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Homeowners insurance protects against financial loss from damage to your home, personal property, and liability for injuries on your property. Mortgage lenders require coverage, but insurance serves homeowners even after the loan is paid off. Understanding coverage options helps homeowners choose appropriate protection without overpaying.

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What This Section Covers

Types of Coverage

Dwelling, liability, personal property, and additional living expenses

Policy Types

HO-1 through HO-8 and what each covers

What Affects Premiums

Location, claims history, credit, and deductibles

Filing Claims

Process, documentation, and handling disputes

Flood Insurance

NFIP, private options, and flood zone requirements

Specialty Coverage

Earthquake, umbrella, scheduled items, and riders

Comparing Insurance

Questions to ask and evaluating providers

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Why Homeowners Insurance Matters

Covers repair or replacement costs when your home is damaged by covered perils (fire, wind, hail, theft, vandalism, and others depending on policy type).Without insurance, a single event could wipe out your largest asset.
Covers legal defense and damages if someone is injured on your property and sues. Also covers damage you or family members cause to others’ property.Lawsuits can result in judgments exceeding home value. Liability coverage protects other assets.
Mortgage lenders require homeowners insurance protecting at least the loan amount. Coverage must remain active for life of loan.Lapse in coverage can result in lender-placed insurance at much higher cost.
Covers belongings inside your home (furniture, electronics, clothing, appliances) if damaged or stolen.Replacement costs for all belongings often exceed what homeowners expect.
Pays for temporary housing, meals, and other costs if your home becomes uninhabitable during covered repairs.Hotel stays and restaurant meals add up quickly during extended repairs.

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What Standard Policies Don’t Cover

Standard homeowners policies exclude several common risks. Separate coverage is required for:
  • Flood damage (requires separate flood policy)
  • Earthquake damage (requires separate policy or endorsement)
  • Sewer and drain backup (requires endorsement)
  • Normal wear and tear
  • Pest damage (termites, rodents)
  • Neglect or intentional damage
  • Business activities conducted from home
  • Certain dog breeds (varies by insurer)
  • Trampolines or pools (may be excluded or require endorsement)

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Key Concepts

Replacement cost: Pays to replace damaged items at current prices without depreciation deduction.Actual cash value (ACV): Pays depreciated value (replacement cost minus wear and tear).Replacement cost policies cost more but pay significantly more when claims occur.
Amount you pay before insurance kicks in. Higher deductible means lower premium but more out-of-pocket per claim.Common deductibles range from $500 to $2,500. Some perils (wind, hail) may have separate, higher deductibles.
Maximum amount policy will pay. Different limits apply to:
  • Dwelling (structure)
  • Other structures (garage, shed)
  • Personal property
  • Liability
  • Additional living expenses
Ensure dwelling coverage matches rebuilding cost, not purchase price or market value.
Named perils: Only covers risks specifically listed in policy. If peril isn’t named, it’s not covered.Open perils (all-risk): Covers all risks except those specifically excluded. Broader protection.Open peril policies provide better coverage but cost more.

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When to Review Coverage

Review your homeowners insurance:
  • Annually: Before renewal, compare rates and coverage
  • After renovations: Improvements increase replacement cost
  • After major purchases: High-value items may need scheduling
  • Life changes: Marriage, divorce, home business
  • After claims: Understand impact on future premiums
  • Market changes: Construction costs affect rebuilding expense
Many homeowners are underinsured because coverage hasn’t kept pace with rising construction costs. Review dwelling coverage annually to ensure it reflects current rebuilding costs.

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Insurance and Home Buying

Start getting quotes 2-4 weeks before closing. Need proof of coverage before lender funds loan.Waiting until last minute limits options and negotiating power.
  • Coverage at least equal to loan amount (or replacement cost)
  • Lender listed as mortgagee/loss payee
  • Paid policy or binder at closing
  • Proof of continuous coverage throughout loan
Typically paid at closing and escrowed going forward. First year premium is a closing cost.Budget $1,000 to $3,000+ depending on location, coverage, and home value.
Most lenders collect monthly insurance payments with mortgage, held in escrow. Lender pays premium when due.Ensures continuous coverage protecting lender’s collateral.

Find Insurance Providers

Research homeowners insurance providers in your area.