Everything You Need to Know About Home Insurance

by Sarah WilliamsNovember 15, 202413 minutes read

Buying a house is a huge milestone in anyone’s life. But just as you protect your car with insurance, it’s crucial to think about safeguarding your home. Whether it’s a storm, a burglary, or an accident, home insurance is there to give you peace of mind, knowing that you won’t be left high and dry when life throws a curveball. So, if you’re in the process of buying home insurance or just want to understand it better, you’re in the right place. Let’s break down everything you need to know.

What is Home Insurance?

At its core, home insurance (also called homeowner’s insurance) is a policy designed to cover the cost of repairs, replacement, or even compensation for losses when things go wrong with your home. These losses can range from fire damage, theft, or natural disasters like floods and earthquakes. Depending on the policy you choose, home insurance can also cover liability for injuries that occur on your property.

In short, it’s the safety net that helps protect one of the biggest investments you’ll ever make—your home.

Main Types of Home Insurance

When it comes to home insurance, one size doesn’t fit all. Different policies are designed to cover different aspects of your home and belongings, depending on factors like your property type, location, and personal needs. Let’s take a closer look at the main types of home insurance and what each one covers:

HO-1 (Basic Form)

The HO-1 policy is the most basic and limited form of homeowner’s insurance. It generally only covers a list of specific perils, such as fire, theft, vandalism, and hail. However, the list of covered risks is quite short, and many modern insurance companies no longer offer it due to its limited scope. Because of this, HO-1 is rarely used and is considered outdated.

Coverage Includes:

●Fire damage

●Theft

●Vandalism

●Lightning and windstorm damage

●Damage from civil disturbance (riots)

What It Doesn't Cover:

●Flooding, earthquakes, or other natural disasters

●Damage from wear and tear

●Accidents on the property (liability)

HO-2 (Broad Form)

The HO-2 policy offers broader coverage than the HO-1. It covers a wider range of disasters and accidents, including damage caused by falling objects, water damage from plumbing issues, and electrical issues. HO-2 is a better option for those who want more protection without paying for extensive coverage.

Coverage Includes:

●Everything covered under HO-1

●Water damage from plumbing or HVAC systems

●Falling objects (trees, etc.)

●Electrical issues (damage caused by power surges, etc.)

●Ice or snow damage

What It Doesn't Cover:

●Flooding and earthquake damage

●Some types of accidental damage (e.g., intentional damage or wear and tear)

HO-3 (Special Form)

HO-3 is by far the most common and comprehensive form of homeowner’s insurance. It’s the standard policy for most homeowners and provides coverage for almost all disasters unless specifically excluded. For instance, it will cover damage from fire, theft, vandalism, storms, and much more. HO-3 is considered an “open peril” policy for the structure of the house itself, meaning it covers all risks except those specifically named in the policy.

Coverage Includes:

●Structural damage to the home (fire, storms, vandalism, etc.)

●Theft or loss of personal property (with certain exceptions)

●Liability coverage (if someone is injured on your property)

●Temporary living expenses if your home is damaged and you need to stay elsewhere

What It Doesn't Cover:

●Flooding and earthquakes

●Wear and tear or damage from poor maintenance

●Damage from pests (termites, rodents, etc.)

HO-4 (Renters Insurance)

HO-4 is specifically for renters. While it doesn’t cover the physical structure of the building (since that’s the landlord’s responsibility), it provides coverage for personal belongings, liability, and other situations that might occur within the rented space. This policy is perfect for renters who want to protect their personal property and cover costs in case of accidents or damage in their apartment or rental house.

Coverage Includes:

●Personal property inside the rented space (furniture, electronics, clothing, etc.)

●Liability coverage (if someone is injured in your rental)

●Additional living expenses if the rental is uninhabitable due to damage (fire, etc.)

What It Doesn't Cover:

●The physical structure of the building (this is covered by the landlord’s insurance)

●Certain high-risk personal items (e.g., jewelry, fine art—may require additional coverage)

HO-5 (Comprehensive Form)

HO-5 is the most extensive form of home insurance and is designed for high-value homes or homeowners who want the most comprehensive coverage possible. It’s similar to HO-3 but goes even further by offering broader coverage for both the structure of the home and personal property. With an HO-5 policy, you typically receive “open peril” coverage for both the house and your belongings, meaning everything is covered unless it’s explicitly excluded in the policy.

Coverage Includes:

●Full replacement cost for both the home’s structure and personal property

●Protection against all perils, except exclusions (such as flood or earthquake damage)

●Liability coverage

What It Doesn't Cover:

Flooding, earthquakes, or other disasters that require separate coverage

Certain exclusions like intentional damage or wear and tear

HO-6 (Condo Insurance)

HO-6 insurance is designed for condominium owners. In a condo, the building structure is usually covered by a master policy that the condominium association holds, but it doesn’t cover your individual unit or your personal belongings. That’s where an HO-6 policy comes in. It covers the interior of your unit and your personal property, but it doesn’t cover the external structure or common areas, which are covered by the association’s master policy.

Coverage Includes:

●Interior structure of the condo unit (drywall, flooring, etc.)

●Personal property inside the condo (furniture, electronics, etc.)

●Liability coverage for injuries or accidents that occur within the condo

●Loss of use if the condo becomes uninhabitable

What It Doesn't Cover:

●The condo building itself (covered by the condo association)

●Common areas (like the lobby or gym)

●Natural disasters (unless you add specific coverage)

HO-7 (Mobile Home Insurance)

HO-7 insurance is designed for owners of mobile homes or manufactured homes. It covers the structure of the home, as well as personal property and liability, but the specifics can vary by insurer. Mobile homes are more susceptible to certain risks, like windstorms, so make sure your policy is tailored to the unique needs of a mobile home.

Coverage Includes:

●Structural damage to the mobile home

●Personal property inside the mobile home

●Liability coverage

What It Doesn't Cover:

●Flooding (unless specifically added)

●Earthquake damage (again, needs a separate policy)

HO-8 (Modified Coverage Form)

HO-8 insurance is specifically designed for owners of older homes that may be difficult or expensive to replace due to age, unique construction, or outdated materials. This type of policy offers a more affordable option for insuring historic or vintage homes, but with certain limitations. It is tailored to provide basic coverage for older properties while accounting for their value and replacement challenges.

Coverage Includes:

●Structural damage to the home

●Personal property inside the home

●Liability coverage

What It Doesn't Cover:

●Flooding

●Earthquake damage

●Full replacement cost

●Damage caused by the natural aging of the home or its systems (such as old plumbing, roofing, or wiring) is not covered.

●Historic or unique materials

What Does Home Insurance Not Cover?

Home insurance is essential for protecting your property against unexpected damage or loss, but it's important to understand the limitations of your policy.

Earthquake and Flood Damage

In most states, standard home insurance policies do not cover earthquake damage, sinkholes, or other types of ground movement. Earthquake insurance can be added to your policy as a rider (an additional endorsement) for an extra fee, but this is available only in California. For flood protection, including damage from mudslides, a separate policy is required and can only be purchased through the National Flood Insurance Program (NFIP), a government-run program.

Other types of water damage, such as backups from sewage systems, sump pumps, or drainage pipes, are also excluded in standard policies. However, you can obtain coverage for these through additional riders if needed.

Maintenance Issues

Properly maintaining your home can help you avoid costly repairs that home insurance does not cover. Many common issues not covered by home insurance arise from neglect or failure to maintain the property. Damage caused by termites, insects, rodents, rust, rot, mold, and general wear and tear will not be reimbursed. Additionally, damage from smoke or dust due to industrial or agricultural work is excluded.

Other Exclusions

While it’s uncomfortable to think about, losses due to war or nuclear hazards are excluded from coverage under home insurance policies. Identity theft expenses are also not covered, but you can purchase a separate identity theft policy.

Minimum Coverage

Certain items receive minimal coverage under a standard home insurance policy:

●Valuables like guns, furs, watches, silverware, and gold. For jewelry theft, the policy typically offers $1,000 in coverage.

●Replacement costs: Most policies use actual cash value (ACV) to determine compensation for lost or damaged items, factoring in depreciation. You can add a replacement cost rider to ensure that claims for lost items are paid based on the cost to replace them, without depreciation deductions.

●Higher liability and medical expenses: Medical costs for third parties or legal fees arising from claims can be significant. Increasing your liability coverage limits helps protect your financial future.

How to Choose Home Insurance?

Choosing the right home insurance isn’t just about picking the cheapest option—it’s about finding coverage that fits your needs. Here’s how to go about it:

Assess the Value of Your Home and Belongings – Know how much your home and personal property are worth. This will help you understand the minimum amount of coverage you need.

Research Coverage Options – Do you live in an area prone to flooding or earthquakes? Make sure your policy covers those risks. You might need to purchase additional coverage.

Understand Your Deductible – The deductible is the amount you pay out of pocket before your insurance kicks in. Higher deductibles often mean lower premiums, but make sure it’s an amount you can afford.

Compare Quotes – Get quotes from several insurance companies to find the best deal. Don’t just go for the cheapest option—read the fine print to ensure you're getting sufficient coverage.

Check the Company’s Reputation – Look into customer reviews and ratings. A cheaper policy might not be worth it if the company is slow to pay out claims or has poor customer service.

Best (Trustworthy) Home Insurance Companies

Amica: Excellent Customer Service and Customizable Coverage

Amica is known for its top-tier customer service, with a remarkably low complaint rate. They offer various insurance packages that cater to different needs, and their Platinum Choice Package is particularly noteworthy. This package expands coverage to include things like increased liability limits and damage caused by clogged drains or sewage pump failures. Amica also offers easy online claim submission and tracking, making the process quick and convenient. However, if you’re interested in purchasing a policy, you’ll need to do so over the phone, as they don’t offer online booking.

●Coverage Areas: Available in all states except Alaska and Hawaii

●Pros: Great customer service, simple claims process, customizable packages

●Cons: No online purchasing option

Auto-Owners: Personalized Service for Specific Needs

If you prefer a more personalized touch when it comes to your home insurance, Auto-Owners is a great option. Instead of online quotes, you’ll need to connect with an agent to receive a quote, purchase a policy, or file a claim. This makes Auto-Owners ideal for homeowners with special insurance needs or those who want to build a long-term relationship with their insurance agent. In addition, Auto-Owners offers extended replacement cost coverage and inland flood insurance, providing you with more comprehensive protection.

●Coverage Areas: Alabama, Arizona, Arkansas, Colorado, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Tennessee, Utah, Virginia, Wisconsin

●Pros: Wide variety of coverage options, personalized service, many discounts

●Cons: Requires contacting an agent for quotes and claims

Chubb: Luxury Coverage for High-Value Homes

Chubb is a top choice for luxury homeowners looking for comprehensive insurance options. Their coverage is tailored to high-net-worth individuals, offering up to $100 million in personal liability coverage, as well as additional services like HomeScan. Chubb's policy also includes extended replacement cost coverage and item replacement cost coverage—two uncommon benefits that ensure you’re fully protected in the event of a loss. However, you’ll need to contact an agent for a quote, as they don’t provide online pricing.

●Coverage Areas: Available in all U.S. states and Washington D.C.

●Pros: Premium coverage for luxury homes, high personal liability limits, unique additional services

●Cons: No online quoting, requires agent contact

Country Financial: Discounts and Comprehensive Protection

Country Financial offers a wide range of discounts to make home insurance more affordable, including discounts for bundling policies, owning a new home, and maintaining a claim-free history. You can also purchase guaranteed replacement cost coverage, which covers the cost of new building materials and labor without limitations. This makes Country Financial a great choice for those who want comprehensive coverage at a competitive price.

●Coverage Areas: Alabama, Alaska, Arizona, Colorado, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nevada, North Dakota, Oklahoma, Oregon, Tennessee, Washington, Wisconsin

●Pros: Numerous discounts, guaranteed replacement cost coverage

●Cons: Limited online service options

Erie: Standard Coverage with Added Protection for Personal Property

Erie’s home insurance policies are based on replacement cost coverage, ensuring that if something happens to your home, you’ll be able to rebuild with the same quality materials. They also provide replacement cost coverage for personal items, which can be a huge benefit if you have valuable possessions. However, Erie doesn’t offer as many online services as some of its competitors, and you’ll need to get quotes and file claims over the phone.

●Coverage Areas: Illinois, Indiana, Kentucky, Maryland, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, Wisconsin, Washington D.C.

●Pros: Replacement cost coverage for both home and personal property

●Cons: No online quotes or claims processing

USAA: Tailored for Military Families

USAA is often considered one of the best home insurance providers for military families. They offer flexible policies that can be tailored to your specific needs, including coverage for personal property at replacement cost. USAA also provides identity theft protection, which is a valuable addition for those who want to protect against fraud and identity theft. However, these additional services do come at a slightly higher price.

●Coverage Areas: Available in all U.S. states and Washington D.C.

●Pros: Customizable coverage, identity theft protection, replacement cost coverage

●Cons: Prices can be higher for additional services

Conclusion

Home insurance isn’t just a “nice-to-have”—it’s a must-have for anyone who owns a home. By understanding the different types of coverage, knowing what’s excluded, and choosing a trustworthy company, you can protect your biggest investment with confidence. The key is to be proactive, compare options, and choose the best fit for you. Don’t leave the safety of your home up to chance.