What is homeowners insurance and what does it cover?
By Allstate
Last updated: March 2025
Homeowners insurance helps provide financial protection for your home and personal belongings. Learn the basics of what homeowners insurance is and what it covers.
What is homeowners insurance?
Homeowners insurance is made up of coverages that may help pay to repair or replace your home and belongings if they are damaged by certain perils, such as fire or theft. It may also help cover costs if you accidentally damage another person's property or if a visitor is injured at your home.
How does homeowners insurance work?
Before you purchase a homeowners insurance policy, any potential insurer will request numerous details about your home. Things like the square footage, the year it was built, the number of bedrooms and bathrooms, the age of the roof and more. These details help determine your home’s replacement cost estimate (RCE), which is roughly the amount it would cost to rebuild your home with materials of a similar quality. An accurate RCE helps the insurer provide recommendations for how much homeowners insurance coverage you should consider.
Once you’ve worked with your insurer to craft a homeowners insurance policy that suits your needs, they may send an inspector to see your home in person or ask you to submit photos of your home and your belongings.
After you purchase your policy and submit the required documentation, your coverage will become active. If a covered event like a fire or vandalism results in damage to your home, you’ll start the repair process by filing a claim with your insurer and providing documentation of the damage. They may then assign a claims adjuster to visit your property, assess the damage and help you through the process of making repairs.
What does homeowners insurance cost?
The costs of homeowners insurance depend on a number of factors, including the coverages you select, features of your home and the value of your personal belongings. There may also be extra costs for additional coverage or increased coverage limits. Your insurance provider can help you choose the coverages that fit your needs and also help determine if you are eligible for any policy discounts.
What does homeowners insurance cover?
Homeowners insurance typically helps cover:
- Your dwelling
- Other structures on your property
- Personal property
- Liability for injuries or damage to someone else's property
You may also be able to purchase additional coverages for greater protection. Typical homeowners insurance policies offer coverage for damage caused by fires, lightning strikes, windstorms and hail. But, it's important to know that not all natural disasters are covered by homeowners insurance. For example, damage caused by earthquakes and floods are not typically covered by homeowners insurance. You may be able to purchase separate insurance policies to help protect your home and belongings against those types of risks.
Dwelling protection
One of the basic coverages of a homeowners insurance policy is dwelling protection, which helps cover the structure of the home in which you live (e.g. the house's foundation, walls and roof). Dwelling protection may also help cover other structures that are attached to the home, such as a garage or a deck, against certain risks.
Other structures protection
Most homeowners insurance policies also include coverage for other structures that are on your property but separate from your home, like a detached garage, tool shed or fence.
Personal property protection
Homeowners insurance doesn't just help cover damage to your home. It may also provide coverage for the personal belongings you keep within it. Suppose your electronics are stolen from your home or your furniture is damaged by a fire. Personal property protection may help pay to repair or replace your belongings if they are damaged or destroyed by a covered risk. Many insurers offer optional coverages that may further help protect the stuff you own. For instance, you may be able to purchase extended coverage for items such as jewelry, watches and furs that have values above your personal property coverage limits.
Liability protection
A typical homeowners insurance policy provides liability coverage when someone not living with you is injured while on your property. Suppose a visitor trips over your broken porch step. Bodily injury liability coverage may help pay for your resulting legal expenses or the visitor's associated medical bills if you are found at fault. You may be able to increase your liability coverage limits by adding a personal umbrella policy. Your agent can explain what options are available to you.
Coverage limits and deductibles
Keep in mind that each coverage in a homeowners insurance policy is subject to a limit — the maximum amount your policy would pay toward a covered loss. You may be able to adjust your coverage limits to your needs — taking into account, for example, the value of your home and belongings and how much it may cost to repair or replace them if they are damaged or destroyed by a covered risk.
In most cases, you will typically have to pay your deductible before your insurance benefits kick in to help cover a loss. Read your policy or contact your insurance provider to review your coverage limits and deductibles. You can typically adjust them to fit your needs.
The protections offered by a homeowners insurance policy may serve as a safety net if the unexpected occurs. Your insurance provider can help you select the types of coverage and limits that make sense for you.
What is not covered by homeowners insurance?
While a standard home insurance policy will usually cover common events like theft, vandalism and fire, among others, it’s important to know what perils your policy doesn’t cover.
Floods are common perils that aren’t covered by most homeowners insurance. Standalone flood insurance policies are available through the federal government to help you recover from damage caused by overflowing inland or tidal waters, storm surges, mudflows and runoff, according to the Federal Emergency Management Agency (FEMA).
A few other types of damage that aren’t commonly covered by homeowners insurance include:
- Earthquakes
- Mold
- Sinkholes
- Landslides
- Creature infestations (termites, birds, etc.)
Standard wear and tear on your home is also your responsibility, so don’t count on your insurance policy to cover basic repairs.
Homeowners insurance FAQs
While homeowners insurance isn’t mandated by law the way auto insurance is, you’ll need it in order to get a mortgage. If you choose not to insure your home or let your homeowners insurance lapse, you may face penalties from your lender. Check your mortgage agreement for details on how much coverage you’re required to carry.
First and foremost: shop around. Get quotes for similar coverage amounts from at least three home insurers, or consider contacting a local broker who’s familiar with the risks and rates in your area.
Most insurance companies also offer discounts for things like bundling your home and auto insurance policies, installing home-security features, paying in full and remaining claim-free for an extended period.
The Insurance Information Institute (III) also recommends a few more ways to save on home insurance, including:
- Installing storm shutters or shatterproof glass
- Opting for a higher deductible to lower your monthly premium
- Reviewing the value of your personal belongings every year
Every homeowner has very different protection needs from those of their neighbors. There are many important factors to consider when tailoring a home insurance policy to your unique needs, but first – and arguably most importantly – you should know roughly how much coverage you need for your home’s physical structure and your belongings.
Doing a thorough, documented inventory of your possessions will help you get a better idea of how much personal property protection you’ll need. Think of how much it would cost to replace every single item in your home, from furniture to clothing to electronics, and everything in between.
Then you’ll need an idea of how much it would cost to rebuild your home if it were destroyed in a catastrophe. Account for the quality of your finishings (for example, a Carrara-marble slab countertop would warrant more coverage than a laminate one). Consider the cost of materials and labor in your area.
These basic steps will help an insurer create a home insurance policy that suits your specific needs and will be there when you need it most.
If your home falls victim to catastrophic damage, you’ll want enough coverage to not only rebuild your home, but also replace all your important possessions. Of course, you’ll also need enough money to make alternate living arrangements during the repair and/or rebuilding process, says the III.
While there may not be a magic formula to help you determine exactly how much that’ll all cost, educating yourself on a few things can help you decide how much coverage you need:
- Your home’s square footage
- The exterior building materials on your home (masonry, siding, etc.)
- The type of roof construction and materials
- Other structures on your property like garages, sheds and outbuildings
- A thorough inventory of your possessions, including valuable items
No, your home insurance premiums are not deductible on your federal income taxes, according to the Internal Revenue Service (IRS). Tax laws vary widely from state to state, so check with a financial adviser to find out if you can deduct your home insurance costs from your state income taxes.