Key points

• A standard homeowners insurance policy costs an average of $1,935 per year.
• A homeowners insurance policy bundles coverage for your house and other structures on your property, personal property, loss of use, liability and medical payment to others.
• There are different types of homeowners insurance policies available, such as policies for renters and condo owners.

Homeowners insurance is a contract between a homeowner and an insurance company, stating that in exchange for your premiums, the insurer will reimburse you for damage or loss caused by certain problems, up to the limits in your policy.  

If your house and belongings are destroyed by a type of damage covered by your policy, like a fire, you can file a claim with your insurance company. 

Home insurance also includes coverage for loss of use, liability and medical payments to others.  

How homeowners insurance works

A standard homeowners insurance policy insures your house structure and belongings in the event of a damaging event or theft. It also covers your liability, or legal responsibility, for damage caused by members of your household, including pets. 

• To keep your policy active, you have to pay your home insurance bills, or premiums, on time. Your insurance company may give you the option of paying your premiums monthly, bi-annually or annually. 
• If your house, other structures on your property or your belongings are damaged by a covered problem, like a windstorm, you can file a claim with your insurance company. 
• If your claim is accepted, you’ll be reimbursed for repairs up to your policy’s coverage limits, minus any deductible. 

What homeowners insurance covers

There are eight types of home insurance policies, depending on your coverage needs. The most common, an HO-3 policy, provides suitable financial protection for most homeowners. It includes the following coverages.

Dwelling

This coverage pays to repair or rebuild the structure of your house if it’s damaged by a problem covered by your policy, like a house fire. Make sure you have enough dwelling coverage to fully rebuild your house if it is completely destroyed. 

An HO-3 policy insures your house structure against all risks, except those listed as exclusions such as flooding and earthquakes. 

Other structures

This coverage pays to repair or rebuild detached structures on your property — such as a shed, pool house or gazebo — if they are damaged by a covered problem. 

Personal property

This coverage pays to repair or replace your belongings if they are stolen or damaged by one of these 16 covered problems:

• Fire and lightning.
• Windstorms and hail.
• Explosions.
• Riots and civil commotions.
• Aircraft (not your own).
• Vehicles (not your own). 
• Smoke damage.
• Vandalism and malicious mischief.
• Theft.
• Falling objects.
• Weight of ice, snow and sleet.
• Accidental water or steam overflow.
• Accidental and sudden bulging, burning, cracking and tearing apart.
• Freezing.
• Sudden and accidental damage from artificially generated electrical current.
• Volcanic eruptions.

Certain high-value items, like jewelry, may have limits in the event they’re stolen. You might be able to get more coverage for these items by scheduling your personal property.

Tip: Your personal property is usually insured at its actual cash value, meaning depreciation is factored into the claim payout. Upgrade to replacement cost coverage if you want to be reimbursed at today’s prices.

Loss of use

If your house becomes uninhabitable because of a covered problem — like if a tree falls on your house — loss of use coverage pays for additional living expenses like a hotel stay, pet boarding and restaurant meals while you’re displaced.

Liability

Liability insurance pays other people for repairs or medical expenses when you, or a resident of your house, cause accidental property damage or injury to others. It also covers your legal fees if you’re sued over the incident, up to policy limits. 

Liability insurance may pay out in these situations:

• Your dog bites a jogger at the park, resulting in injury.
• Your child throws a football, breaking a neighbor’s glass door.
• A guest slips on the icy stairs leading to your porch.
• You cut down a tree and it lands on a neighbor’s fence.

Tip: You can typically get $100,000 to $300,000 in liability coverage. If your total assets exceed this amount, consider purchasing an umbrella insurance policy to protect them in the event of a lawsuit.

Medical payments to others

If a guest is injured on your property, medical payments to others coverage can pay for their medical expenses, regardless of who is at fault. 

You can typically get up to $5,000 in medical payments to others coverage. More expensive injuries may be covered by your liability insurance. 

What homeowners insurance doesn’t cover

Standard home insurance will not pay to repair or rebuild your property if it is damaged by any of the below problems. 

• Earth movement, including earthquakes, sinkholes, mudslides and mudflow, shockwaves and tremors.
• Flooding.
• Industrial smoke and pollution.
• Mold, rot and fungus caused by neglected upkeep.
• Negligence.
• Intentional loss.
• Corrosion caused by dry rot, rust or smog.
• Sump pump or drainage overflow. 
• Mechanical breakdowns.
• Standard wear and tear.
• Nuclear hazards.
• Pest and insect damage.
• Personal pet damage to your own property.
• Acts of war.

Tip: You can purchase additional policies or coverage — like flood insurance, earthquake insurance or water backup coverage — to make sure you’re covered in the event of an excluded problem.

How much does homeowners insurance cost?

The average cost of home insurance is $1,935 per year, according to our analysis of rates. The amount of dwelling coverage you need — or how much it would cost to rebuild your house from the ground up — will impact how much you pay for homeowners insurance.

In addition to the rebuild cost of your house, or dwelling coverage, several factors can impact how much your homeowners insurance costs, including:

• Your ZIP code.
• Your credit history and claims history.
• Deductible amount.
• House age and condition.
• Additional coverage.
• Discounts you qualify for. 
• Proximity to a fire station or water source.
• Safety features, such as smoke alarms.

The insurance company you choose will also determine your cost. 

• Progressive charges an average of $746 per year for $350,000 in dwelling coverage.
• Allstate charges an average of $1,313 for the same amount of coverage.

Tip: Save on home insurance by comparing the cheapest home insurance companies.

How to get homeowners insurance

By completing a few steps, you can find a homeowners insurance policy that matches your budget and coverage needs.

1. Identify how much coverage you need

• Dwelling coverage. The amount of home insurance you need depends on your house’s rebuild value, meaning how much it would cost to rebuild from the ground up using similar materials in today’s market. 
• Personal property coverage. You’ll also need to decide whether the standard amount of personal property coverage adequately protects your possessions or if you want more. Conducting a home inventory can help you determine the value of your belongings. There are free home inventory apps that can help. 
• Liability coverage. When determining how much liability coverage you need, consider the total value of your assets, or how much you stand to lose in a lawsuit. 

2. Gather required information

Insurance companies ask for specific information when you request a quote. This can include:

• Property address.
• Age and square footage of house.
• Year of purchase.
• Number of rooms.
• Roof condition and age.
• Building materials.
• HVAC information.
• Mortgage details.
• Any renovations.

3. Pick a deductible amount

A deductible is the amount subtracted from your claim payout. If you file an approved claim for $10,000 and your deductible is $1,000, you’ll receive $9,000 from your insurance company.

The higher your deductible, the cheaper your home insurance will be, but the less you’ll receive in a claim reimbursement. 

4. Collect and compare quotes

It’s important to compare several home insurance quotes to ensure you’re not missing out on a better deal for the same level of coverage. 

But don’t only look at price. You should also compare insurers’ financial ratings, claims service and customer service ratings, ease of use and available discounts.

Shopping for homeowners insurance? Start here:  Best home insurance