Homeowners Insurance: Everything You Need to Know

Shawn Plummer

CEO, The Annuity Expert

Homeowners insurance is a vital part of protecting your home and your family. It can help to cover the costs of repairing or rebuilding your home if it is damaged in a fire, storm, or other natural disaster. It can also help to cover the costs of replacing your belongings if they are damaged or stolen. However, homeowners insurance can be complex, and many different plans and options are available.

This guide will answer some of the most frequently asked questions and explain what a policy is, how it works, and its benefits and drawbacks. We will also recommend some of the best plans for different types of homeowners.

What Is A Homeowners Insurance Policy?

Homeowners insurance is a type of property insurance that covers your home and belongings in the event of damage or theft. It can help to cover the costs of repairing or rebuilding your home if it is damaged in a fire, storm, or other natural disaster. It can also help to cover the costs of replacing your belongings if they are damaged or stolen.

Insurance is not required by law, but most mortgage lenders will require you to have it if you have a mortgage on your home.

Home Insurance

How Does Homeowners Insurance Work?

Homeowners insurance typically works by reimbursing you for the cost of repairing or rebuilding your home and replacing your belongings after a covered event. For example, most homeowners insurance policies cover damage caused by fire, wind, hail, water, and theft.

Some policies will also cover additional types of damage, such as vandalism or damage caused by a natural disaster.

What Are The Three Main Types Of Homeowners Insurance Coverage?

There are three main types of homeowners insurance: dwelling coverage, personal property coverage, and personal liability coverage.

  1. Dwelling coverage helps protect your home from damage caused by a covered event.
  2. Personal property coverage helps to protect your personal belongings from damage or theft.
  3. Personal liability coverage helps to protect you from being sued if someone is injured on your property.

What Are The Benefits And Drawbacks?

There are a lot of different benefits to having insurance.

  • It can help to protect your home and belongings in the event of damage or theft.
  • It can also help to cover the costs of repairing or rebuilding your home if it is damaged in a fire, storm, or other natural disaster.

However, there are also some drawbacks to having a homeowners policy.

  • One of the most significant drawbacks is that it can be expensive, especially if you live in an area prone to natural disasters.
  • Insurance is also not required by law, so you may not be able to get coverage if you do not have it.

What Are The Best Homeowners Insurance Plans?

There are a lot of different insurance plans available, and the best plan for you will depend on your specific insurance needs and situation. Some of the best plans for different types of homeowners include:

  • For homeowners who live in an area prone to natural disasters: A policy that covers damage caused by fire, wind, hail, water, and theft.
  • For homeowners who have a lot of valuable belongings: A policy that covers damage caused by fire, wind, hail, water, theft, and vandalism.
  • For homeowners with a mortgage: A policy that covers damage caused by fire, wind, hail, water, and theft. Most mortgage lenders typically require this type of policy.
  • For homeowners looking for affordable coverage: A policy that covers damage caused by fire, wind, hail, water, and theft. This type of policy is typically less expensive than other types of insurance.

Why Do Homeowners Insurance Policies Go Up?

Like auto insurance, rates can increase each year. There are several reasons why insurance rates may go up. Some of the most common reasons many insurance companies charge a higher deductible include:

  • The value of your home increases
  • The cost of rebuilding your home increases
  • You claim your homeowners policy
  • You add or remove coverage from your policy
  • Your credit score changes
  • You move to a new house, condo, or townhome

The Best Homeowners Insurance Company

Who do we recommend as the best homeowners insurance company? I (Shawn Plummer) have used Liberty Mutual for my insurance for over seven years. Why? Because when we’ve filed claims in the past, Liberty Mutual has made the process easy and without the feeling of being “ripped off.”

A “Real Life” Example: In 2021, our home had minor water damage in the pantry and our master bedroom closet. Instead of repairing only the minor water damage, Liberty Mutual replaced the entire hardwood flooring on the first floor of our home so all of the wood would match. Shout out to Shannon Reid for all the great work!

Liberty Mutual Home Insurance

Disclaimer: We are neither Liberty Mutual agents nor sell Liberty Mutual products. However, we may receive a referral fee if you purchase a policy. Therefore, we recommend them, and I have been thoroughly happy with their policies and procedures thus far.

Should I Get A Home Warranty?

A home warranty is not the same as homeowners insurance. A home warranty is a service contract that covers the repair or replacement of major home appliances and systems, such as air conditioners, refrigerators, and ovens.

On the other hand, homeowners insurance covers damage to your home and belongings caused by covered events, such as fires, storms, and theft.

You may want to consider getting a home warranty if you are worried about the cost of repairing or replacing major home appliances and systems.

Home Warranty

Disclosure: I may get paid a commission if you buy a product from American Home Shield

Bottom Line

Homeowners insurance is a vital part of protecting your home and your family. It can help to cover the costs of repairing or rebuilding your home if it is damaged in a fire, storm, or another natural disaster. It can also help to cover the costs of replacing your belongings if they are damaged or stolen.

Insurance coverage is not required by law, but a mortgage lender will require it if you have a mortgage on your home. There are a lot of different homeowners insurance plans available, and the best plan for you will depend on your specific needs and situation.

Homeowners Insurance

Frequently Asked Questions

What is the difference between home insurance and house insurance?

Home and house insurance are both types of home insurance. Home insurance typically provides financial protection in case of property damage to your home, while house insurance covers damage to your personal property.

Do I need homeowners coverage if I don’t have a mortgage?

No, you are not required to have a homeowners insurance policy if you do not have a mortgage. However, it is still a good idea to have coverage in case of damage or theft.

What’s the best way to compare homeowners insurance?

Like auto insurance, the best way to compare policies is to get a homeowners insurance quote from multiple insurance companies and compare their rates, coverage, and customer service. Again, an insurance agent can assist with finding the best products. You can also read reviews of different homeowners insurance companies to understand which ones are the best.

What’s the average cost of homeowners insurance?

Average insurance costs are $780 per year. However, this number will vary depending on your home’s location, value, how much coverage you need, and other factors. Getting homeowners insurance when you purchase a home or renew your lease would be best.

How much home insurance coverage do I need?

Your insurance will depend on your home’s value and the coverage you want. You can typically choose between two types of coverage: actual cash value and replacement cost. Actual cash value covers the current value of your home, while replacement cost coverage covers the cost of rebuilding your home.

How many homeowners are insurance claims too many?

There is no definitive answer to this question, as it will vary depending on the insurance company. For example, some home insurance companies may cancel your policy if you file more than two claims in a year, while others may not have any policy limit. Therefore, it is essential to read the fine print of your insurance policy so that you know the company’s stance on claims.

How do home insurance claims work?

Claims typically work by you filing a claim with your insurance company and then the company sending an adjuster to assess the damage. Once the adjuster has assessed the damage, they will give you an estimate of how much it will cost to repair or replace your belongings. You will then have the option to either repair or replace your belongings.

If you choose to repair your belongings, the insurance company will typically give you a check for the estimated cost of repairs.

If you choose to replace your belongings, the insurance company will typically give you a check for the replacement value of your belongings.

What’s the difference between dwelling coverage and contents coverage?

Dwelling coverage covers the structure of your home, while content coverage covers your belongings. Most people carry two policies: one for the dwelling and the contents. However, you may need to carry more than two policies if you have a high-value home or a lot of valuable belongings.

What doesn’t homeowners insurance cover?

A homeowners insurance policy does not cover flood damage, earthquakes, or sinkholes. However, coverage will vary depending on the policy. Therefore, it is essential to read the fine print of your policy to see what is and is not covered.

What are some common homeowners insurance discounts?

Some common ways to save money include a multi-policy discount for bundling policies within the same company or affiliated companies, having a home security system or fire alarm, being claims-free, and having a new roof. However, discounts will vary depending on the insurance company. Therefore, when shopping for homeowners insurance policies, it is essential to ask about discounts.

For example, you may get a discount if you have pet insurance or car insurance coverage with the same company.

What is a home insurance deductible?

A deductible is an amount you must pay out-of-pocket before your home insurance company starts paying for a claim. For example, if you have a $500 deductible and file a $1000 claim, you will have to pay $500, and your insurance company will pay $500.

What is the difference between replacement cost and actual cash value?

Replacement cost is the amount it would cost to replace your personal belongings at today’s prices. At the same time, the actual cash value is the amount it would cost to replace your belongings minus depreciation. For example, if you have a sofa that is five years old and it would cost $1000 to replace it at today’s prices, the replacement cost would be $1000. However, the actual cash value of the sofa would be $500 because it has depreciated over time.

Will home insurance cover mold?

Mold is typically not covered. This is because it is considered to be a high-risk item. However, if you have mold in your home, you may consider adding an endorsement to your policy to cover it.

What does home insurance cover for pools?

Pools are typically not covered. This is because they are considered to be high-risk items. However, if you have a pool in your home, you may consider adding an endorsement to your policy to cover it. Medical bills, property damage, and additional living expenses are not covered.

What does home insurance cover for trampolines?

Trampolines are typically not covered. This is because they are considered to be high-risk items. However, if you have a trampoline in your home, you may consider adding an endorsement to your policy to cover it. Medical expenses and legal and living expenses are not considered covered losses.

What does home insurance cover for roofs?

A homeowners policy typically covers roofs for up to $500 per square. If you have a high-value roof, you may consider adding an endorsement to your policy to cover it.

Will home insurance cover tree removal?

Most home insurance policies will not cover the cost of tree removal. However, some policies may offer limited coverage for trees that fall on your home or other structures on your property. If you have a tree at risk of falling, you may consider adding an endorsement to your policy to cover it.

What does home insurance cover for water damage?

Water damage is typically covered. However, there may be some limitations or exclusions depending on the cause of the water damage. For example, most policies will not cover flood damage. If you are concerned about water damage, you should check your policy or contact your insurance company to see what is covered. A separate flood insurance policy will cover flooding.

Will insurance pay for a new roof?

Most homeowner’s policies will not cover the cost of a new roof. However, some policies may offer limited coverage for roofs damaged by wind or hail. If you are concerned about your roof, you should check your policy or contact your insurance company to see what is covered.

What does homeowners insurance cover for windows?

Homeowners insurance policies typically cover windows for up to $500 per window. If you have high-value windows, you may want to consider adding an endorsement to your policy to cover them.

What does home insurance cover for fences?

Fences are typically not covered. This is because they are considered to be high-risk items. However, if you have a fence in your home, you may consider adding an endorsement to your policy to cover it.

What does home insurance cover for gutters?

Gutters are typically not covered. This is because they are considered to be high-risk items. However, if you have gutters in your home, you may consider adding an endorsement to your policy to cover them.

What does home insurance cover for sheds?

Sheds are typically not covered by a homeowners policy. This is because they are considered to be high-risk items. However, if you have a shed in your home, you may consider adding an endorsement to your policy to cover it.

What does home insurance cover for decks?

Decks are typically not covered. This is because they are considered to be high-risk items. However, if you have a deck in your home, you may consider adding an endorsement to your policy to cover it.

Will insurance pay for dead tree removal?

Most insurance policies will not cover the cost of tree removal. However, some policies may offer limited coverage for trees that fall on your home or other structures on your property. If you have a tree at risk of falling, you may consider adding an endorsement to your policy to cover it.

Will home insurance cover termite damage?

Most policies will not cover the cost of termite damage. However, some policies may offer coverage limits for termites that cause damage to your home. If you are concerned about termite damage, you should check your policy or contact your insurance company to see what is covered.

Will insurance cover HVAC?

Most insurance policies will not cover the cost of HVAC repairs or replacement. However, some policies may offer limited coverage for HVAC systems damaged by wind or hail. If you are concerned about your HVAC system, you should check your policy or contact your insurance company to see what is covered.

Where do I find my home insurance policy?

You should be able to find your insurance policy in your legal documents when closing on your home. If you can’t find your policy, you may be able to find it online or by contacting your insurance company.

Are homeowners and renters insurance the same thing?

Homeowners and renters insurance is not the same thing. Homeowners cover your home and belongings in the event of a fire, theft, or other disasters. Renters insurance covers your possessions in the event of a fire, theft, or other disasters.

Should I get a home warranty?

A home warranty is not the same as insurance. A home warranty is a service contract that covers the repair or replacement of your home’s major systems and appliances. An insurance policy covers your home and belongings in the event of a fire, theft, or other disasters.

There are several home warranty companies, and the best one for you depends on your individual needs. Some factors to consider include the coverage offered, the cost of annual premiums, and the company’s reputation.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

Scroll to Top