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- Homeowners insurance protects the homeowner, home, and personal belongings.
- If your home is damaged and unlivable, relocation costs can be reimbursed under loss of use.
- Damage to your home must be caused by an insurance peril to be covered.
Homeowners insurance protects your dwelling, personal property, and offers personal liability coverage.
Unlike car insurance, homeowners insurance is not required by state law. However, if you have a mortgage, your lender will require homeowners insurance to protect the investment.
What is homeowners insurance?
Homeowners insurance protects your dwelling and your personal belongings, and offers personal liability coverage for injuries that happen on your property. For instance, if the mailman slips and falls on your sidewalk, the dog bites a guest, a tree falls on your roof, or the neighbor's kid injures himself in your swimming pool, homeowners insurance will protect you from financial hardship.
Additionally, if you are forced out of your home due to damage, homeowners insurance offers "loss of use," also known as "additional living expenses," to help with relocation costs.
To get covered by homeowners insurance, damage or loss must be due to an insurance peril. A peril is an event that damages your home or belongings, like theft, fire, or a storm. The type of peril coverage you have depends on the homeowners insurance you have.
| Coverage | Included with homeowners insurance? |
| Dwelling/Structure | Yes |
| Personal liability | Yes |
| Personal belongings | Yes |
| Loss of Use (additional living expenses) | Yes |
| High-end electronics/special jewelry | Limited, requires add-on* |
| Equipment breakdown | Yes |
| Electrical outage | Yes* |
| Service lines | Yes* |
| Cyber liability | Yes* |
| Water damage | Yes |
| Flood | No** |
| Wind or hail | Yes, but not high winds*** |
| Earthquake | No* |
| Pets | Yes* |
*Available as add-on coverage if not part of your policy
**Flood insurance is available through the NFIP and approved insurers
***If you live in hurricane or tornado areas, an additional windstorm rider may be required
Is homeowners insurance required?
Homeowners insurance isn't required by law. But it is often mandatory if you have a mortgage. In any case, it is a good idea to financially safeguard your home and yourself with a homeowners insurance policy, says Greg Pannhausen, head of countrywide homeowners product at
What does homeowners insurance cover?
The standard homeowners insurance protects you, and your home. It also covers any additional expenses you may incur if your home is inhabitable. However, while homeowners insurance covers an expansive list of damages, exclusions will apply.
A peril is any risk that results in a loss of your home or belongings such as wind, fire, hail, and theft, according to Garcia. There are two types of perils: named perils and open perils.
Named perils are damages listed in your policy. A homeowners insurance policy has 16 named perils. A few perils listed are fire, theft, and windstorm.
Open perils "typically provide customers coverage for their home and personal belongings from most perils, unless the peril is specifically listed as excluded," according to Garcia. In other words, your insurance policy will cover every peril except the listed exclusions in your policy.
Here are some of the named and open perils a homeowners insurance policy covers.
Named peril | Open peril |
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Source: Lemonade and The Zebra; coverage may vary based on where you get your insurance.
There are 8 types of homeowners insurance policies
There are eight types of homeowners policies based on your home type. If you have a mortgage, your lender may prefer the type of coverage necessary to secure the home loan. Therefore, it is best to talk to your agent and lender to ensure proper coverage.
Additionally, some condominium associations will have by-laws rules about minimum homeowners insurance coverage coverage.
| Policy | Dwelling | Liability | Belongings | Peril Type |
| HO-1: Basic* | Yes | No | No | Named |
| HO-2: Broad* | Yes | No | Yes | Named |
| HO-3: Special | Yes | Yes | Yes | Open/Named |
| HO-4: Renters | No | Yes | Yes | Named |
| HO-5: Comprehensive** | Yes | Yes | Yes | Open |
| HO-6:Condo/Co-op | Yes*** | Yes | Yes | Named |
| HO-7: Mobile Homes | Yes | Yes | Yes | Open/Named |
| HO-8: Older homes | Yes | Yes | Yes | Named |
Townhomes can be HO-3 or HO-6
*Most lenders don't consider this sufficient coverage
**Typically for brand-new homes only
***Covered under condo association's master policy
How much does homeowners insurance cost?
The average annual premium in the United States in 2019 was $1,272, according to the most recent data from the Insurance Information Institute.
But, each home's costs for insurance vary widely based on a variety of factors, including your home's value.
Here's how much homeowners insurance costs on average by home value in the United States, according to the most recent release of the Homeowners Insurance Report by the National Association of Insurance Commissioners (NAIC):
| Estimated home value | Average annual homeowners insurance premium |
| $49,999 and under | $648 |
| $50,000 to $74,999 | $757 |
| $75,000 to $99,999 | $826 |
| $100,000 to $124,999 | $882 |
| $125,000 to $149,999 | $930 |
| $150,000 to $174,999 | $975 |
| $175,000 to $199,999 | $1,012 |
| $200,000 to $299,999 | $1,113 |
| $300,000 to $399,999 | $1,278 |
| $400,000 to $499,999 | $1,492 |
| $500,000 and above | $2,168 |
*The above table uses data from the NAIC.
How to find homeowners insurance
If you currently have homeowners insurance, review your policy coverage yearly. If your homeowners insurance company hasn't provided the level of service you expected, maybe it is time for you to select a new provider.
Remember that a cheap price doesn't mean good customer service. Focus on claims and customer satisfaction rankings, like those from J.D. Power, and comparison shop. This is especially important for those living in disaster-prone areas when good service can make all the difference.