A home is the biggest asset most Americans have. Homeowners insurance offers protection for the home and personal possessions.
Although homeowners insurance is not required by law, if you have a mortgage your lender will require homeowners insurance to protect the home. If you live in a disaster-prone area, you may need additional coverage.
What does homeowners insurance cover
Homeowners insurance protects the dwelling, your personal belongings, and offers personal liability coverage for injuries that happen on your property. Additionally, homeowners insurance provides “loss of use” in the event you need to temporarily relocate because your home is unlivable.
Damage to your home and belongings must be from “insurance perils.” A peril refers to a specific event that caused damage to your home and belongings.
Common insurance perils are: Fire or lightning; Windstorm or hail; Explosion; Riots; Aircraft; Vehicles; Smoke; Vandalism; Theft; Falling objects; Weight of ice, snow, or sleet; Accidental discharge or overflow of water or steam; Sudden and accidental tearing, cracking, burning, or bulging; Freezing; Sudden and accidental damage due to short circuiting; and Volcanic eruption.
| Coverage | Included with Homeowners Insurance |
| Dwelling/Structure | Yes |
| Personal liability | Yes |
| Personal belongings | Yes |
| Loss of Use (additional living expenses) | Yes |
| High-end electronics/special jewelry | Limited, requires add-on* |
| Equipment breakdown | Yes* |
| Electrical outage | Yes* |
| Service lines | Yes* |
| Cyber liability | Yes* |
| Water damage | Yes |
| Flood | No** |
| Wind or hail | Yes, but not high winds*** |
| Earthquakes | No* |
| Pets | Yes* |
*Available as add-on coverage if not part of policy
**Flood insurance is available through the NFIP and approved insurers
***If you live in hurricane or tornado areas, additional windstorm rider may be required
Types of homeowners insurance
The type of homeowners insurance you need depends on the type of home you purchased: condo, townhome, single family, rental, or mobile home. Your coverage will vary based on the type of policy you have.
| Policy | Dwelling | Personal Liability | Personal 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
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.
Your dwelling consists of your home and any “other structures” on the property, like a garage or shed. The type of dwelling coverage you have depends on the type of homeowners insurance policy.
Personal property coverage
Your possessions are covered from damage or theft under personal property coverage. There are limits to standard personal property coverage depending on your policy and insurance carrier, usually $100,000.
Specialty items like high-end electronics, special jewelry, furs, fine arts, firearms, and cash may not be covered. According to Steve Wilson, senior underwriting manager at Hippo Insurance, these items may need a “personal article” endorsement or add-on rider.
Personal liability
Homeowners insurance offers homeowners personal liability protection if someone is injured at your property (pet bites) or sues for damages. Some carriers offer identity theft and cyber liability as part of their personal liability coverage or as an add-on rider.
There are limits to standard personal liability coverage depending on your policy and insurance carrier. Basic personal liability homeowners policies typically have a $100,000 coverage limit.
Having certain items — like a pool or trampoline — can increase your liability as a homeowner. Also, exotic pets and certain dog breeds are excluded from some homeowners insurance policies. Some homeowners insurance companies will not offer coverage based on the size and breed of the dog, especially large dogs and breeds considered to be aggressive.
Loss of use or additional living expenses
“Loss of use” coverage, also known as “additional living expenses” or ALE, is included in most homeowners policies and provides reimbursement for temporary housing when a peril causes damage to your property or belongings that makes your home inhabitable.
In order for “loss of use” to be triggered, the damage must be related to a peril or covered event in the policy. Don’t assume that your insurance carrier will pay additional living expenses, because the definition of inhabitable varies by company.
Have an emergency “go bag” ready
It is recommended to have an emergency “go bag” ready, especially for those living in disaster-prone areas. Your emergency bag should include a thumb/flash drive with important documents scanned (birth certificates, copies of passport, driver’s license, medical records, estates documents, photos, etc). Have a first aid kit and a list of your medication with a supply to last at least a week.
Emergency Go Bag from NYC Fire Dept
Ronda is an attorney, writer, and entrepreneur. She is a contributing writer for the Huffington Post. Originally from Chicago, she has lived in Los Angeles and New York. She loves to travel and is passionate about education equity, especially for first generation college students.