What is homeowners insurance?

How does homeowners insurance work?

Homeowners insurance coverage may provide you with protection if the unexpected happens to your home or property. Your home insurance company provides you with coverage for your home, belongings, and the other structures on your property. If a sudden and accidental loss occurs, you can file a claim with your insurance company. You will receive payment for covered losses, minus any home insurance deductible, up to your policy's coverage limit.

Is homeowners insurance required?

Unlike car insurance, home insurance isn't mandated by law. However, if you're financing your home, mortgage lenders have a vested interest in it. They will typically require you to have a homeowners insurance policy in place. Even if you paid off your mortgage, your home is arguably one of your most valuable assets and you may want to protect it. Because homeowners insurance not only protects your home and property but may also cover you if someone sues you for accidental injuries, you might consider it a must-have.

What does homeowners insurance cover?

Homeowners insurance typically covers your dwelling, other structures on your property, personal property, personal liability, medical payments to others, and loss of use costs. Payment for damages depends on if a covered peril caused the loss and the homeowners insurance coverage limits on your policy.

• Dwelling coverage: If your home's physical structure, including your roof, siding or attached garage, is damaged by a covered peril, dwelling coverage may pay to repair or rebuild the physical structure of your home and anything permanently attached to it.
  For example, if a windstorm knocks your chimney down, your policy's dwelling coverage may pay for those repairs, up to your policy's limits, minus your deductible.
• Other structures coverage: Other structures coverage for structures on your property that are not attached to the main home, including outbuildings like detached garages, fences, and gazebos. If a violent thunderstorm damages your garden shed, other structures coverage may pay for the damage, up to your policy's limits, minus your deductible.
• Personal property coverage: Personal property coverage protects your belongings such as electronics, furniture, and clothing up to your coverage limits and minus your homeowners insurance deductible.
  For example, personal property coverage may pay to replace a computer stolen from your car, up to your policy's limits and minus your deductible.
• Personal liability coverage: Personal liability coverage protects against financial loss if you're liable for another party's damages or injuries. It may even cover legal fees and lawsuits if you're sued.
  For example, if your child accidentally breaks a neighbor's stained-glass window while playing catch in the yard, your liability coverage may pay to replace the window, up to your policy's liability coverage limit.
• Loss of use coverage: Loss of use coverage, which includes "additional living expenses," may pay for extra costs you incur to maintain your living situation while your home is being repaired or rebuilt due to a covered loss.
  For example, suppose a fire destroys much of your home and leaves it uninhabitable. Loss of use coverage may pay the additional costs you incur for a short-term rental and certain living expenses up to your policy's limit while your home is being repaired. Learn about how insurance may cover fire damage.

Optional homeowners insurance coverages also include water backup coverage and personal injury coverage.

FAQs about homeowners insurance

Is home insurance tax deductible?

Homeowners insurance is generally not tax-deductible. But some exceptions may warrant a possible home insurance tax deduction, including if you have a home-based business. Consult a tax professional for more details. Properties with a home-based business might not be eligible for coverage. However, some insurance carriers might accept your business if there isn't any foot traffic on the premises, including employees and clients.

Learn more about if homeowners insurance is tax deductible.

How long are home insurance policies in effect?

Most policies are for 12 months and renew annually. Learn more about policy lengths and how homeowners insurance is paid.

Do I need homeowners insurance for a rental property?

If you have rental properties and tenants, you need landlord insurance to safeguard your property and provide liability coverage like any other home insurance policy.

See more frequently asked questions about home insurance.