Homeowners Insurance 101

Get answers to home insurance questions

by Dawn Klintworth

When you’re looking for home insurance, you need to know what you’re buying and what protection you'll have if you need to file a home insurance claim. Whether you are buying a new home or choosing a new home insurer for your existing home, if your home was damaged by a storm, fire, vandalism or other covered incident, you rely on your insurance to provide what you need to repair or rebuild.  

We know insurance can be confusing, so before you get a homeowners insurance quote, you need to understand the basics.  To help you, we put together information to help answer your questions, such as: What is home insurance? What does home insurance cover? And equally important, what does it not cover? 

With this information, you’ll be more prepared to get the coverage you need. Keep in mind that this information is not specific to COUNTRY Financial and is meant to provide a general overview. The specifics of your coverage will be outlined in your home insurance policy, and your local insurance agent is available to answer any questions specific to your situation.  

Key takeaways 

• Home insurance provides financial protection against damage to your home caused by sudden, unexpected and accidental events like storms and fire. 
• In addition to the main structure, home insurance covers other structures on your property such as sheds, fences and detached garages.
• Damage to your home resulting from maintenance issues or ongoing wear and tear and appliance repairs and system failures like HVAC would not be covered by home insurance.
• Many factors affect the cost of home insurance, such as the cost to rebuild, size and age of your home and where it's located. 
• Claims are settled based on your decision to buy actual cost value or replacement cost coverage. Understanding the difference will help your claim go more smoothly.

What is home insurance? 

Home insurance, or homeowners insurance, is protection. It’s a contract between you as a homeowner and the insurance company you select. You pay your home insurer a premium (your bill) usually monthly, twice a year, or annually. In exchange, the insurance company agrees to pay for the cost to repair or rebuild their home when it is damaged or destroyed by an event or action as outlined in your home insurance policy. 

What does home insurance cover?

Home insurance generally provides protection against damage caused by sudden and accidental incidents. A standard home insurance policy will usually cover three main types of protection following a covered loss:  

Dwelling Coverage

This protection is designed to repair or rebuild your main home structure. This dwelling coverage is the main protection provided by home insurance, but a standard home insurance policy will also protect auxiliary structures like detached garages, sheds or fences under other structures coverage.

Personal Property Coverage

This protection covers items in your home if they are damaged or stolen. This Personal Property Coverage allows you to replace items such as electronics like computers and gaming systems, furniture, clothing and other belongings. You should create and maintain a list of your belongings in a home inventory list to help you know what you need to replace if your home was damaged or destroyed. 

Liability Coverage

When people are injured on your property or when you or a member of your household cause damage to other’s property, this liability coverage will provide financial protection for you. This also protects against lawsuits resulting from those injuries. You also may have medical payments associated with those injuries that could be covered by your home insurance.  

Home insurance policies pay up to a certain amount, and if you need more coverage, you should talk to your insurance agent. For example, if you need more liability coverage, talk about an umbrella policy.  

Covered losses are events, sometimes called perils, that are covered by homeowners insurance and commonly include: 

• Fire or lightning
• Hail
• Windstorm
• Vandalism
• Theft
• Smoke
• Falling objects, like trees
• Weight of ice, sleet or snow
• Electrical damage
• Frozen pipes
• Explosions (ex: from a gas grill)

Please note that this is not an inclusive list.

Explore our home insurance coverage to learn how COUNTRY Financial can help protect you, your family and your home. 

What is not covered by homeowner insurance?

While it’s important to know what your home insurance policy covers, you also need to understand what’s not included.

Damage that happens over time or is not related to a single event is normally not covered. 

General home maintenance issues 

Maintenance issues would include things like wood rot on decks and aging roofs. In addition, issues that happen over time like the growth of mold or damage caused by pests, like termites and mice, are not covered by home insurance.

Appliance and system failures 

While you can buy warranties to protect you from appliance breakdowns and HVAC system failures, those items are not covered by home insurance.

Other types of insurance are available for these instances.

Home-based business insurance coverage

If you run a business from your home, you need to inform your insurance agent. If something were to happen to your home, your home insurance may not cover business-related costs. While you can add some protection to your home insurance policy, your agent can assess your specific situation to determine if you need other commercial insurance policies to protect your business, customers, and assets.

Flood Insurance

While a flood could be a single and sudden event, flood damage is not included in a general home insurance policy. You should work with your insurance agent to see if you qualify for flood insurance to cover water damage resulting from a flood.

Protection can be added to a standard home insurance policy for these instances.

Sump pump failure and sewer back up coverage

A common addition to home insurance, water damage insurance in case your sump pump fails, or sewer backs up into your home.  You would need to have this sump pump failure endorsement to be covered.

Earthquake coverage

This additional coverage, known as a rider, will allow you protection in case of an earthquake. 

Scheduled Personal Property  

The personal property coverage included in your home insurance policy has limits. If you have high-value property, you need to list separately (or schedule) these items for coverage. This could include insuring jewelry like wedding rings or family heirlooms, antiques, collectables and other valuables. 

Umbrella Coverage 

Additional liability insurance, known as an umbrella policy, is a separate policy that works with the liability protection in your home and auto insurance. 

This list doesn’t include everything that’s not covered under a home insurance policy. Talk with your insurance agent and learn more about home insurance coverage.

How much is home insurance?

Many factors determine what home insurance you need and what it will cost to insure your home. Just as factors like size and location affect the purchase price of a house; home insurance cost also varies.

Factors of homeowner insurance cost

• Location, age, size and condition of your home
• How many and what types of claims you’ve had in the past
• How much of the risk you take (your deductible)
• The limits you select for liability and medical coverage

Most insurers offer home insurance discounts for having more than one type of insurance with one company and other safety and loyalty factors. 

How can I be sure I am covered for a home insurance claim?

When you buy homeowners insurance, you choose how your property will be valued if you have a claim, and that will affect the amount of coverage you have to rebuild. While it may vary by home insurer, these are levels of protection: actual cash value and replacement cost. 

Actual cash value 

Actual cash value (ACV) protection is the dollar amount you’d receive if your home or belongings are damaged. ACV subtracts for the reduced value of the item due to time and wear and tear, or depreciation. 

The amount of coverage available to rebuild or repair under ACV is limited. It includes the cost of labor and construction materials, minus depreciation, up to 100% of the coverage amount you set for your policy. If construction costs have gone up or the value of your house has gone down, this may not provide you enough money to fix the damage.

Replacement cost  

What is replacement cost coverage? It helps you rebuild if your home is damaged or destroyed and allows you to set the amount of coverage you have. Replacement cost includes the cost of labor and construction materials but doesn't subtract for depreciation. So, it's based on today's costs. It accounts for inflation up to 100% of the coverage amount you set for your policy. With this option, your claim will be settled at actual cash value first. Once the repairs have been completed, you’ll be reimbursed up to your coverage amount.

Do you have more home insurance questions?

While these questions cover the basics of homeowners insurance, each situation is unique. If you have more questions, read our home insurance FAQs.

Start a home insurance quote

Get a home insurance quote or contact your local insurance agent to get the home insurance coverage you need at a price you deserve. 

Updated 5-31-23