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The Basics

How does home insurance work?
You pay the insurance company an amount of money every year to have home insurance, which is called a "premium." Then, if your home or property get damaged (like from a fire), the insurance company will use the pool of money that they have collected from you and other customers to pay to fix your house, replace your property, or pay the medical bills of people injured in an accident in your home.

Can I get home insurance if I'm a renter?
Yes! There are actually three basic kinds of home insurance policies:

  • Policies for homeowners (and people buying a new home)
  • Policies for renters
  • Policies for people who live in condominiums or co-ops

Most insurance companies will offer all three policies, and you choose the one that is right for you. In addition, some companies also offer policies for people who live in mobile homes. Get information on insurance for people living in mobile homes.

What does home insurance cover?
Most home insurance policies will cover most disasters except for floods, earthquakes, and standard maintenance costs (which are always the responsibility of the homeowner). But since not all policies are the same, read your policy carefully and talk to your insurance agent about exactly what is covered under yours.

If I buy $25,000 in insurance, does that mean I have to pay $25,000 a year?
No. If you have $25,000 in insurance, it means the insurance company will pay you up to $25,000 if your property is damaged or destroyed because of a fire, burglary or some other kind of accident.

How much you have to pay the insurance company each year in premiums depends on the insurance company and your personal situation, but it usually will be a few hundred dollars (or less).

Why should I buy home insurance?
If your home burned down in a fire or you were robbed and lost your television, stereo, computer, and other valuable items, would you have enough money to replace what you lost? And even if you did, would that wipe out most of your savings?

Home insurance protects you financially if a disaster happens by paying you (or your contractor), the money necessary to fix or replace your property. Home insurance helps in four basic ways:

    • Providing the money to rebuild your home
    • Providing the money to replace your property (furniture, clothes, appliances, etc.) if it is destroyed, stolen or damaged
    • Covering any injuries that happen to other people or their property in your home/on your property
    • Covering the cost of your move if you're forced to leave your home because of a fire or other disaster

Do I need to own home insurance to buy a home?
In most cases if you have to take out a loan, banks and mortgage companies will require that you have home insurance. But even if you aren't required to have it, home insurance still makes sense. Your home is probably your most important asset. Could you afford to lose it in a fire or other accident and get nothing back?

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