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Home Insurance Tips and Advice - Home Insurance Explained Bookmark this page Home Insurance Tips and Advice Center Topic: Home Insurance Explained What is homeowners insurance? See the subtopics menu for a detailed explanation of home insurance. For additional information about home insurance, see the topic list directly below. Homeowners Insurance Topics · Home Insurance Explained · Choosing Home Insurance · Home Insurance Terminology Home Insurance Explained - Subtopics · About Homeowners Insurance · Special Coverage for Homeowners · Basic Coverage for Homeowners · Reviewing Existing Coverage · Insurance for Renters · Choosing a Specialist About Homeowners Insurance What is homeowners insurance? 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: 1) 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. 2) 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. 3) 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. 4) 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. ^ Back to top Special Coverage for Homeowners Does homeowners insurance cover everything in a home, for every type of disaster? Basic homeowners insurance does not provide coverage for every type of event that could cause damage to a home or property. It also does not provide coverage for the replacement cost for every item a homeowner possesses. Damage caused by earthquakes is not covered in standard home insurance policies. Homeowners in earthquake-prone areas need to purchase special earthquake insurance in order to be paid for losses caused by an earthquake. Floods are another disaster not covered in standard home insurance policies. Homeowners who live on floodplains or in flood-prone areas need to purchase special homeowners insurance flood coverage. Umbrella policies add protection for things that are not included in the basic homeowners policy, like a swimming pool or other high-risk items. These types of special insurance coverage can be expensive, but well worth the cost in the event of a claim. Basic homeowners insurance may not cover the full cost of some expensive items inside a home — like jewelry, fine art, furs, or other precious items. For these items, a homeowner has two choices, to raise the liability limit on the basic insurance policy or to purchase a special policy to cover the items. The additional policy (called a rider) requires appraisal of the items and provides the broadest protection, as it covers items if they are lost, stolen, or damaged in a disaster. ^ Back to top Basic Coverage for Homeowners What are the basic types of protections for homeowners? Basic homeowners insurance policies provide protection for property and possessions against a standard set of events or disasters. Most cover the following: fire; lightning; windstorms; hail; explosions; riots or civil commotion; damages caused by aircraft or vehicles; smoke; vandalism; theft; volcanic eruption; falling objects; weight of ice, sleet, or snow; bursting or overflow of water or steam from, tearing apart or burning of, or freezing of plumbing, heating, air conditioning, fire sprinklers, or household appliances; or sudden damage from artificially generated electrical current. If one of these events occurs, homeowners insurance will provide four types of protection. The insurance company will pay to repair or rebuild the home if it is damaged. The insurance will pay to repair or replace damaged or lost personal possessions, whether they were in the home or were damaged by one of these events anywhere in the world. The insurance will pay for living expenses if the home is unlivable because of one of these events. The insurance will also pay if one of these events is caused by the homeowner and injures another or damages another's property. For each of the four types of homeowners insurance coverage — property, possessions, liability, living expenses — damage caused by events such as war, nuclear accidents, floods, and earthquakes are specifically excluded. ^ Back to top Reviewing Existing Homeowners Insurance Coverage When should existing homeowners insurance coverage be reviewed? Homeowners insurance is an important part of a sound financial plan. Homeowners are advised to review the coverage periodically, to ensure that it covers the proper value of the home and possessions, and that the coverage is adequate for all other risks. A good time to review a homeowners insurance policy is each year when it's time to renew the policy. At that time, homeowners should understand any changes in the insurance policy are necessary: If the deductible is at the right level If the coverage — for the structure, possessions, or liability especially — is adequate If other coverage — such as riders for jewelry or art, or flood or earthquake insurance — is needed Another good time to review the insurance policy is after any major change: After a renovation or an addition that adds square footage to the home, even for structures like a garage or shed that aren't connected to the home. After the purchase of a piece of fine art or other expensive item, like a diamond necklace or computer. After improvements that make the home safer, such as a new burglar or fire alarm, or heating or air conditioning system. After a major lifestyle change such as a marriage or divorce, or the addition of a roommate, as this changes the amount and type of belongings in the home. After starting a home-based business, which may require additional coverage for equipment or inventory. ^ Back to top Insurance for Renters What is renters insurance? Renters insurance is a special type of insurance for individuals who do not own the home they live in. Although the owner of the property is usually insured, the owner's homeowners insurance does not cover the possessions of renters on the property. Renters insurance provides three types of coverage: 1) Personal belongings — This insurance will pay for items lost as a result of a covered disaster, like a fire, theft, lightning, or damage by an aircraft or vehicle. Off-premises coverage, which is included with most renters insurance policies, means that a renter's belongings are covered for these risks anywhere in the world. 2) Liability — This insurance will cover injuries or property damage that renters, or their children or pets, cause other people, anywhere in the world, and includes court costs and damages. 3) 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. Homeowners and renters insurance have a lot in common. The one major difference is coverage for the actual structure of the home. Renters insurance policies do not include this coverage, as that is the responsibility of the owner of the rental property. Like basic homeowners insurance, renters are not covered for losses caused by floods, earthquakes, war, or nuclear accidents, or any other event specifically excluded from the policy. ^ Back to top Choosing a Homeowners Insurance Specialist What is the best way to find a homeowners insurance agent? The best way to find the right insurance for homeowners is to work with a licensed insurance professional. Insurance is a complicated business and it's best to work closely with a professional who understands the insurance business, the kind of risks that homeowners face, and any special concerns about the area the home is located in, as well as offering advice about the best insurance policy to consider. Homeowners will most likely work with an insurance agent to purchase a policy, rather than directly with the insurance company. There are two types of insurance agents: Captive agents, who represent one insurance company and will have a deep understanding of that company's offerings and which will work best for a homeowner. Independent agents, who represent multiple insurance companies, and can offer choices among several insurance companies' policies. To find a good insurance agent, talk with neighbors and family and friends for recommendations. Then talk to the recommended agents and ask a lot of questions. It's important to feel comfortable with an insurance agent and the customer service they offer, as this is often the first phone call after a loss. Also do some research to make sure the agent is licensed and there are no outstanding complaints — state insurance departments are good sources for this kind information. ^ Back to top Mortgage Refinance Calculator Should you refinance your existing mortgage? This calculator can help you that find out. Enter the specifics about your current mortgage, along with your current appraised value, new loan term, new rate and closing costs. Together, this can determine how much refinancing might save you overall. · Calculate how much you could save in interest Note: This information is for general use only. Use this information as part of a full research process. General advice does not always apply directly to individual matters. Please consult a local expert with specific and complex questions about your individual situation. Recommend this page to a friend  ^ Back to top

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