Written by Irena Martincevic
Published on February 27th, 2026
What Is Homeowners Insurance?
Homeowners insurance is a type of property insurance that covers your home's structure, your personal belongings, and your personal liability, all in a single policy. If something unexpected happens to your home, your possessions, or someone gets hurt on your property, it's the financial safety net that keeps one bad event from becoming a life-altering loss.
For a complete breakdown of how homeowners insurance works, what it typically includes, and how policies are structured, see our full homeowners insurance guide.
| Topic | Key Insight |
|---|---|
| What It Is | A single policy bundling structure coverage, personal belongings coverage, and personal liability protection. |
| Mortgage Requirement | Lenders almost always require homeowners insurance as a condition of the loan. |
| Exclusions | Floods, earthquakes, and maintenance issues are common exclusions not covered by standard policies. |
| How You Pay | You pay a regular premium and cover a deductible first before insurance pays remaining eligible costs up to policy limits. |
| Ongoing Review | Renovations, big purchases, or moving are signals to revisit your coverage. |
Ozzy's takeaways
- Homeowners insurance is a single policy that bundles three core protections: coverage for your home's structure, your personal belongings, and your personal liability if someone is injured on your property.
- If you have a mortgage, your lender will almost certainly require you to carry homeowners insurance as a condition of the loan.
- A standard policy does not cover every disaster; floods, earthquakes, and routine maintenance issues are common exclusions that often catch homeowners off guard.
- You pay a regular premium to keep your policy active, and if something goes wrong, you cover a deductible first before your insurer pays the remaining eligible costs up to your policy's limits.
- Homeowners insurance isn't set-it-and-forget-it; renovations, big purchases, or moving are all signals that it's time to revisit your coverage.
Why homeowners insurance exists
Your home is almost certainly the most valuable thing you own. And like anything valuable, it's exposed to risk, from storms, fires, burst pipes, and accidents you never saw coming. Without insurance, a single disaster could mean paying tens or hundreds of thousands of dollars out of pocket, or losing your home entirely.
That's the core reason homeowners insurance exists: to protect you from large, unexpected financial losses that most people simply cannot absorb on their own.
There's also a practical reality: if you have a mortgage, your lender will almost certainly require you to carry homeowners insurance. Lenders have a financial stake in your home too, and they need to know it's protected.
Beyond property damage, there's another risk that often gets overlooked: liability. If someone is injured on your property and decides to sue, the legal and medical costs can be significant. Homeowners insurance helps protect you from that exposure as well.
At its core, homeowners insurance gives you something that's hard to put a price on: peace of mind. Knowing that you're covered if something goes wrong means you can focus on living in your home, not worrying about what might happen to it.
What does a standard homeowners policy protect?
A standard homeowners insurance policy bundles several types of protection into a single plan. Here's a general look at what's typically included.
Your home's structure
This is coverage for the physical building itself: the walls, roof, floors, foundation, and built-in systems like plumbing and electrical. If a covered event damages your home, this part of your policy helps pay to repair or rebuild it.
Your belongings
Your personal property, furniture, clothing, electronics, and appliances are also covered under a standard policy. If your belongings are damaged, destroyed, or stolen, your insurance can help you replace them.
Liability protection
If a guest slips and falls in your home, or if your dog bites someone in the neighborhood, you could be held financially responsible. Liability coverage helps protect you from the legal and medical costs that can follow accidents like these.
Temporary living expenses
If your home becomes uninhabitable after a covered loss, say, a fire forces you out while repairs are made, your policy can help cover the cost of staying somewhere else. This might include hotel bills, meals, and other living expenses during the displacement period.
What does homeowners insurance NOT cover?
Standard homeowners insurance is broad, but it has limits. There are certain events and situations that most policies simply don't cover.
Floods. Flooding from outside your home, heavy rain, rising rivers, and storm surge are not covered by a standard policy. Separate flood insurance is required for this type of protection.
Earthquakes. Damage caused by earthquakes and earth movement is excluded from most standard policies. Earthquake coverage typically requires a separate policy or endorsement.
Maintenance issues. Insurance is designed for sudden, unexpected damage, not wear and tear. Gradual deterioration, mold from long-term moisture, or a roof that simply aged out are generally not covered.
Intentional damage. If you or a household member intentionally damages the property, your policy won't cover it.
How does homeowners insurance work?
The basic mechanics of homeowners insurance are simpler than you might think.
You pay a regular premium, usually monthly or annually, to keep your policy active. In return, your insurer agrees to help cover the cost of covered losses, up to the limits defined in your policy.
If something happens, you file a claim. You'll typically be responsible for paying a deductible first, a set dollar amount you cover before insurance kicks in. After that, your insurer pays the remaining eligible costs, up to your policy's limits.
Here's a simple example: Imagine a tree falls on your roof during a storm and causes $15,000 in damage. If your deductible is $1,000, you'd pay the first $1,000 and your insurer would cover the remaining $14,000, assuming that type of damage falls within your coverage limits.
This system works because insurance companies pool risk across thousands of policyholders. Most people won't experience a major loss in any given year, so the premiums collected collectively fund the claims of those who do.
Types of homeowners insurance policies
Homeowners insurance isn't one-size-fits-all. Policies are labeled with "HO" numbers that indicate the type of coverage and who they're designed for. Here's a quick overview of the most common types.
| Policy | Also known as | Best for |
|---|---|---|
| HO-1 | Basic form | Homeowners who need bare-minimum coverage — protects against a limited list of named perils only; rarely offered today |
| HO-2 | Broad form | Homeowners who want more protection than HO-1 but still on a named-perils basis — covers a wider list of risks than HO-1 |
| HO-3 | Special form | Owners of standard single-family homes — the most common policy type |
| HO-5 | Comprehensive form | Newer homes or those with higher-value contents needing broader protection |
| HO-6 | Condo insurance | Condo owners who need to cover their unit interior and personal belongings |
| HO-4 | Renters insurance | Tenants who don't own their building but want to protect their belongings and liability |
| HO-8 | Modified coverage form | Older homes where rebuilding costs exceed the home's current market value |
Homeowners vs. renters insurance
The key distinction between homeowners and renters insurance is ownership. Homeowners insurance is for people who own their home, it covers the structure and the contents inside it. Renters insurance is for tenants. Since they don't own the building, the policy focuses on protecting their personal belongings and covering their personal liability.
Both types of policies include liability protection, which works similarly regardless of whether you own or rent. But only homeowners insurance covers the building structure itself.
When should you review or adjust your coverage?
Homeowners insurance isn't something you set up once and forget. Life changes, and your coverage should keep up.
A few key moments to revisit your policy include after a renovation, since adding a room or upgrading a kitchen increases your home's value and therefore your coverage needs. Major purchases like new jewelry or electronics may also need to be reflected in your policy. When you move to a new home, your coverage needs may be completely different. And major life changes (marriage, divorce, a new baby) can all affect what kind of protection makes sense.
Homeowners insurance basics FAQ
What is the average cost of homeowners insurance?
The cost varies widely depending on where you live, the size and age of your home, your claims history, and the coverage limits you choose. Nationally, the average homeowners insurance premium in 2026 is $2,420 per year.
What is the best homeowners insurance?
There's no single "best" insurer, the right company for you depends on your home, location, budget, and priorities, whether that's price, customer service, or claims handling.
Is homeowners insurance required?
Legally, no, but practically speaking, yes if you have a mortgage. Most lenders require borrowers to maintain homeowners insurance as a condition of the loan. If your loan is paid off, it's technically optional, though still strongly advisable.
Is homeowners insurance tax-deductible?
For most homeowners, no. Primary residence insurance premiums are generally not tax-deductible on federal returns, with some exceptions. For example, if you rent out part of your home or use a portion as a home office.
Can I cancel homeowners insurance anytime?
You can request to cancel your policy at any time. However, if you have a mortgage, your lender may require you to maintain coverage, and canceling without a replacement policy could trigger lender-placed insurance, which is typically more expensive.
What happens if I don't have homeowners insurance?
Without homeowners insurance, you're personally responsible for the full cost of any damage to your home, loss of your belongings, or legal claims against you. For most people, that financial exposure is substantial. If you have a mortgage and let your coverage lapse, your lender may purchase insurance on your behalf, often at a higher rate than you'd find on your own.
Ready to protect your home? Compare quotes and find the right policy in minutes.
About the Author
Irena Martincevicirena@fixr.com