Homeowners insurance helps protect one of your biggest investments—your home. It covers damage, losses, and legal problems caused by unexpected events. Most people choose an HO-3 policy because it gives wide coverage for single-family homes.
Core Coverage Areas
A standard homeowners insurance policy is divided into several main parts. Each part covers a different type of risk.
Coverage A: Dwelling
This covers the main structure of your home. It includes walls, roof, floors, and attached features like decks or porches. If your home is damaged by events such as fire, wind, or hail, this coverage helps pay to rebuild or repair it.
Coverage B: Other Structures
This covers buildings that are not attached to your house, such as garages, sheds, or fences. It is usually set at about 10% of your dwelling coverage.
Coverage C: Personal Property
This protects your belongings like furniture, clothes, TVs, and electronics. Coverage is usually equal to 50% to 70% of the dwelling amount. Items are covered for specific risks and even when they are outside your home, but limits apply.
Coverage D: Loss of Use
If your home is damaged and you cannot live in it, this coverage helps pay for hotel stays, rent, and extra living costs during repairs.
Coverage E: Liability Protection
This covers legal costs if someone is injured or their property is damaged because of you or your family. Most policies start at $100,000 in liability coverage.
Medical Payments
This pays small medical bills for guests who get hurt on your property, no matter who is at fault. Family members are not included.
Trees and plants also get limited protection, usually up to $500 per item, for certain types of damage.
What Homeowners Insurance Covers
HO-3 policies use “open perils” for the home structure. This means your house is covered for all risks except those clearly excluded in the policy. Personal belongings are covered only for listed risks such as theft, vandalism, fire, or falling objects.
Homeowners insurance usually pays for damage caused by storms, explosions, or vehicles hitting your home. Jewelry, artwork, and collectibles have lower limits, so extra coverage is needed for full protection.
Most policies repair or rebuild using similar materials. Choosing replacement cost coverage helps you avoid losing money due to depreciation. Some policies also include small benefits like credit card fraud protection and key replacement.
Common Exclusions to Watch
Homeowners insurance does not cover floods, earthquakes, or ground movement. These require separate policies. Damage from poor maintenance, pests, mold from neglect, or war is also excluded.
Some older homes may need inspections, especially for roofs. Building code upgrades often require special add-ons to be covered.
Average Costs in 2025
The average homeowners insurance cost in the U.S. is about $2,424 per year for $300,000 in dwelling coverage. This equals roughly $202 per month.
Prices vary greatly by state. Storm-prone states like Nebraska, Louisiana, and Florida have very high rates. States like Vermont and Delaware have much lower costs.
Other factors that affect price include your home’s age, your credit score, claim history, and deductible amount. Newer homes usually cost less to insure, while frequent claims increase premiums.
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Cost Factors Comparison Table
| Factor | Low-End Rate | High-End Rate | Impact Example |
| Dwelling Amount | $1,459 ($150K) | $5,254 ($750K) | Higher rebuild cost |
| Credit Tier | $2,160 (Excellent) | $5,122 (Poor) | Big premium increase |
| Home Age | $2,182 (2020) | $3,314 (1982) | Older homes cost more |
| Deductible | $1,989 ($5K) | $2,366 ($1.5K) | Higher deductible saves money |
Bundling home and auto insurance can lower costs by 10% to 25%. Safety alarms and new roofs also help reduce premiums.
Choosing the Right Policy
Start by estimating how much it would cost to rebuild your home, not its market value. Consider size, materials, and local labor costs. Lenders require insurance, but they do not decide coverage amounts.
Choose replacement cost coverage instead of actual cash value. Homes in storm-prone areas may need special wind or hail deductibles. Review past claim reports and compare at least three quotes every year.
Filing a Claim Step-by-Step
Report damage as soon as possible by phone or online. Take photos and videos of the damage. An insurance adjuster usually visits within a few days.
After approval, you receive payment minus your deductible. Wind claims average about $13,500, while fire claims can exceed $80,000. Quick reporting helps speed up payment.
Tips to Lower Premiums
Raising your deductible can reduce costs if you can afford higher out-of-pocket expenses. Updating roofs, improving home safety, and fixing credit scores can also lower rates.
Smart home devices may give discounts. Avoid filing small claims to keep your history clean.
State Requirements and Variations
No state requires homeowners insurance by law, but mortgage lenders do. Most states allow insurers to use credit scores. Flood-prone and wildfire-prone areas often require extra policies and may face policy cancellations.
FAQ: Homeowners Insurance Basics
What does homeowners insurance not cover?
Floods, earthquakes, wear and tear, pests, and neglect are not covered.
How much coverage do I need?
Enough to fully rebuild your home, with 50%–70% for belongings and at least $300,000 liability.
Does home age affect insurance cost?
Yes. Older homes usually cost 20%–50% more to insure.
Can I insure a rental property with homeowners insurance?
No. Rental homes need landlord insurance.
How long does a claim take?
Inspection usually happens within a week, and payment follows after approval.
Are swimming pools covered?
The structure may be covered, but liability risk is higher and safety rules apply.
