What Is Homeowners Insurance And How Does It Work?

Apr 28, 2024

12-minute read

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A man and two children sharing a heartfelt embrace in a cozy living room.

With all you have tied up in your home — most of your possessions, your family’s future, not to mention the massive financial commitment — it’s essential that you have sufficient house insurance to hedge against a big or even total loss of property at your home. In fact, most lenders will require that you have at least some level of homeowners insurance before they’ll back your mortgage.

Let’s look more in-depth at homeowners insurance and how it provides crucial financial security and peace of mind.

What Is Homeowners Insurance? 

Standard homeowners insurance typically offers a range of protections for your property and personal belongings. It covers damage to your home’s structure and personal belongings in the event of perils such as fire, storm damage or theft. It also provides liability if someone is injured on your property, medical payments to cover injuries, and additional living expense coverage if you need to move out during repairs.

Homeowners insurance covers your personal belongings within your home, including furniture, clothing, jewelry and other possessions, plus key appliances and mechanical systems like your furnace and air conditioner. Some insurance companies ask you to provide descriptions and photos of high-priced items like artwork or jewelry that can be referenced if you make a claim.

Most standard policies also provide coverage for garages, sheds, outdoor grills, swing sets, fences and more. High-risk items like swimming pools may require additional coverage.

As a homeowner, it’s important to understand the details of your policy and how much coverage you can expect when you file a claim. For instance, most policies do not cover damage caused by floods or earthquakes. For these you’ll need to pay for additional insurance.

Are You Required To Have Homeowners Insurance?

Homeowners insurance isn’t required by law, but it is often required by lenders as a condition of mortgage approval. This helps protect the financial interest that your mortgage lender has in your home.

But the question “Is homeowners insurance required?” has both a legal and a practical answer. Practically, home insurance should be a requirement of your own financial strategy. It can help you protect yourself from e