What does homeowners insurance cover?

Homeowners insurance coverage explained

Homeowners insurance provides homeowners with financial protection against the loss of a home or possessions, and lawsuits against the homeowner. Homeowners that have mortgages on their property usually are required to have insurance.

Banks that hold mortgages are co-owners and require insurance to protect their investments. Homeowners without a mortgage are not required to insure their property, but it’s a good idea to do so.

Homeowners insurance provides four types of coverage:

The actual building
This insurance will pay to repair or rebuild the home if it’s damaged by a disaster covered in the policy, such as a fire or lightning, but will not pay to repair or rebuild if the damage is caused by normal wear and tear.

Personal belongings
This insurance will pay for items lost as a result of a covered disaster, like a fire, and for theft. Off-premises coverage, which is included with most homeowners insurance policies, means that homeowners’ belongings are covered for these risks anywhere in the world. Expensive items like fur or jewelry may require additional insurance to cover their full value.

Liability
This insurance will cover injuries or property damage homeowners, or their children or pets, cause other people, anywhere in the world, and includes court costs and damages.

Temporary living expenses
This insurance pays for costs of living away from home, for things like staying in a hotel or dining in restaurants, if the home is temporarily unlivable because of an insured disaster.

Damages are not covered if they are caused by events that are not included in the insurance policy. Typical insurance policies don’t cover damages caused by earthquakes, floods, war, or nuclear accidents.