Raise your deductible if you have an emergency fund.
• Install smoke detectors, monitored alarms and water leak sensors.
• Update your roof, plumbing and electrical systems.
• Compare quotes every one to two years.

Read more: what homeowners insurance covers and what it does not.

This guide is for general information only and is not insurance, legal, tax or financial advice. Coverage, rules and prices vary by state, insurer and policy. Always read your policy documents and speak with a licensed insurance agent or your state insurance department before making a decision.