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What is homeowners insurance?

How home insurance works and what it covers

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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 become 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…

  • Fire
  • Smoke
  • Theft
  • Vandalism
  • Falling trees or debris
  • Lightning
  • Tornadoes
  • Wind/hail damage
  • Explosion
  • Volcanic eruption

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 from 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 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 of 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 the homeowners insurance declaration page.

What is flood insurance?

Flood insurance is similar to homeowners insurance except that it only covers damage due to flooding. Flood insurance offered by insurance companies is also called private flood insurance. The Federal Emergency Management Agency (FEMA) also offers flood insurance through the National Flood Insurance Program (NFIP). FEMA states that an event is qualified as a flood if "an excess of water on land that is normally dry affects two or more acres of land or two or more properties."

What is the National Flood Insurance Program?

The National Flood Insurance Program (NFIP) offers basic flood insurance coverage and is backed by FEMA. You can find providers that offer NFIP coverage with a tool from FEMA. FEMA offers flood maps on their 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 as homeowners insurance. It typically breaks down into two categories: building coverage and contents coverage.

Building coverage protects your home and…

  • 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, well water tanks
  • Solar energy equipment

Contents coverage protects your belongings like…

  • Clothing, furniture, and electronic equipment
  • Curtains
  • Washer and dryer
  • Portable air conditioners
  • Microwave
  • Carpets not included in building coverage
  • Valuable items like artwork

Flood insurance does not typically cover other types of water damage, like 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. The National Flood Insurance Policy also doesn’t 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 design of your home (e.g. do you have a basement?) 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 separately and also have separate deductibles.

Flood insurance vs. 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 insurance 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

Freedom Mortgage has partnered with Matic Insurance to help you save on your homeowners insurance policy. Get a free quote and compare policies from top-rated carriers.


FEMA. Learn more.
FloodSmart. Learn more.
The Insurance Information Institute. Learn more.

Last reviewed and updated September 2022 by Freedom Mortgage Corporation.

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