Buying a home is one of the biggest milestones in life. But once you’ve signed the paperwork and moved in, your job isn’t done—you need to make sure your home is protected. That’s where homeowners insurance comes in.
Homeowners insurance helps protect your home and personal property against damage, theft, and other risks. It also offers liability coverage if someone gets hurt on your property. In this guide, we’ll break it all down in simple terms so you can feel confident when you buy homeowners insurance.
Typical homeowners often face unexpected surprises—storms, broken pipes, fires, or theft. Homeowners insurance is there to offer financial protection so you don’t have to pay for everything out of your own pocket.
If you have a mortgage, your mortgage lender usually requires insurance as part of the loan agreement. Even if it’s not required, having adequate coverage is a smart way to help protect your home and personal belongings.
Homeowners insurance is a specific type of property insurance that provides a safety net in case of a covered loss. This includes property damage caused by fire, storms, vandalism, and theft, as well as personal liability if someone gets injured on your property.
It’s important to review your insurance policy regularly to make sure you have the right insurance coverage for your home’s value and your family’s needs. Different homeowners insurance policies come with different coverage options, and knowing what you’re getting helps you stay adequately protected.
Let’s look at what a standard homeowners insurance policy typically covers:
Some things, like flood damage or earthquake damage, are not included in a standard homeowners policy. You’ll need to buy separate flood insurance or earthquake insurance to get protection from those risks.
Homeowners insurance cost depends on several factors:
In 2025, homeowners insurance costs continue to rise due to inflation, natural disasters, and rebuilding costs. According to Bankrate, the national average is about $2,341 per year for $300,000 in dwelling coverage.
When shopping for insurance, you’ll likely see two types of property coverage:
For most homeowners, replacement cost is the better option. It ensures you have enough coverage to rebuild your home or replace damaged belongings without paying a lot out of pocket.
Homeowners insurance is one type of property insurance. Property insurance includes:
Each type protects different types of homes. For example, condo insurance protects the inside of your condo unit, while your building’s insurance covers the outside. Landlord insurance is for people who rent out homes, and mobile home insurance is specifically designed for manufactured homes.
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It’s important to buy homeowners insurance before you close on your home. Here’s how to get started:
You can begin the process at trusted websites your state's Department of Insurance. In our home state of California, the CDI offers a Homeowners Insurance Comparison Tool online.
Your insurance policy is a legal agreement between you and your insurance company. It includes:
Keep your policy in a safe place, and review it once a year or whenever your home value changes.
You can help protect your home and possibly lower your premium with a few smart steps:
Taking action now can save you money and stress in the future.
Understanding your homeowners policy coverage is important so you know what protection you really have. Here’s a breakdown of what typical homeowners insurance policies include:
Always review your policy and talk to your insurance company to make sure your coverage limits are high enough to match your home’s value and belongings.
Liability coverage protects your finances if someone is injured on your property or if you damage someone else’s property. For example:
Without personal liability insurance, you might have to pay those medical expenses or legal costs out of your own pocket. Most policies include at least $100,000 in liability coverage, but many experts recommend increasing that to $300,000 or more for better financial protection.
Bundling insurance products is one of the easiest ways to lower your homeowners insurance cost. Many insurance companies offer discounts if you:
This approach not only saves money, but also makes it easier to manage your insurance policies and payments. Ask your provider about bundle and save options when you request a homeowners insurance quote.
Learn more about other kinds of insurance from our article on The Basics of Insurance.
“Other structures” refers to any buildings or constructions on your property that are not attached to your main house. This includes:
Standard homeowners insurance coverage often sets aside 10% of your total dwelling limit for these. For example, if your home is insured for $300,000, you’ll have up to $30,000 in coverage for other structures.
Not everything is covered under a standard homeowners policy. You may want to add extra protection through endorsements or riders, especially if you have:
These additions may require an additional premium but can give you peace of mind that you’re adequately protected.
Flood damage and earthquakes are not covered by standard homeowners insurance policies. These must be purchased separately.
If you live in a high-risk flood zone, your mortgage lender will likely require flood insurance. Even if you live in a low-risk area, flooding can happen. You can buy flood insurance through the National Flood Insurance Program (NFIP) or from private insurers.
Earthquake insurance is important in areas like California, where seismic activity is common. It’s also a separate policy and covers repairs, rebuilding costs, and personal property damage due to earthquakes.
Without flood or earthquake coverage, you may be left paying for repairs yourself after a major natural disaster.
Here are some other smart coverage options that many homeowners choose:
Knowing how much coverage you need depends on your home’s replacement cost, not market value. Use a home insurance calculator or talk to a licensed agent to make sure you’re not underinsured.
Want to save money without sacrificing quality coverage? Try these tips:
Keeping your coverage affordable while maintaining adequate protection is all about balance. Work with a reputable insurance agent who understands your needs and risks.
Learn more: 6 Ways to Save on Homeowners Insurance
Not all insurance companies are the same. When comparing providers, look for:
Top-rated national insurers in 2025 include Chubb, Amica and The Hartford, according to J.D. Power.
Check out Consumer Reports' Homeowners Insurance Buying Guide for more info.
Homeowners insurance isn’t just a piece of paper; it’s your safety net when life throws unexpected problems your way. From protecting your personal belongings to covering your rebuilding costs after a fire, homeowners insurance coverage offers real peace of mind.
To protect your biggest investment, make sure you have the right type of coverage, the right limits, and extra protection if needed. Whether you’re a first-time buyer or a long-time homeowner, updating your insurance coverage regularly ensures you stay adequately protected.
If you are buying a home for the first time, be sure to get first-time homebuyer education, which will teach you more about insurance and what to look for when choosing a policy. If you need help with credit or debt, or want to learn more about budgeting or personal finance, get started with free, confidential counseling and education right here at Credit.org.
