Educational Article

How Does Homeowners Insurance Work?

If you already own a home, or are shopping for one, you’re going to want (or need) to protect it. Here’s how.

Service member and spouse outside of a house with a "For Sale" sign

Homeowners Insurance Coverage Basics

There are two main reasons to have homeowners insurance:

It’s a prudent financial move to make given the high value of your home and possessions, combined with the other protections homeowners insurance offers.
It’s required by lenders since most homeowners finance the purchase of their homes.

You’re not just insuring your home with a homeowners insurance policy. These policies generally provide protection against losses in all of these coverage categories.

House with flag on front porch

Dwelling

Damage to the building itself and any attached structures

Other structures

Damage to other unattached structures on the property like garages, sheds, and fences

Personal liability

Damages or injury to someone else for which the insured may be responsible

Medical payments

Medical expenses for anyone hurt on the property or by the insured person’s pet

Personal property

Damages to personal property even if that property is not in the home at the time of loss

Loss of use

Expenses associated with living elsewhere while the home is repaired or rebuilt

Depending on your policy and insurance provider, you can often adjust the amounts of coverage within each of these categories to fit your situation.

To be covered by a policy, losses within these categories must be the result of a covered event, or “peril,” as they are known in the insurance world. Common perils covered under standard homeowners insurance policies include:

Fire
Smoke
Windstorm
Hail
Lightning
Weight of snow, ice or sleet

Falling Objects
Civil Unrest
Vehicles
Explosions
Vandalism
Theft

Tip: It’s important to recognize that floods, earthquakes, insect damage and normal wear and tear are generally not covered in a typical homeowners insurance policy. However, protection against floods or earthquakes can be obtained through additional coverage or government insurance programs.

Roles and Responsibilities

Here’s a quick rundown of the basic roles and responsibilities involved with acquiring and using homeowners insurance.

YOU	INSURANCE COMPANY
Choose an insurance company	Offers homeowners insurance
Select your coverages from the options available	Offers various coverage options and amounts
Pay your premiums on time	Issues policy insuring your home and possessions
File claims for accidents or other losses covered by your policy	Evaluates claims and if judged to be valid, pays expenses associated with them, minus any applicable deductibles