Homeowners Insurance

What it protects against

Financial consequences of perils such as windstorms, fire and theft on a house, garage and other structures on the property. It does not cover the effects of floods or earthquakes. Homeowners insurance protects personal property inside the house and loss of personal property anywhere in the world. It covers the expenses of loss of use - the cost of living elsewhere while the property is restored. Liability coverage protects against injuries sustained by guests, and it covers damage you, your family members and pets cause to other properties.

How it works

Insurers underwrite homeowners insurance through agents who visit a property and by responses from the homeowners, and increasingly with software that helps measure the value of buildings and quantify risks in an area. The amount insurers will pay when a house is destroyed depends on the level of coverage the insured has chosen, from less than the cost of rebuilding to actual cost.

Who needs it

Property owners, particularly those whose lenders require homeowners insurance. Government does not require homes be insured. Insurers suggest you buy enough insurance to rebuild your house at current construction costs, and that you inventory personal property to make sure you have proper coverage.

Who may not need it

Do you really want to consider not insuring the building you call home?

When to buy it

When you buy your home. You should periodically review coverage. Sometimes, you can get discounts for such items as a burglar alarm or a new heating system. Affluent homeowners might consider an umbrella policy to add liability coverage beyond what their homeowners and auto policies provide.

How you pay for it

Annual premiums.

Terms to Know

• Extended Replacement Cost
  This option extends replacement cost loss settlement to personal property and to outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment, subject to limitations on certain kinds of personal property; includes inflation protection coverage.
• Floater
  A separate policy available to cover the value of goods beyond the coverage of a standard renters insurance policy including movable property such as jewelry or sports equipment.
• Hurricane Deductible
  Amount you must pay out-of-pocket before hurricane insurance will kick in. Many insurers in hurricane-prone states are selling homeowners insurance policies with percentage deductibles for storm damage, instead of the traditional dollar deductibles used for claims such as fire and theft. Percentage deductibles vary from one percent of a home's insured value to 15%, depending on many factors that differ by state and insurer.
• Umbrella Policy
  Coverage for losses above the limit of an underlying policy or policies, such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.