Homeowners insurance protects your most valuable asset. Understanding what your policy covers and how to strengthen it can save you money and prevent financial hardship after a disaster.
Is homeowners insurance needed?
Yes. Homeowners insurance covers the cost to repair or replace your home and personal property if they are damaged, stolen, or destroyed. It also includes liability coverage for injuries or property damage caused to others, including injuries caused by household pets. This applies even after your mortgage is paid off.
What does homeowners insurance cover?
Coverage varies by location, insurer, and policy, but a standard homeowners policy covers losses from fire, theft, and liability claims. It also covers additional living expenses, such as hotel costs, meals, and clothing, if you are displaced during repairs.
Personal property coverage for furniture, appliances, and clothing is included in most base policies. Additional coverage for jewelry, art, or other valuables can be added, as standard policies typically cap coverage for high-value items at $1,500.
Most standard policies also cover other structures on your property, such as a detached garage, shed, or fence. This coverage is typically set at 10% of your dwelling coverage limit. If you have a workshop, carport, or other outbuildings, confirm with your agent that the coverage amount is adequate.
What is the difference between a premium and a deductible?
Your premium is what you pay annually for coverage. It can change year to year based on your home's age, roof condition, claims history, credit score, and market factors. Many mortgage servicers collect it monthly through escrow.
Your deductible is what you pay out of pocket when you file a claim. If your deductible is $2,500 and you have a $10,000 claim, the insurer pays $7,500. Some deductibles are percentage-based, which is common with wind policies. A 5% deductible on a $200,000 home means you pay the first $10,000 of any wind claim.
What types of coverage are there?
Replacement Cost Value (RCV) is what we recommend. It pays to replace damaged items at today's prices, with depreciation not deducted. It costs more but delivers significantly better protection.
Actual Cash Value (ACV) is more affordable, but it pays out the depreciated value of the damaged item. After depreciation and your deductible, an older roof or appliance may result in little to no payout.
Is wind insurance included?
In coastal states, wind coverage is typically a separate policy or endorsement. It may be called wind, hurricane, named storm, or wind and hail insurance. For inland homeowners, wind and hail coverage is usually included in the base policy. Learn more about wind insurance.
What endorsements should I ask about?
Ask your agent about these in particular:
Ordinance or Law coverage pays to bring your home up to current building codes if it is substantially damaged. Standard policies do not cover this gap, and code upgrades can be expensive.
Water and sewer backup coverage protects against overflow and is separate from flood insurance. Without it, those costs come out of pocket.
Inflation guard is worth asking about as well. Construction costs and materials prices have risen sharply in recent years. A coverage amount that was sufficient when you bought your policy may no longer cover what it would actually cost to rebuild your home today. An inflation guard endorsement automatically adjusts your dwelling coverage limit to keep pace with rising costs.
Is flood insurance needed?
Homeowners insurance does not cover flood damage in most cases. If your home is in a Special Flood Hazard Area and carries a mortgage, flood insurance is likely required. Even outside flood zones, it is worth considering. One inch of water can cause up to $25,000 in damage. Learn more about flood insurance.
Can resilient construction lower my premium?
Yes, meaningfully. A FORTIFIED designation is third-party verified documentation that your home has been built or retrofitted to a standard that significantly reduces storm damage. A 2025 peer-reviewed study found FORTIFIED Roof homes had 73% fewer insurance claims and 72% lower total losses during Hurricane Sally than conventionally built homes. In states with enacted legislation, FORTIFIED homeowners qualify for discounts of 20% to 55% off the wind portion of their premium. Many carriers offer discounts voluntarily in additional states. FORTIFIED designation has also been shown to increase home resale value by nearly 7%. Learn More About FORTIFIED
For wildfire-prone areas, the IBHS Wildfire Prepared Home standard provides a comparable framework. California insurers are now required to offer discounts to homes that meet it.
How much coverage do I need?
Your policy should cover the full replacement cost of your home and any additional structures, your personal possessions, additional living expenses if you are displaced, and liability to others. Review your coverage limits annually. Rising construction costs mean many homeowners are underinsured without realizing it. Work with an agent who understands resilient construction and can help you find the right coverage at the best available price.
Have questions about coverage, discounts, or resilient construction in your state? Contact us.