Homeowners insurance covers damage to your home and belongings caused by fire, heavy wind and other disasters.
Updated Sep 5, 2024 · 6 min read Written by Sarah Schlichter Lead Writer Sarah Schlichter
Lead Writer | Home insurance, renters insurance, pet insurance
Sarah Schlichter is a NerdWallet authority on homeowners, renters and pet insurance. Prior to joining NerdWallet, she spent more than 15 years in digital media as a writer, editor and spokesperson. Sarah enjoys delving into complicated topics and helping readers understand the ins and outs of their insurance coverage. She lives in the Washington, D.C., metro area.
Reviewed by Brenda J. Cude Professor Emeritus, University of Georgia Brenda J. Cude
Professor Emeritus, University of Georgia
Brenda J. Cude is Professor Emeritus in the Department of Financial Planning, Housing and Consumer Economics at the University of Georgia. Dr. Cude has served in various consumer-focused roles for the National Association of Insurance Commissioners since 1994. She has also been a member of the Advisory Council for the Center for Insurance Policy and Research; a Board Member of the Coalition Against Insurance Fraud; a member of the Federal Advisory Committee on Insurance; and a Board Member for the Insurance Marketplace Standards Association. Dr. Cude’s primary research interest is consumer decision-making, with an emphasis in personal financial literacy.
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Assistant Assigning Editor Caitlin Constantine
Assistant Assigning Editor | Home insurance, renters insurance, pet insurance
Caitlin Constantine is an assigning editor at NerdWallet, focusing on homeowners, renters and pet insurance. She has more than 15 years of experience in digital media, including as the deputy managing editor at The Penny Hoarder and as a digital producer for a 24/7 news station based in the Tampa Bay area. Caitlin enjoys exploring the ways technology can help people become better informed about the world. She currently lives outside Asheville, North Carolina.
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Nerdy takeawaysYour home is more than just a roof over your head. It may be your most valuable asset — and one you likely can’t afford to replace out of pocket if disaster strikes. That’s why protecting your place with the right homeowners insurance coverage is important.
Homeowners insurance is coverage you can buy to protect yourself financially against certain types of damage and lawsuits.
To get this coverage, you pay an insurance company a certain amount of money, called a premium. In return, the company will pay you if a covered event, such as a fire, damages your home or belongings. Homeowners insurance may also provide financial support if you injure someone else or damage their property.
Key terms to understandClaim : A request for your insurance company to pay you under the terms of your policy. To file a claim, you’ll reach out to your insurer (online or by phone) and explain the extent of the damage. The insurer will evaluate your claim and pay or deny it, depending on your coverage.
Declarations page : Typically the first page of your homeowners policy. It displays important information such as your premium amount, your coverage limits and the address of the home that’s insured.
Deductible : The amount of a claim you’re responsible for. The insurance company will subtract this amount from your payout if you file a claim. The more damage you’re willing to pay for yourself, the lower your homeowners insurance premium will be.
Endorsement: An amendment that adds, changes or removes something in your homeowners policy. For instance, if you’ve paid extra for identity theft coverage , your insurer will add an endorsement to your policy to explain what’s covered.
Limit: The maximum amount your policy will pay for a given type of claim. Homeowners insurance policies generally have different limits for each type of coverage. For example, you may have a coverage limit of $300,000 for the structure of your home and $150,000 for your belongings.
Homeowners insurance covers your house and belongings in case of events such as fires, hail, tornadoes and burst pipes. If one of these scenarios causes damage, your policy can pay to repair it. Homeowners insurance can also reimburse you for theft or vandalism of your belongings.
But a homeowners policy doesn’t just cover your house and your stuff. It can also pay to defend you from lawsuits or cover medical bills for someone who gets hurt on your property. And if you can’t live at home after a covered disaster, your homeowners policy could pick up the tab for a hotel or rental.
Get home insurance quotes in minutes Answer a few questions to see custom quotes and find the right policy for you. Get StartedStandard homeowners insurance policies generally include these six types of coverage:
Covers damage to the home and attached structures, such as a porch.
Enough to rebuild your home.
Covers stand-alone structures on your property, such as a fence or shed.
10% of dwelling coverage.
Pays to repair or replace stolen or damaged belongings.
50% to 70% of dwelling coverage.
Helps pay temporary living expenses while your home is being repaired.
20% of dwelling coverage.
Pays if you injure someone or cause property damage unintentionally or through neglect.
$100,000 to $500,000.
Pays to treat someone injured on your property, regardless of who’s at fault. It also pays if you, a family member or a pet injures someone away from your home.
Dwelling coverage encompasses the structure of your home, including the walls, floors, windows and roof. Built-in appliances, such as furnaces, are also typically included in your dwelling coverage. An attached garage, porch or deck would fall under your dwelling coverage, too.
Which events are covered: Most homeowners policies cover your dwelling for any cause of damage that isn’t specifically excluded. Some of the most common causes of homeowners insurance claims include wind, hail, freezing, fire and lightning, according to the Insurance Information Institute [0]
Insurance Information Institute . Facts + Statistics: Homeowners and renters insurance. Accessed Sep 5, 2024.
How it works: A severe thunderstorm uproots a tree that falls onto your home, crushing part of the roof and attic. You’d pay your share of the repair cost — known as the homeowners insurance deductible — and then the insurer would pay the rest, up to your dwelling coverage limit.
Just like it sounds, other structures coverage provides insurance for structures on your property that aren’t attached to your house. That could include a shed, fence or detached garage.
Which events are covered: As with dwelling coverage, most homeowners insurance policies cover other structures for any event that isn’t specifically excluded. That means you'd likely have coverage for fire, wind, hail and snow, among other issues.
How it works: Part of your fence collapses under the weight of heavy snow. The insurance company would pay to repair it, minus your deductible.
Personal property refers to your personal belongings — like clothes, furniture, electronic devices and appliances that aren’t built in. Most homeowners policies cover these items anywhere, not just inside your house. So if someone steals your bike from outside a store, it’ll likely be covered (minus your deductible).
Which events are covered: In most homeowners policies, personal property coverage works differently than dwelling and other structures coverage. Instead of covering your belongings for anything that isn’t specifically excluded, homeowners policies often cover only disasters that are listed.
These events, typically called “perils” in your policy, tend to include:
Fire or lightning. Windstorms and hail. Explosions. Weight of ice, snow and sleet. Sudden damage from a power surge. Volcanic eruptions. Falling objects. Water overflow or discharge from household systems like plumbing, air conditioning and appliances. Freezing of those same household systems.Sudden tearing, cracking or bulging of a hot water, steam, air conditioning or fire protective system.
Damage from aircraft or vehicles.How it works: A pipe bursts on a frigid winter night, sending water cascading into your kitchen and dining room. Although dwelling coverage would pay for damage to built-in items such as cabinets, personal property coverage would take care of ruined furniture, minus your deductible.
Sometimes called “additional living expenses,” the loss of use section of your homeowners policy can come in handy if your home is too damaged to live in. Loss of use coverage may pay for hotel stays, restaurant meals or other expenses associated with living somewhere else if your home is uninhabitable after a disaster your policy covers.
Which events are covered: As long as your home is undergoing repairs for a covered claim, you’ll likely be eligible for loss of use coverage. But if your home’s damage is from a disaster that isn’t covered — such as a flood — your insurer won’t pay your additional living expenses, either.
How it works: After a kitchen fire spreads to your living room, your home is out of commission for a few months while contractors make repairs. Your insurance company would pay for you and your family to rent a similarly sized house nearby.
Personal liability coverage offers financial help if you’re responsible for injuring someone or damaging their property. Coverage generally extends to anyone in your household, including pets — so if your dog bites someone at the park, you may have coverage. (See Does Homeowners Insurance Cover Dog Bites? for more information.)
Which events are covered: Liability insurance covers bodily injury and property damage to others, with some exceptions. For instance, your policy won't cover criminal acts or harm you cause on purpose. Nor will it pay for injuries or damage from a car accident (your liability car insurance would cover those).
How it works: A delivery person slips on your icy sidewalk before you can salt it. He breaks his wrist in the fall and sues you for medical bills and lost wages. Your liability coverage could pay your legal fees, plus any damages you’re responsible for in the lawsuit, up to your policy limit.
Like liability coverage, medical payments coverage pays if you cause physical injury to someone outside your household. However, you don’t need to be found at fault for medical payments coverage to pay out.
Which events are covered: You could tap your medical payments coverage if someone suffers a minor injury on your property or you cause harm to someone outside your home. Similar restrictions apply to liability and medical payments, with no coverage for intentional acts or car accidents, among other exclusions.
How it works: Your dog bites the hand of a visiting friend. There’s no serious harm, but your medical payments insurance covers the cost of their trip to urgent care for stitches.
Even the broadest homeowners insurance policy won’t cover everything that could go wrong with your home. For example, you can’t intentionally damage your house and then expect your insurer to pay for it. Policies also typically exclude damage due to:
Flooding from external sources like heavy rainfall or storm surges. Drain and sewer backups. Earthquakes, landslides and sinkholes. Infestations by birds, vermin, fungus or mold. Wear and tear or neglect. Nuclear hazard. Government action, including war. Power failure.However, you can buy separate coverage for some of these risks. Flood insurance and earthquake insurance are available separately, and in hurricane-prone states, you may need or want windstorm insurance.
Talk to your insurer if you have concerns about problems your policy doesn’t cover. In many cases, you can pay for endorsements — or add-ons to your policy — that offer more coverage.
Below are a few of the most common home insurance endorsements. Note that availability may vary by state and company.
Scheduled personal property covers a specific valuable item such as a ring or musical instrument. You may need an appraisal — a document that states the value of the item — to get this coverage.
Ordinance or law coverage pays to bring your home up to current building codes during repairs or rebuilding.
Water backup coverage pays for damage due to backed-up sewer lines, drains or sump pumps.
Equipment breakdown coverage pays to repair or replace major home systems and large appliances if they stop working for reasons other than normal wear and tear.
Service line protection pays for damage to water, electric or other utility lines that you’re responsible for.
Identity theft insurance pays expenses associated with identity theft such as lost wages and legal fees.
Get home insurance quotes in minutes Answer a few questions to see custom quotes and find the right policy for you. Get StartedThis table shows common problems and whether your homeowners insurance policy will cover them.
Your liability coverage typically covers expenses if your dog bites someone outside your household. See Does Homeowners Insurance Cover Dog Bites?
If a covered event knocks a tree onto your home, your policy will probably pay to remove it. But if the tree simply falls on your lawn, you're on your own. Learn more about home insurance and tree removal .
Fire is one of the standard perils most homeowners insurance policies cover. Learn about wildfire insurance .
If a covered event such as a windstorm damages your heating or cooling system, your homeowners policy would likely pay to repair it. Adding an equipment breakdown endorsement to your policy could give you additional coverage for mechanical failures. However, homeowners insurance won't pay for normal wear and tear. Learn more about homeowners insurance and AC units .
A standard homeowners insurance policy covers jewelry only for theft, fire or other named events, not for accidental loss. That’s why it’s a good idea to add broader coverage for valuable jewelry. Learn more about jewelry insurance .
It depends on the cause of the mold. Most insurers will cover mold only if it's caused by a covered problem such as a burst pipe. Learn more about homeowners insurance and mold .
Damage from sudden, accidental leaks may be covered, but slow leaks that develop over time generally won’t be. (The latter are considered a maintenance issue.) See Does Homeowners Insurance Cover Plumbing Problems?
It depends on why your roof is leaking. Insurance typically covers damage due to a sudden, accidental event such as hail or wind, but it won't cover simple wear and tear. Learn more about homeowners insurance and roof leaks .
It depends on the cause of the damage. If your septic system was damaged by a covered event like fire or lightning, your policy may cover it. However, home insurance won’t pay for damage caused by negligence or wear and tear. For more information, read Does Homeowners Insurance Cover Septic Systems?
Insurance companies generally consider dealing with infestations to be a part of regular home maintenance, which they don't cover. Learn more about homeowners insurance and termite damage .
It depends on the type of water damage. Most home insurance policies won’t cover floods, for example. They won't cover damage from a backed-up drain or sewer unless you've paid for that endorsement. But if a pipe freezes and bursts, your insurer will typically pay for the resulting damage. To learn more, see Does Homeowners Insurance Cover Water Damage?
If your home is destroyed, your homeowners insurance company won't simply write you a check for the coverage amount listed on your policy. First, you’ll have to file a claim, documenting the damage. And your payout could vary depending on your coverage and deductibles.
One key factor in your payout is whether your coverage will pay whatever it takes to rebuild your home, even if that cost is above your policy limits. This situation may arise, for instance, if construction costs have increased in your area while your coverage limits haven't changed. Here’s a rundown of several options you may encounter.
Actual cash value coverage pays the cost to repair or replace your damaged property, minus a deduction for depreciation. Most policies don’t use this method for the house, but it’s common for personal belongings. For items that are several years old, this means you’ll probably get only a fraction of what it would cost to buy new ones. Learn more about actual cash value coverage.
Functional replacement cost coverage pays to fix your home with materials that are similar but possibly cheaper. For example, your contractor could replace damaged plaster walls with less expensive drywall.
Replacement cost coverage pays to repair your home with materials of “like kind and quality,” so plaster walls can be replaced with plaster. However, the payout won’t go above your policy’s dwelling coverage limits.
Some policies offer replacement cost coverage for personal items. This means the insurer would pay to replace your old belongings with new ones, with no deduction for depreciation. If this feature is important to you, check the policy details before you buy. It’s a common option, but you typically need to pay more for it. Learn more about replacement cost coverage .
Extended replacement cost coverage will pay more than the face value of your dwelling coverage, up to a specified limit, if that’s what it takes to fix your home. The limit can be a dollar amount or a percentage, such as 25% above your dwelling coverage amount. This gives you a cushion if rebuilding is more expensive than you expected.
Guaranteed replacement cost coverage pays the full cost to repair or replace your home after a covered loss, even if it goes above your policy limits. Not all insurance companies offer this level of coverage.
Homeowners policies typically include a deductible — the amount you have to cover before your insurer starts paying. The deductible can be:
A flat dollar amount, such as $500 or $1,000. A percentage, such as 1% or 2% of the home’s insured value.When you receive a claim check, your insurer subtracts your deductible amount. Say you have a $1,000 deductible and your insurer approves a claim for $10,000 in repairs. The insurer would pay $9,000, and you would be responsible for $1,000.
Choosing a higher deductible will usually reduce your premium. However, you’ll shoulder more of the financial burden should you need to file a claim. A lower deductible, on the other hand, means you might have a higher premium but your insurer would pick up nearly the whole tab after an incident.
Be aware that some policies include separate — and often higher — deductibles for specific types of claims such as damage from wind, hail, hurricanes or earthquakes. For example, a policy might have a $1,000 deductible for most losses but a 10% deductible for optional earthquake coverage. This means if an earthquake damages a home with $300,000 worth of dwelling coverage, the deductible would be $30,000.
Liability claims generally don’t have a deductible.
Homeowners insurance comes in several types, called “policy forms.” Some types have more expansive coverage than others, so it’s worthwhile to know the difference. Note that different insurance companies may have different names for these policies.
HO-3 insurance policies, also called “special form,” are the most common. If you have a mortgage, your lender is likely to require at least this level of coverage.
HO-3 insurance policies generally cover damage to your home from any cause except those the policy specifically excludes, such as an earthquake or a flood. However, where it concerns your belongings, HO-3 insurance typically covers only damage from the perils listed in your policy.
An HO-5 insurance policy offers the most extensive homeowners coverage. It pays for damage to your home and belongings from all causes except those the policy excludes. It’s typically available only for well-maintained homes in low-risk areas, and not all insurers offer it.
HO-5 policies are sometimes called “comprehensive form” or “premier” coverage. However, an HO-3 policy may also be labeled “premier” in some cases, without offering the broader coverage of an HO-5 policy. If you want HO-5 insurance coverage, be sure to ask your agent or representative.
Much less popular are HO-1 and HO-2 homeowners insurance, which pay only for damage caused by events listed in the policy.
Get home insurance quotes in minutes Answer a few questions to see custom quotes and find the right policy for you. Get Started Frequently asked questions Is homeowners insurance required?Homeowners insurance isn’t required by law, but if you have a mortgage, your lender will likely require you to insure the home to protect its investment. Even if you don’t have a mortgage, home insurance is almost always a wise purchase. Because it gives you property and liability coverage, a homeowners policy is a financial safety net you may someday be glad to have. For more information, read Is Homeowners Insurance Required?
How much does homeowners insurance cost?The average cost of homeowners insurance in the U.S. is $1,915 per year, according to NerdWallet’s rate analysis. But your rate could be much higher or lower, depending on your location and the amount of coverage you buy. In most states, your credit score can also be a factor.
What’s the difference between home insurance and mortgage insurance?Homeowners insurance isn’t the same as mortgage insurance , which you may have to buy if you put less than 20% down on your home loan. (Federal Housing Administration, or FHA, loans and other federal loans may also require mortgage insurance, regardless of your down payment amount.) If you default on your loan, mortgage insurance will reimburse your lender.
To put it another way: Mortgage insurance protects your lender, while homeowners insurance protects you.
How can I pay less for homeowners insurance?If your premium seems too high, there are ways to save on homeowners insurance . For example, many insurers offer a discount for bundling home and auto insurance. You might also get a lower rate for having common safety features such as burglar alarms and deadbolt locks. And it’s always a good idea to compare multiple homeowners insurance quotes to make sure you’re getting the best deal.
How much homeowners insurance do you need?You need enough homeowners insurance to cover the cost of rebuilding your home if it’s destroyed. For your belongings, you’ll generally want personal property coverage limits that are at least 50% of your dwelling coverage amount. Finally, consider setting your liability limit at least high enough to cover all your assets. To learn more, see How Much Home Insurance Do You Need?
Is homeowners insurance tax-deductible?If your home is your primary residence, your homeowners insurance premium is not tax-deductible. But if the house is a rental property, you may be able to deduct the premiums on your taxes.
Is homeowners insurance required?Homeowners insurance isn’t required by law, but if you have a mortgage, your lender will likely require you to insure the home to protect its investment. Even if you don’t have a mortgage, home insurance is almost always a wise purchase. Because it gives you property and liability coverage, a homeowners policy is a financial safety net you may someday be glad to have. For more information, read
Is Homeowners Insurance Required?
How much does homeowners insurance cost?average cost of homeowners insurance
in the U.S. is $1,915 per year, according to NerdWallet’s rate analysis. But your rate could be much higher or lower, depending on your location and the amount of coverage you buy. In most states, your
can also be a factor.
What’s the difference between home insurance and mortgage insurance?Homeowners insurance isn’t the same as
, which you may have to buy if you put less than 20% down on your home loan. (Federal Housing Administration, or FHA, loans and other federal loans may also require mortgage insurance, regardless of your down payment amount.) If you default on your loan, mortgage insurance will reimburse your lender.
To put it another way: Mortgage insurance protects your lender, while homeowners insurance protects you.
How can I pay less for homeowners insurance?If your premium seems too high, there are ways to
save on homeowners insurance
. For example, many insurers offer a discount for bundling home and auto insurance. You might also get a lower rate for having common safety features such as burglar alarms and deadbolt locks. And it’s always a good idea to compare
multiple homeowners insurance quotes
to make sure you’re getting the best deal.
How much homeowners insurance do you need?You need enough homeowners insurance to cover the cost of rebuilding your home if it’s destroyed. For your belongings, you’ll generally want personal property coverage limits that are at least 50% of your dwelling coverage amount. Finally, consider setting your liability limit at least high enough to cover all your assets. To learn more, see
How Much Home Insurance Do You Need?
Is homeowners insurance tax-deductible?If your home is your primary residence, your homeowners insurance premium is not tax-deductible. But if the house is a rental property, you may be able to deduct the premiums on your taxes.
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MethodologyNerdWallet calculated median rates for 40-year-old homeowners from various insurance companies in every ZIP code across the U.S. All rates are rounded to the nearest $5.
Sample homeowners were nonsmokers with good credit living in a single-family, two-story home built in 1984. They had a $1,000 deductible and the following coverage limits:
$300,000 in dwelling coverage. $30,000 in other structures coverage. $150,000 in personal property coverage. $60,000 in loss of use coverage. $300,000 in liability coverage. $1,000 in medical payments coverage.We made minor changes to the sample policy in cases where rates for the above coverage limits or deductibles weren’t available.
These are sample rates generated through Quadrant Information Services. Your own rates will be different.
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