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  (View Definition )
  • Hurricane Deductible  (View Definition )
  • Umbrella Policy  (View Definition )