Home Owners Insurance: Frequently Asked Questions
Have questions about home owners insurance? Browse our home owners insurance FAQs and learn everything you need to know right now.
- Q. “Is home owners insurance required by law?”
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No. However, if you finance your home through a mortgage lender, the lender may require that you purchase home owners insurance until your mortgage is paid off.
- Q. “What does home owners insurance cover?”
Home owners insurance covers against damage caused by a covered peril, up to your policy limit. Home owners insurance covers damage sustained by the following:
- The home's structure
- Personal possessions
- Sheds, swimming pools and other structures on the property
Along with liability insurance, home owners insurance provides loss of use, which pays for living expenses when the home is repaired or rebuilt.
- Q. “How much home owners insurance coverage do I need?”
There is no one-size-fits-all policy. However, you should have at least enough home owners insurance to:
- Completely rebuild your home and replace your possessions
- Cover additional living expenses if you are forced to live elsewhere while your home is being rebuilt or repaired
- Provide for personal liability protection
Speak with a licensed home insurance agent to determine your exact needs.
- Q. “What’s the difference between replacement cost and actual cash value?”
The difference between replacement cost and actual cash value, in a nutshell, is as follows:
- Replacement cost coverage replaces your home and possessions with brand-new items of equal quality
- Actual cash value replaces your home and personal possessions, minus the depreciated value
Replacement cost coverage is more expensive, but it pays out more and is generally recommended by insurance advisors.
- Q. “Does home owners insurance cover flood or earthquake damage?”
Home owners insurance does not cover flood or earthquake damage. Homeowners will need to purchase separate policies to cover against these perils.
- Q. “Is my diamond engagement ring covered?”
There are special limits of liability (usually $1,500) for certain luxury items, including:
- High-end electronics
If you own a high-value item, you may need to purchase a rider to be fully covered. A rider simply increases coverage levels for certain luxury items.
- Q. “Is my home-based business covered by home owners insurance?”
No. Home owners insurance does not cover activities related to a home-based business. However, you may be able to purchase an endorsement to cover use of your home for business purposes.
- Q. “Does home owners insurance cover items my child takes to college?”
If your child lives in a dorm or other university-affiliated housing, his or her personal possessions will likely be covered by your home owners insurance. If your child lives in off-campus housing, though, the possessions probably will not be covered. The child will need to purchase renters insurance.
- Q. “How often should I review my policy?”
Experts recommend you review your policy each time it comes up for renewal. Additionally, it’s a good idea to reevaluate your coverage as a result of the following situations:
- Following a home renovation
- When an occupant moves in or out
- After purchasing a high-end luxury item
- Q. “I'm building a new home. Do I need insurance while it's under construction?”
Insure your home while it's under construction. Otherwise, unless your home builder offers protection, you are not covered if a disaster destroys your partially completed home.
- Q. “If someone slips on my property and sues me, will home owners insurance cover the losses?”
Yes. Home owners insurance covers injury or property damage suffered at your home by a non-resident, up to your policy limit. Medical bills and legal defense fees will also be covered.
- Q. “Can I cancel my policy at any time?”
You can cancel your home owners insurance at any time. You will receive a refund for the unused insurance premium, minus the expenses the insurance company charges for establishing insurance coverage.
- Q. “Where can I buy home owners insurance?”
You can purchase home owners insurance from any licensed insurer. Or, you can compare home owners insurance quotes from several providers using InsWeb's free home insurance quote form.