Homeowners insurance is one of the most powerful ways to protect your property and personal possessions in the event of damage, natural disaster, theft or personal liability. You’ll almost always need to acquire homeowners insurance if you’re applying for a mortgage, and it’s generally considered a wise move.
Your home is probably your most valuable asset, and it’s not a good idea to leave it unprotected. Take a look at what’s covered by homeowners insurance and why it can be a smart investment.
What is a Homeowners Insurance Policy?
Homeowners insurance is a type of protection that covers damage to a property, theft or loss of possessions within the home and personal liability for injuries to others. Sometimes, it can cover alternative housing expenses as you wait for your house to be rebuilt.
Homeowners insurance policies can vary widely, but they generally all cover the same basics. For additional insurance, you may want to opt for a more wide-ranging policy or one that covers your specific needs.
| Circumstance | Usually Covered | Sometimes Covered | Rarely or Never Covered |
| Fences | ✓ | ||
| Mold Damage | ✓ | ||
| Water Damage | ✓ | ||
| Roof Damage | ✓ | ||
| Termite Damage | ✓ | ||
| Theft | ✓ | ||
| Specialty Jewelry | ✓ | ||
| Plumbing Issues | ✓ | ||
| Fire | ✓ | ||
| Tree Removal | ✓ | ||
| Air Conditioning Units | ✓ | ||
| Roof Repair | ✓ | ||
| Foundation Repair | ✓ | ||
| Dog Bites | ✓ |
Understanding Homeowners Insurance Coverage
Let’s take a deeper look into homeowners insurance coverage and what you need to know.
Damage to the Interior or Exterior of Your Home
In the case your home is damaged from a disaster like fire, hurricanes, lightning or vandalism, your homeowners insurance will provide funds to repair or completely rebuild your home.
Coverage often also extends to the contents within your home, such as furniture, appliances and other valuables. As long as it's covered by an insured disaster, you should be able to receive its full market value. In most cases, destruction from floods, earthquakes or poor home maintenance is not covered by general policies, and you’ll need to pay extra for these protections.
Fine art, expensive clothing and jewelry may not be covered by all homeowners insurance policies or limited in the coverage of these items. So it’s important to itemize your valuables if you’d like them to be protected. You typically have the option to insure these items as a floater to your existing homeowners policy, or you may wish to insure them separately through a specialty jewelry insurance company.
Personal Liability for Damage or Injuries
Personal liabilities protect you from lawsuits arising from harm, injuries and other damages caused by you, your home or someone in your household.
Say your dog bites someone and they sue you for their medical bills, or your child heads to a friend’s house and ends up breaking a valuable piece of decor — these are just some of the scenarios where homeowners insurance can protect you. The amount of coverage you receive for personal liability will depend on your specific policy and how much coverage you’ve paid for.
Hotel or House Rental While Your Home is Being Rebuilt or Repaired
In case of a disaster that causes major damage, you may need to find additional housing until your home is repaired or rebuilt. If you ever find yourself in this situation, you’ll be grateful for homeowners insurance as it can reimburse you for rent, hotels and meals.
The policy will specify daily limits on how much you can spend, but you may be able to increase this amount if you pay more for your policy.
Types of Homeowners Coverage
Home insurance coverage is unique to your situation. The type of coverage you receive and the payout in the event of a disaster will depend on how much you are willing to pay for a policy. At a glance, here are the three most common types of coverage.
Actual Cash Value
An actual cash value policy will cover the entire cost of your home in the event of a disaster plus the value of your belongings. Depreciation is typically accounted for.
Replacement Cost
A replacement cost policy works like an actual cash value policy; however, the main difference is that with this policy, depreciation is not deducted. This means you’ll be able to repair or rebuild your property up to its original value.
Guaranteed or Extended Replacement Cost/Value
This policy tends to be the most generous, as it covers the complete restoration of your home even if costs go over your initial policy limit. With an extended replacement, you may be able to access up to 25% more than the coverage you purchased. This feature can help offset the costs of rebuilding your home, especially at current prices taking inflation into account.
What Isn't Covered by Homeowners Insurance?
Most homeowners insurance policies will not cover jewelry, artwork and other collectibles. Identity theft protection, damage caused by an earthquake or a flood, damage caused by pests or mold and maintenance repairs are also not typically covered.
If you live in an area that is prone to flooding or earthquakes, you will need to pay more to receive coverage in these areas.
Even in scenarios where your homeowners insurance policy covers valuables in your home like art or jewelry, it will generally not cover the full amount unless you make special arrangements for coverage and pay more for your policy.
Recommended Additional Insurance Coverage
Considering that not all your property and valuables are covered by homeowners insurance, you may want to opt for additional protections. In case of a disaster, break-ins or misplacing items, you’ll want the peace of mind of knowing that their value won’t be lost forever.
Take a look at some noteworthy options for additional insurance coverage.
Additional Living Expenses Coverage
Homeowners insurance does cover basic living costs when you’re displaced from your home. However, most policies tend to have strict limits on daily spending.
Additional Living Expenses (ALE) coverage goes a step further than traditional homeowners insurance to make sure you’ll have enough for housing, food, storage and other costs that arise from having to find temporary living arrangements.
Specialty or Investment Jewelry Coverage
Homeowners insurance policies won’t always cover your high-priced jewelry, and even when a policy does, it’s rare that you’ll receive the full value in reimbursement. When homeowner's insurance is not enough to cover your investment jewelry, you may want to opt for separate jewelry insurance that offers full protection.
Liability Coverage
A single lawsuit can inflict considerable damage on your finances. Liability coverage protects you in case someone is hurt on your property or if you or someone living in your home accidentally hurts another person or damages their belongings. Scenarios like these can give way to lawsuits, which in worst-case scenarios can cause considerable financial damage.
Although most homeowners insurance policies offer some protections against personal liability, it’s rare to find full coverage. If you have kids or don’t want to be responsible in case someone is injured in your home, purchasing additional liability coverage can offer peace of mind.
Best Home Insurance Providers
Looking for homeowners insurance but don’t know where to start? Take a look at some top home insurance providers.
Don’t Cut Corners with Your Insurance Coverage
Homeowners insurance offers considerable coverage for safeguarding your most important assets. This includes your home but can also extend to the valuables within your home, living expenses if you are displaced and personal liability.
Almost all mortgage providers will require homeowners insurance. But the exact policy you receive will ultimately be up to you. You may want a general policy or more extensive coverage. In many cases, it can also be wise to get additional coverage for your most prized possessions, such as art or jewelry. When it comes to insurance, it’s better to be safe than sorry.
Frequently Asked Questions
How much does homeowners insurance cost?
Contrary to what many people believe, homeowners insurance doesn’t have to be expensive. The average cost for homeowners insurance in the U.S. is $140 a month.
Is flood damage covered by homeowners insurance?
If you live in an area that is prone to flooding, flood damage will not automatically be covered. Instead, you will need to pay more to receive this coverage and will probably need to buy the coverage from a flood insurance company.
How much does it cost to insure jewelry?
While some homeowners insurance policies do offer coverage for jewelry, most are limited. If you own high-priced jewelry, it can be worthwhile to get insurance specifically for jewelry, as this is the best way to get full coverage.
What happens if you lose an insured ring?
You’ll need to file a claim with your insurance provider and discuss the details of the loss. You should be able to receive a replacement ring of equal value, and your insurance company should work with a jeweler of your choice to make sure you’re happy with the replacement. If covered by a homeowners policy, you will likely receive funds up to the allotted amount of your policy.