Homeowner’s insurance, also called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use (aka. additional living expenses), or loss of other personal possessions of the homeowner. The standard homeowner’s insurance policy also includes liability insurance for accidents that may happen to a third party at the home or caused by the homeowner within the policy coverage territory. It requires that at least one of the named insureds occupies the home. There is also a dwelling policy which is similar, but used for residences which don’t qualify for various reasons, such as vacancy/non-occupied homes, seasonal or secondary residence or possibly age of the dwelling.
The cost of homeowner’s insurance often depends on what it would cost to replace the home as well as any additional coverages (or riders) that are added to the policy. Typically, certain “perils” are excluded from a standard homeowner’s insurance policy like claims due to floods or war and other standard exclusions (like termites). Special insurance can be purchased for these possibilities, including flood insurance. The amount of insurance on the dwelling is typically adjusted at renewal by applying an inflation factor into the replacement cost. This helps to ensure that the home always has enough dwelling coverage to replace the home in the event of a total loss. It is recommended, however, that you periodically review this figure with your agent to be sure it is accurately reflecting the actual cost of replacement. Most insurers offer discounts based on factors that they know will reduce the possibility of a loss such as new homes, homes with fire and/or burglar alarms, homes located near fire stations, etc.
Most home buyers borrow money in the form of a mortgage loan and the mortgage lender always requires that the buyer purchase homeowner’s insurance as a condition of the loan. This is designed to protect the bank if the home were to be destroyed. Anyone with an insurable interest in the property should be listed on the policy.