14 Common Homeowners Insurance Questions
Reading time • 9 minutes
By Matic
Homeowners insurance can be a somewhat complicated subject, especially if this is your first time buying or switching policies. But it doesn’t need to be.
Homeowners insurance is supposed to be there when you need it; it shouldn’t be confusing or intimidating. With this in mind, below we’ve answered some of the most common questions that people ask about homeowners insurance.
What is homeowners insurance?
Homeowners insurance is, at its simplest, an insurance policy that provides financial protection against accidents and damages involving your house. It covers your home, as well as your personal property and can provide liability coverage if someone is injured on your property and sues you.
It works like other forms of insurance. Once you have purchased a homeowners insurance policy, you will be responsible for making regular premium payments. Then, in the event that a covered event causes damage or destruction to your home or other covered assets, you can submit a claim. After you have met your deductible, coverage will kick in, and your insurance carrier will pay to repair, replace, or rebuild (depending on the liability limits of your policy).
Is hazard insurance the same thing as homeowners insurance?
No, hazard insurance is not the same thing as homeowners insurance. Instead, it can be better understood as a piece of your overall homeowners insurance policy. Mortgage lenders can require that the home is protected, and therefore require hazard insurance; however, insurance carriers provide more comprehensive policies to cover the home AND the homeowner, that are not required by the lender.
You typically can’t buy hazard insurance separately from a homeowners insurance policy, though you can in many cases increase the amount of hazard coverage in your policy.
What does homeowners insurance cover?
What, exactly, your homeowners insurance policy covers will depend on the type of policy that you hold, as well as the specific terms of that policy. That being said, most standard policies include four basic types of coverage:
- Structural Coverage: This coverage protects the physical structure of your primary dwelling and other structures on your property.
- Personal Property Coverage: This coverage is for items in your home that become damaged or destroyed by a covered event.
- Liability Coverage: This coverage protects you in the event you are deemed legally liable for an accident that takes place on your property which injures another person or damages their property. It commonly covers medical bills and legal fees.
- Additional Living Expenses: This coverage helps to pay for your living expenses if you are unable to live in your home for a period of time due to damage caused by a covered event.
Additionally, it may be possible to purchase riders or amendments that add other forms of coverage to your policy.
What does homeowners insurance not cover?
While individual policies will vary, homeowners insurance typically doesn’t cover damage or destruction caused by:
- Flooding and related damage
- Water or sewage backup
- Termite damage
- Rodent and pest damage
- Earthquakes
- Acts of war
Additionally, the personal property coverage offered by most homeowners insurance policies usually won’t be enough to fully cover particularly valuable items like jewelry or collectibles. If you have items whose value exceeds your coverage limits, you can often add more coverage.
In many cases, you can purchase additional coverage in the form of riders which may address some of the exclusions listed above. Flood insurance and earthquake insurance, for example, are very common riders.
Do you need homeowners insurance?
Unlike car insurance, homeowners insurance is not required by law.
That being said, virtually all mortgage lenders will require hazard insurance as a condition of your loan. Failing to purchase a homeowners insurance policy to include hazard insurance, will most likely result in your mortgage application being denied, and allowing coverage to lapse once you do have a mortgage can result in a number of negative consequences, including potential default.
But even if you own your home outright and are under no obligation to purchase insurance, doing so is likely a good idea. If you’re like most people, your house is your single most valuable asset. Homeowners insurance offers you significant peace of mind that comes from knowing that if a covered event caused damage to your home, you won’t need to pay out of pocket for major repairs.
How much does homeowners insurance cost?
Many different factors can influence how much you pay for homeowners insurance. Some of the most important include:
- Your home’s age
- Your home’s condition
- Where you live
- Your claims history
- The level of coverage you purchase
- The size of your deductible
- Your home’s replacement cost
That being said, recent data from Matic found that the average cost of homeowners insurance in the United States was about $1,779 per year.
The good news? Most carriers offer a variety of homeowners insurance discounts that can help you lower your rates and make coverage more affordable.
How much homeowners insurance do I need?
As a general rule of thumb, you should aim to have at least enough structural coverage to rebuild your home in the event of a total loss.
What this translates into as a dollar amount will vary depending on the size and construction grade of your home and the cost of building materials. That being said, the Insurance Information Institute (III) recommends multiplying the total square footage of your home by the per-square-foot building costs in your location and using this as a starting point.
Note: If you have a mortgage, your lender will likely have their own coverage requirements built into the terms of the loan. Generally speaking, this will be equal to however much you have borrowed. Depending on the size of your down payment and other factors, this minimum amount can be significantly lower than the cost to rebuild your home.
Likewise, how much personal property coverage and liability coverage you need will depend on your own unique circumstances.
How to get homeowners insurance
When it comes to actually buying homeowners insurance, you can rest easy knowing that, generally speaking, buying a policy is pretty straightforward. All you need to do is contact a carrier, determine how much coverage you need, and select a policy. It’s as easy as that!
Of course, before choosing a carrier, it will be important to shop around to make sure that you are getting the best policy with adequate coverage for the lowest price possible. Otherwise, you may end up overpaying for coverage.
Other FAQs about coverage
Does homeowners insurance cover water damage?
It depends.
If the water damage was caused by a covered event, then yes — your homeowners insurance policy will likely cover it. Generally speaking, this would include any event that is “sudden and accidental” such as a burst pipe or accidental discharge from a water heater.
Water damage that is caused by lack of maintenance, water/sewer backup, or from flooding, is not covered under a standard homeowners policy.
Water/Sewer backup coverage can be added to your existing homeowners policy as an endorsement, and flood policies can be purchased separately.
Learn more about flood insurance here.
Does homeowners insurance cover mold?
If the mold was caused by a covered event — such as a burst pipe or accidental discharge — then your homeowners insurance may help with mold removal and remediation. But as with water damage, any mold that is caused by a non-covered event will not be covered under your policy, leaving you on the hook.
Common causes of mold that are typically not covered include:
- Flood damage
- Improperly sealed windows or doors
- Poorly maintained plumbing
- Lack of ventilation in moist parts of the home, such as a bathroom
- Sump pump failure
- Water backup
Does homeowners insurance cover termite damage?
Damage caused by termites (and other pests such as carpenter ants, carpenter bees, honey bees, and rodents) will typically not be covered by your homeowners insurance.
Why? Because the damage that they cause happens over the course of many months or years. This means that it does not meet the “sudden and accidental” doctrine that most carriers apply when evaluating claims.
Does homeowners insurance cover foundation issues?
Your foundation is a part of your home’s structure, and as such, damage to the foundation by a covered event is covered by your homeowners insurance.
That being said, some common causes of foundation damage are typically excluded from a standard homeowners insurance policy. Foundation damage caused by earthquakes, flooding, and acts of war, for example, are typically not covered by homeowners insurance unless you have purchased specific riders or additional coverage.
Learn more about earthquake insurance here.
Does homeowners insurance cover a second home or vacation home?
The homeowners insurance policy that you carry for your primary residence will not insure a second home or vacation home. In most cases, you will need to purchase a standalone policy (often called second home insurance) to protect that property.
That being said, your primary homeowners insurance policy may extend liability coverage to your second home. For example, if you own your second home outright and don’t require hazard insurance, but want to be protected from suits, you can extend liability to cover the additional property.
Does homeowners insurance cover theft?
Yes, homeowners insurance covers losses related to theft of your personal property, wherever it may be, after all applicable deductibles have been met. There are, however, many limits in place and it is important to check your policy for these limits.
If your personal property is stolen, the personal property coverage portion of your policy will cover it (up to the covered maximum). If the theft resulted in damages to your home, then the structural coverage portion of your policy would cover repairs.
As an important note, however, homeowners insurance does not cover car theft. Comprehensive coverage on your auto insurance policy would be responsible for covering a stolen vehicle.
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