How Does Homeowners Insurance Work?

There is a thrill to buying a home. Whether it’s the excitement of owning your first home, or of getting some more space for a larger family, it’s nearly indescribable.


However, anyone who buys a home knows they need to protect their home. Without proper protection, a home can be damaged or have the items within stolen. Homeowners insurance is the answer to that question.

Some people call insurance a bet against themselves. The truth is that insurance is a hedge against potential disaster. It’s rare for people to ever make an investment more expensive than the one they will make for their house. Therefore if there’s ever a time to get insurance and protect your investment, it’s through homeowners insurance. It covers a large variety of things in relation to a home.

What Does Homeowners Insurance Cover?

As mentioned before, homeowners insurance is rather inclusive. It covers a wide variety of situations or legal requirements to allow a person to live in peace. Homeowners insurance will commonly include:

  • House Structure - When a home is damaged by natural disasters or fire, the insurance will cover and reimburse for it. It’s important to note that the type of disaster that could cause it must be within the policy. Typically the part of the year may influence which issues are covered. Commonly, things like floods or earthquakes are not included.
  • Belongings - The belongings within a house are also included in homeowners insurance. The coverage isn’t as high as that for the actual structure itself, but can be quite high as well. For true values, a pre-loss appraisal is necessary to ensure it’s valued at the right price.
  • Liability - There’s always the potential for a homeowner to face a lawsuit due to an injury or property damage. Liability insurance covers these incidents, but also incidents where a person may cause damage to a neighboring home. Even pet mistakes and damages might be covered.

Is Homeowners Insurance Included With New Homes or Mandatory?

There is no legal requirement to have homeowners insurance like there is with owning a car. However, most people purchase homes via mortgage. Most banks will require the borrower to get homeowners insurance in order to secure the loan. It protects the bank as well as the homeowner.

Some people get homeowners insurance mixed up with new home insurance. New home insurance instead covers the quality of a new home. Things like the foundation, plumbing, electrical and roof are covered for a few years as a guarantee against their quality.

Bundling Insurance Options

One of the best ways to save on insurance in any form is to bundle it together. There’s not a lot of insurance providers out there who won’t be willing to offer a discount on a bundle. It gets them an additional revenue stream.

Since everyone needs car insurance, bundling that with homeowners insurance is a natural step as long as the homeowner is also a driver. In reality, most home owners will also own at least one vehicle, so it goes together well.

One of the best things about bundling is that it can often get other insurance types involved as well. If someone bundles their car and homeowners insurance together, they may get a free policy for other things like a boat or motorcycle. Bundling simply saves money.