5 Things to know about home insurance

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UPDATED: 2021-02-12T19:35:25.786Z
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The process of buying your first home is more complex than simply finding a property and paying the price; it involves many steps and procedures you should know beforehand. Once you start planning, you’ll discover all the details you need to know about types of mortgages, the taxes you need to cover, and even the architectural and structural roof and foundation integrity, for instance.

Home insurance is definitely one of the most important things you’ll be dealing with, and because you’ll need such a policy for your new dwelling, it’s good to look into it as well. To make things easier for you, we’ve put together a list of five things you should know about homeowners insurance and why it’s so important.

Am I required to have a home insurance policy?

In a word, yes. Your home insurance policy covers your home as well as your household goods, but also provides liability coverage in case someone gets injured on your property.

If you take out a mortgage to buy the property, which is usually the case, the mortgage holder (or lender) is interested in recovering their investment should your house sustain any damage, either from fire, wind, or any other unusual occurrences. Without insurance, you'd be responsible for repaying the mortgage on a damaged house, and the assumption is, you would not have the necessary funds to repair it.

So, a homeowners insurance policy has two main functions: it covers the mortgage if the home is destroyed in any way, and it provides you with the funds to rebuild in case it sustained material damage. However, there is no such thing as a one-size-fits-all home insurance policy, so it’s smart to talk to your realtor and insurance agent about the options that would work best for you.

>>See which insurers consumers rate as the best homeowners insurance companies

How much coverage should I have?

As long as your policy covers the costs of your mortgage in case of a total loss, you decide the amount of coverage you buy. If you opt to buy through an agent, they’ll likely offer you some options.

It's also important that you consider inflation and how that affects your home’s value when you're choosing the coverage amount. Your home’s worth will likely appreciate in time, and if the worst scenario does happen and your property suffers extensive damage, you’ll want the insurance to cover your mortgage in full, and hopefully leave you with something extra as well. As a general rule, the safest way to go about this is to make sure your policy also covers the cost of rebuilding your property, should it be destroyed.

What does my home insurance policy cover?

Dwelling & loss of use

Home insurance covers the house itself, and the other structures on the property. The coverage typically includes some named perils, such as damage from fire, smoke, vandalism, windstorms, and explosions. Anything that is not specifically named is not covered, like a backed-up sewer line, for example.

An open peril policy covers almost everything, with only a few exceptions being listed. Common examples of such exceptions are war, earthquake, flood, mudslide, government seizure, and general wear and tear. A burst water main is covered, for instance, but a slow pipe leak that eventually causes severe damage is not.

With open peril or named perils aside, if you're looking at, for example, homes for sale in Las Vegas, where earthquakes, floods, and mudslides are not unheard of, separate riders to a policy are available. Flood and mudslide riders to your policy come at an additional premium, but very few insurers will write an earthquake policy. However, in case of damage that forces you to leave your home, you perhaps could get coverage that pays for an apartment or a hotel if you have to move out during repairs.


Your household belongings (furniture, appliances, tools, and clothing) are covered in the contents portion of the policy. There is a limit to coverage of luxury goods under a basic policy, though. If you have lots of art, jewelry, furs, coins, or antiques, you can purchase an insurance rider or endorsement to raise your limits for those belongings.


A homeowner’s insurance policy also protects you against liability if someone (workman, mailman, neighbor) gets hurt on your property. For instance, suppose your dog bites the mail carrier, the carrier can sue you for his medical bills and lost wages, but your insurance will take care of that.

What is my deductible?

The deductible on your homeowners insurance is similar to your health or auto insurance. If you have to file a claim for damages, you are responsible for paying a small amount for these damages (the deductible), and the insurance pays the rest. So, if your deductible is $500 for example, and your property sustained damages worth $10,000, you'll get a check for $9,500 and the remaining $500 is up to you.

A home insurance policy deductible can range in amount, but the lower your deductible, the higher your annual premium.

What about the premium?

A standard home insurance policy is typically lasts one year and you’ll receive a renewal notice before it’s set to expire. When you first purchase home insurance on a new home, you'll likely be required to pay for some of the premium up front.

The cost of your homeowners insurance depends on many factors, such as how much your home is worth, where you live and the company your purchase from. If you visit our home insurance rankings page for your area, you can see average rates for select companies.

Many homebuyers opt to bundle their auto and homeowners insurance with the same company for discounts on premiums. If you’re looking for top companies to bundle your insurance with, see which insurers other consumers rank as the best car and home insurance companies.

Real Estate News by Point2Homes is a well-established source of information for real estate professionals, journalists and (future) homeowners alike. It covers everything housing-related, from market trends and news to interior design and home buying as well as home selling tips.

The content on this site is offered only as a public service to the web community and does not constitute solicitation or provision of legal advice. This site should not be used as a substitute for obtaining legal advice from an insurance company or an attorney licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter. The comments and opinions expressed on this site are of the individual author and may not reflect the opinions of the insurance company or any individual attorney.

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