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What is homeowners insurance?

How home insurance works and what it covers

Homeowners insurance, also called home insurance, protects you financially if your home or property is damaged. Coverage like this can help you after accidents or events, like a theft or fire. Homeowners insurance is different than a home warranty, which covers appliances and systems in your home that get worn out over time.

What does homeowners insurance cover?

Homeowners insurance covers the home, most of its contents (like furniture, clothing, and your belongings), and the surrounding property. This typically includes other structures on your property, like garages, fences, and sheds. Homeowners insurance covers damage from what insurance companies call "known perils." Known perils can include:

  • Fires
  • Smoke
  • Theft
  • Vandalism
  • Falling trees or debris
  • Lightning
  • Tornadoes
  • Wind or hail damage
  • Explosions
  • Volcanic eruptions

If someone is injured on your property, some homeowners insurance policies will also cover associated medical expenses. This is called liability protection. Some homeowners insurance policies cover living expenses while your home is being rebuilt after damages. This coverage reimburses you for the cost of living in a hotel or restaurant meals that are more than your normal living expenses.

How much is homeowners insurance?

The cost of homeowners insurance can vary, depending on your coverage. When deciding on the policy that’s right for you, you should consider the total value of your possessions and the risks to which your home may be exposed. Are tornadoes or wildfires a regular occurrence in your area? What about the crime rate? The frequency of these possibilities can help you determine which events need to be covered.

Homeowners insurance companies also take your home’s location into account when determining their charges. They look at the size, age, condition, and materials used to construct your home, as well as its risk level.

If you own artwork, large musical instruments, or electronics, you may need to extend your policy to ensure all your possessions are sufficiently protected. It’s a good idea to create an inventory list of some of your items with photos. This will make filing a claim for reimbursement easier.

When you have a mortgage, you typically make payments for your homeowners insurance into your escrow account, and your lender pays the premiums when they come due.

What is not protected by most homeowners insurance?

There are some circumstances that are left out of many homeowners insurance policies. Some of these exclusions are:

  • Earthquakes
  • Floods
  • Wear and tear
  • Damage caused by pests, like termites
  • Corrosion or rot

Mold is only covered if it is the result of a problem that is already covered under your policy. Higher-risk items are often not included in basic homeowners insurance coverage, either. Artwork, jewelry, or structures, like a swimming pool, often cost more to protect. You can keep track of what is and isn’t covered on your policy on your homeowners insurance company's declaration page.

What is flood insurance?

Flood insurance is similar to homeowners insurance, except that it only covers losses directly covered by flooding. According to the Federal Emergency Management Agency (FEMA), a flood is "an excess of water on land that is normally dry, affecting two or more acres of land or two or more properties."

What is the National Flood Insurance Program?

Flood Insurance is offered through the National Flood Insurance Program (NFIP) which is administered by FEMA. The NFIP works closely with more than 80 private property and casualty insurance companies to offer flood insurance to homeowners, renters, and business owners. The NFIP offers basic flood insurance coverage. You can find providers that offer NFIP coverage with this tool from FEMA. FEMA also offers flood maps on its website that can tell you which areas are at the highest risk of flooding.

What does flood insurance cover?

Flood insurance also has similar coverage to homeowners insurance. It typically breaks down into two categories: building coverage and contents coverage.

Building coverage protects your home in many ways:

  • Electrical and plumbing systems
  • Water heaters
  • Appliances, like refrigerators, stoves, and dishwashers
  • Permanently installed carpeting, cabinets, paneling, and bookshelves
  • Window blinds
  • Foundation walls and staircases
  • Garages
  • Fuel tanks and well water tanks
  • Solar energy equipment

Contents coverage protects your belongings, like:

  • Clothing, furniture, and electronic equipment
  • Curtains
  • Washers and dryers
  • Portable air conditioners
  • Microwaves
  • Carpets that are not included in building coverage
  • Valuable items, like artwork

Flood insurance does not typically cover other types of water damage, such as damage from a sewer backup that was not caused by flooding. Regular homeowners insurance covers "additional living expenses" when you’re displaced by the damage. NFIP coverage does not typically extend to these costs, but some policies with private companies do.

While NFIP coverage is for flooding, it does not extend to mold damage after flooding occurs if a policyholder fails to take action to prevent the growth and spread of mold after flooding. NFIP coverage also does not cover:

  • Property outside of the building, like decks, fences, and swimming pools
  • Cars
  • Currency
  • Personal property kept in basements

How much is flood insurance?

The cost of flood insurance varies by the location and age of your home, just like homeowners insurance. Your flood risk and the design of your home (like basements) are also factors in determining cost. If your coverage is through NFIP, they’ll cover up to $250,000 for building coverage and up to $100,000 for contents coverage . These two coverages are purchased individually and have separate deductibles.

Flood insurance versus hurricane insurance

Damage from hurricanes typically falls into two categories: wind and water. As a result, there is typically no insurance policy specifically for hurricane damage. If you’re in an area affected by hurricanes, it’s important to make sure you’re protected by both homeowners and flood insurance.

Is homeowners insurance required to get a mortgage?

Yes, most lenders will require you to purchase homeowners insurance as a condition of approving your mortgage. Lenders also usually require you to continue buying homeowners insurance until you have fully paid off the loan. That’s why mortgage companies collect payments toward your insurance premiums as part of your monthly mortgage bill and pay these premiums for you when they are due. Depending on where you live, your lender may require you to purchase flood or earthquake insurance, too.

Get a quote on homeowners insurance

Matic is a digital insurance marketplace that can help you find the right homeowner's policy to help you save on your homeowner's insurance. Get a free quote and compare policies from top-rated carriers.


The Insurance Information Institute.

Last reviewed and updated August 2023 by Freedom Mortgage.

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