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- Homeowners insurance isn't required by law, but if you have a mortgage your lender may require it.
- If you bundle your auto and homeowners insurance, you can save money.
- You can shop and compare homeowners insurance online or contact your insurance provider.
If the mailman slips and falls on your sidewalk, the dog bites a guest, a tree falls on your roof, or the neighbor's kid injures himself in your swimming pool, homeowners insurance can protect you.
Although homeowners insurance isn't required by law, if you have a mortgage, your lender will require homeowners insurance to protect the investment.
Buying homeowners insurance is easy online and if you bundle with your auto insurance, you can save.
How to buy homeowners insurance
1. Understand what homeowners insurance covers
Homeowners insurance protects your dwelling and personal belongings, and offers personal liability coverage for injuries that happen on your property. It also provides additional living expenses if your home is damaged and you need to temporarily relocate.
There are eight types of homeowners policies based on the type of home you have. However, they all fall into one of two categories: named peril or open (all) peril. A named peril policy covers you for listed events, like a fire, storm, or theft. Open peril includes named perils and is more expansive covering just about anything that might happen, unless your policy specifically notes that it's not covered.
| Policy | Dwelling | Liability | Belongings | Peril Type |
| HO-1: Basic* | Yes | No | No | Named |
| HO-2: Broad* | Yes | No | Yes | Named |
| HO-3: Special | Yes | Yes | Yes | Open/Named |
| HO-4: Renters | No | Yes | Yes | Named |
| HO-5: Comprehensive** | Yes | Yes | Yes | Open |
| HO-6:Condo/Co-op | Yes*** | Yes | Yes | Named |
| HO-7: Mobile Homes | Yes | Yes | Yes | Open/Named |
| HO-8: Older homes | Yes | Yes | Yes | Named |
Townhomes can be HO-3 or HO-6
*Most lenders don't consider this sufficient coverage
**Typically for brand-new homes only
***Covered under condo association's master policy
2. Understand what's not covered and optional coverage you should consider
Earthquakes, floods, government seizures, mudslides, ordinance updates, sewer backups, and sinkholes are perils that are not covered by homeowners insurance. They require add-on coverage using a rider policy or separate coverage.
Homes located in disaster-prone areas — hurricanes, tornadoes, and wildfires — will have increased premiums because these types of events are not included in basic coverage and will need to be add-on riders.
3. You can shop for homeowners insurance online
You can use an online insurance platforms to shop and compare homeowners insurance policies online, like PolicyGenius or The Zebra. Or, you can go on insurance companies individual websites to get quote information.
4. You can contact your insurance agent
Most insurance companies offer discounts to customers that combine their auto and homeowners insurance.
5. Remember that cheap isn't always good
A cheap price doesn't mean good customer service. Focus on customer satisfaction and claims satisfaction rankings, like those from J.D. Power, and comparison shop. This is especially important for homes in disaster-prone areas, when good service can make all the difference.
How much homeowners insurance do I need?
This goes back to understanding the four basics of homeowners insurance:
1. Dwelling coverage
Dwelling coverage is the part of a homeowners insurance policy that can help cover the cost to repair or rebuild your home if it is damaged. This cost is the price to rebuild your home. You should update this yearly as the cost of labor and materials increase especially if you're in a disaster-prone area.
Vintage and heritage homes come with charm and rules and regulations for historic dwellings, making the cost to repair or rebuild more costly. The age of your home, roof, appraised value of your home, location, and size of your home are all factors in determining dwelling coverage.
2. Personal property coverage
Personal property coverage protects your belongings and furnishings from damage due to covered events, known as insurance perils. A peril is an event that may damage your home or belongings. It is important to find out if your policy offers replacement cost or actual cash value (ACV). Replacement cost is the cost to replace the item with a new or used product. Actual cash value takes into consideration depreciation of the item.
There are limits to standard personal property coverage depending on your policy and insurance carrier, usually $100,000. This may not be enough coverage, as specialty items like high-end electronics, special jewelry, furs, fine arts, firearms, and cash may not be covered. You can get optional endorsement for these items at an additional cost.
3. Personal liability coverage
Personal liability coverage protects the homeowner if someone is injured at your property or sues for damages. Basic personal liability homeowners policies typically have a $100,000 coverage limit. If you own a pet, have a swimming pool, or trampoline, you may need to increase liability coverage. Additionally, some companies don't cover exotic pets or certain dog breeds, which may require umbrella coverage.
4. Additional living expenses
Additional living expenses is also known as "loss of use" and provides reimbursement for temporary housing when a peril causes damage that makes your home inhabitable. Some carriers will reimburse you for temporary housing. Others may have a list of housing alternatives.
Your additional living expense allowance will be a percentage of your dwelling coverage. If you're considering leaving your home due to damage, contact your homeowners insurance provider first and take detailed pictures of the damage.
Home warranties vs. homeowners insurance
A home warranty isn't insurance — it's a service contract. Home warranties cover repair and maintenance issues for appliances, not structural issues. Homeowners insurance doesn't cover damage due to lack of proper maintenance or wear and tear. Likewise, many home warranties may have exclusions if there is improper maintenance.
| Coverage | Homeowners Insurance | Home Warranty |
| Dwelling/Structure | Yes | No |
| Personal liability | Yes | No |
| Personal belongings | Yes | No |
| Loss of Use (additional living expenses) | Yes | No |
| High-end electronics/special jewelry | Limited, requires add-on* | No |
| Equipment breakdown | Yes**** | Yes |
| Electrical outage | Yes* | No |
| Service lines | Yes* | No |
| Cyber liability | Yes* | No |
| Water damage | Yes | No |
| Flood | No** | No |
| Wind or hail | Yes, but not high winds*** | No |
| Earthquake | No* | No |
| Appliance (AC/HVAC/water heater etc) - repair | No | Yes |
| Appliance (AC/HVAC/water heater etc) - replacement | Maybe**** | Yes |
How much does homeowners insurance cost?
According to the Homeowners Insurance Report by the National Association of Insurance Commissioners (NAIC), the average annual homeowners insurance premium in the United States in 2017 was $1,211.
Note that the cheapest price is probably not the way to go if that means a company isn't responsive when you file a claim. Focus on customer service, complaints, and the reputation of the insurance provider.
Here's how much homeowners insurance costs on average by home value in the United States, according to the NAIC:
| Estimated home value | Average annual homeowners insurance premium |
| $49,999 and under | $645 |
| $50,000 to $74,999 | $748 |
| $75,000 to $99,999 | $826 |
| $100,000 to $124,999 | $888 |
| $125,000 to $149,999 | $937 |
| $150,000 to $174,999 | $981 |
| $175,000 to $199,999 | $1,018 |
| $200,000 to $299,999 | $1,114 |
| $300,000 to $399,999 | $1,272 |
| $400,000 to $499,999 | $1,482 |
| $500,000 and above | $2,148 |
Data from the NAIC
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