Insurance
Home Insurance: What It Covers and What to Compare
Home insurance bundles several different coverages into one policy. Knowing what each one does makes it easier to compare quotes apples-to-apples.
What home insurance usually covers
A standard homeowners policy (often called HO-3) typically combines property coverage, liability coverage, and additional living expenses. Flood and earthquake are usually separate policies.
Dwelling coverage
Pays to repair or rebuild the physical structure of your home after a covered loss. Coverage is usually based on the home's estimated rebuild cost — not its market value or what you paid for it.
Personal property
Covers your belongings: furniture, electronics, clothing, and household items. High-value items like jewelry, art, or collectibles may need a scheduled rider for full coverage.
Liability coverage
Helps cover legal costs and damages if someone is injured on your property or you cause accidental damage to others. Common limits range from $100,000 to $500,000+.
Loss of use
Pays for additional living expenses (hotel, meals, temporary rental) if a covered loss makes your home uninhabitable while it's being repaired.
Deductibles
The amount you pay out of pocket per claim. Higher deductibles lower your premium but increase what you pay when something happens. Some areas have separate wind/hail or hurricane deductibles, often expressed as a percentage of dwelling coverage.
Replacement cost vs actual cash value
- Replacement cost pays to replace items with new equivalents.
- Actual cash value pays replacement cost minus depreciation.
- Replacement cost typically costs more in premium but pays out more in a claim.
Factors that may affect premium
- Location, ZIP-level catastrophe risk, and crime statistics.
- Year built, square footage, and construction type.
- Roof age and condition.
- Prior claims on the home and on your own record.
- Credit-based insurance score (where allowed by state law).
- Deductible, coverage limits, and endorsements.
- Security features (alarm system, smoke detectors, water-leak sensors).
What to consider before comparing policies
- Use the same coverage limits and deductibles when getting quotes — otherwise prices aren't comparable.
- Confirm dwelling coverage matches estimated rebuild cost, not market value.
- Ask whether the quote uses replacement cost or actual cash value.
- Check if you need separate flood, earthquake, or umbrella coverage.
- Review carrier reputation, claims handling, and financial strength ratings.
Does home insurance cover floods?
Standard homeowners policies do not cover flood damage. Flood insurance is typically a separate policy through the National Flood Insurance Program (NFIP) or a private carrier.
Should I insure my home for market value?
No — dwelling coverage is based on rebuild cost. Market value includes land and location, which you usually don't need to insure.
How often should I review my coverage?
At least once a year, and after any major change: renovation, new high-value items, marriage, or a new mortgage.
Will filing a claim raise my rate?
It can, especially for multiple claims in a short period. Some insurers offer claim-free discounts that disappear after the first claim.
Explore insurance options tailored to your criteria
Based on your location, household details, coverage needs, property information, vehicle information, or family goals, Finance Choices can help you compare relevant insurance options from partner providers.
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