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Home Insurance: What it Covers and How it Works


You value your home and everything in it. That’s why it’s crucial you have a home insurance policy that protects your property. There is a variety of options from which to choose, so it’s important to know what your policy entails.

Here are some basics to keep in mind when it comes to home insurance.

Your coverage amount

The amount for which you’re covered is critically important. Keep an eye out for what the policy states is your property replacement amount—this is what you’d receive in case your home suffered a “total loss” and needed to be completely rebuilt. If you match this value to the value of your structure, you can rest easy that you’d be able to rebuild the same house with the same features.

Your deductible

This functions no differently than other insurances you’re used to—from health insurance to auto insurance. Your deductible is the maximum amount you’ll pay out of pocket in a policy period. The higher the deductible, the more you’ll need to pay in case of damage or weather-related disasters, such as roof damage. Make sure your deductible is one you can comfortably afford. 

Your coverage details

The list of items covered by your homeowner’s insurance can be boiled down to three basic categories:

  • Buildings—from your home itself to other structures on your property, such as your garage, your insurance should cover repair and total replacement.
  • Belongings—your furniture, appliances and other items within your property’s buildings can also be covered to a certain extent. Make sure your coverage details what’s covered and up to what amount.
  • Liability—on the off-chance someone visiting your home or a stranger walking by is injured on your property, your policy can cover legal and medical costs associated with the liability.

Your disaster coverage

Not all “disasters” are built alike. There are several things that many home insurance policies cover, but don’t assume every weather-related or unforeseen disaster will be included on that list. Take special care to check on items that particularly pertain to your region—if you’re coastal, check for hurricane coverage. If you’re in the Great Plains, check for tornado coverage.

Keep in mind that some events aren’t covered by any basic home insurance policy—events such as flooding, earthquakes or even mold are not generally covered and may require a supplemental policy if you have a concern about their prevalence.

Your add-ons

Basic insurance covers basic items (such as the ones bulleted above)—but you can include add-ons to cover even more. If you know your house has a history of sewer problems, consider adding coverage for backups. Some home insurance providers even offer protection for the cost of dealing with an identity theft. Talk to your provider about all of your options and choose the ones that best fit your situation.

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