What is homeowners insurance and what does it cover? – State Farm

After investing in your home, it's important to have it insured properly. What are all the policy coverages, forms and exclusions?

Homeowners insurance is a type of insurance that will provide coverage for your home and other personal property in the case of a covered loss.It can also provide liability coverage if someone hurts themselves at your home or you cause property damage. Homeowners insurance is not only desired, but in many cases, required by your mortgage company so they will also be protected financially if your home experiences a covered loss.

A home is the single biggest investment most individuals will ever make. It is typically the largest asset on the family "balance sheet." Also, the contents of a typical home, in the form of furniture, appliances, clothing, family heirlooms and other movable personal belongings, represent a substantial additional investment. The unprotected loss (or partial loss) of a home and its contents to theft, fire, windstorm or some other disaster, could be financially devastating.

Further, everyone faces the risk of personal liability. For example, a visitor to the residence could slip and fall. Such accidents can result in court decisions awarding large sums to the injured party for medical expenses and pain and suffering.

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Originally, a standard homeowners policy covered only the risk of fire. Today's homeowners policies provide protection against a number of the perils of modern life, in one "package" policy. A typical homeowners policycan provide insurance protection for the following:

There are several organizations that work with insurance companies to develop standardized homeowners policies. While the details of a particular policy can vary, these standardized policies or forms are generally very similar.

The standard homeowners policies specifically exclude a number of perils from coverage. Policy coverage for these excluded perils can generally be added through an endorsement and payment of an additional premium. Typical policy exclusions might include the following:

Through an endorsement and payment of an additional premium, reimbursement can be on a "replacement-cost" basis. Replacement cost means, simply, restoring the home to its pre-loss condition using materials and workmanship of similar quality. In some policies, the availability of this feature requires the homeowner to maintain coverage on the home equal to at least 80% of the cost to rebuild or repair. If insurance coverage were not maintained at the 80% level, any loss would be reimbursed at a lesser amount or on an actual-cash-value or depreciated basis.

An insurance policy is a written contract between the insured and the insurance company. The protection provided by the policy typically represents a significant part of an individual's overall risk management program. Thus, it's important for an insured individual to read and understand key policy provisions such as the following.

Insurance agents and brokers, insurance counselors and other trained financial consultants can help provide answers to detailed questions about a particular policy. These individuals can help you select the right policy and the appropriate amount of coverage.

Many mortgage lenders require homeowners insurance, to protect the dwelling, as a condition of granting the mortgage.

The specific coverage and terms of a policy can vary from company to company and from state to state.

Jewelry, silverware, securities, cash and collectibles are examples of personal property subject to these "internal" policy limits.

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What is homeowners insurance and what does it cover? - State Farm