Home Insurance: What It Covers and How to Compare It

What does home insurance actually cover?

You are buying a house, or your renewal just arrived, and the quote is full of terms nobody taught you. Here is the short version. Home insurance pays to fix or rebuild your house and replace your belongings after a covered loss, like a fire, a storm or a theft. It also pays when you are responsible for someone else’s injury or damage.

The big gaps are floods and earthquakes. A standard policy covers neither, and those are the gaps worth closing before something happens.

Most policies bundle six kinds of cover.

• House. The building and anything attached to it. Insurers call this the dwelling limit. The other parts are usually a share of it.
• Other buildings. A detached garage, shed or fence. Most policies set this near 10% of the house amount.
• Belongings. Furniture, clothes and electronics, with low caps on jewelry and art.
• Living costs. Rent and extra expenses while your house is being repaired. It can be capped at 10% to 20% of the house amount.
• Liability. If you are responsible for someone’s injury or damage, this pays, including court costs if you are sued. An umbrella policy can add more.
• Medical payments. Medical bills for a guest hurt at your home.

No law requires home insurance, but your mortgage lender will. Renting? See renters insurance basics. For covered causes, read home insurance basics.

Does home insurance cover floods and earthquakes?

Usually not. Most home policies exclude flood damage, so flood cover is a separate policy. You can buy it from the federal flood program, called the National Flood Insurance Program (NFIP), or from a private insurer. Earthquakes are excluded too, though many insurers sell an earthquake add-on.

Three flood facts change what you do:

• It starts late. A new federal flood policy usually takes effect 30 days after you buy. Buying while a storm approaches does not work.
• It has a ceiling. For a one-to-four-family home, the federal program pays up to $250,000 for the building and $100,000 for belongings. If a rebuild would cost more, you cover the rest.
• It runs on short extensions. Congress has to keep renewing the program, and it has lapsed twice since October 2025. During a lapse, no new policies can be sold, but existing ones run to the end of their term. The current approval ends Dec. 11, 2026, so buy new cover well before then.

Do not count on the flood map to tell you that you are safe. Lenders require flood cover in high-risk zones, where the yearly chance of a flood is about 1% or more. Yet more than half the homes flooded by Hurricane Harvey sat outside them. Our flood insurance guide goes deeper.

What else does home insurance leave out?

Wear and tear, leaks that keep running, pests and mold cleanup are commonly excluded. Sewer backup, foundation damage and building code upgrades are often sold as add-ons, which insurers call endorsements. Short-term rentals are usually not covered either. If one of these worries you, ask for it by name before you buy.

How much coverage do I need on my house?

Enough to rebuild it, not the price it would sell for. Your house amount should match what a rebuild would cost with today’s labor and materials. A sale price includes the land and the neighborhood, so the two can be far apart.

Here is an example with made-up numbers, not a quote. Say your house would sell for $520,000, but $140,000 of that is land. Rebuilding would cost $380,000. You would insure it for $380,000, because land cannot burn. Insuring for $520,000 would mean paying for cover you could never use.

Ask your insurer or agent for a rebuild estimate, and ask again each year, since building costs change.

What is the difference between replacement cost and actual cash value?

Replacement cost pays today’s price to repair or replace something, with nothing taken off for age. Actual cash value takes off depreciation, which is the value lost to age and wear. Texas regulators give a roof example. A roof costs $10,000 to replace and is 20 years old, so its actual cash value is $4,000. If your deductible is also $4,000, the policy pays nothing.

With replacement cost, you are often paid in two checks. The first comes after depreciation and your deductible. The second comes once you show the repair bills. Not everyone defines actual cash value the same way, so read how your policy pays losses.

What happens if I insure my house for too little?

Some policies shrink even small claims. Many have a minimum-coverage rule. In Texas, most companies require at least 80% of rebuild cost, and some require 100%. Fall below it and a claim can be cut down to size.

Back to the example. Eighty percent of $380,000 is $304,000. If you carry $228,000, three-quarters of that, a $20,000 repair might pay about $15,000 before your deductible. Not every policy has this rule.

Ask about inflation guard, an add-on that raises your limit automatically as building costs rise.

What is a percentage deductible, and what could it cost me?

A deductible is the part of a claim you pay before the insurer pays anything. A flat deductible is a fixed amount, like $1,000. A percentage deductible is a share of your house amount, so it grows when your coverage does. Typical percentages run from 1% to 5%.

Take the same made-up house, insured for $380,000. A hail storm damages the roof, and the repair bill is $12,000.

• With a $1,000 flat deductible, you pay $1,000 and the insurer pays $11,000.
• With a 2% deductible, you pay $7,600 and the insurer pays $4,400.
• With a 5% deductible, the deductible is $19,000, which is more than the repair. You pay all $12,000.

Same storm, same roof, a very different bill. So before you sign, ask for your wind, hail and hurricane deductibles in dollars. Then ask what triggers each one. A hurricane deductible applies only to hurricanes, though some states start it when a warning is issued, before landfall. A wind and hail deductible applies to any wind damage, so it matters in tornado and hail country too.

The industry group Triple-I counts 19 states and D.C. with hurricane deductibles, mostly on the Gulf and Atlantic coasts. Rules and triggers differ. In Florida, insurers must offer $500, 2%, 5% and 10% options, with exceptions by home size. The deductible applies once per calendar year, and storm-proofing your home earns you a lower deductible or a discount.

A higher flat deductible lowers your premium, the price you pay for the policy. Texas regulators say moving from $500 to $1,000 can cut it by up to 20%. Pick an amount you could pay tomorrow. Our wind and hail deductible guide has more.

Why did my home insurance bill go up?

Usually for two reasons. Things about you or your house changed, and the whole market is getting more expensive.

Insurers price a house using its age, the age and material of the roof, where it sits, what it would cost to rebuild, your claims history and, in many states, a credit-based score. Brick and stone cost less to insure than wood frame. In most states, an insurer cannot use that score as the only reason to raise your rate, cancel you or refuse to renew. Ask your insurer what changed at renewal.

The wider market has moved a lot. A 2026 study from the NAIC, the group of state insurance regulators, put the 2024 average at $1,600 per policy. That figure blends in renters, condo and mobile-home policies and leaves out New York, so it is not a price for your house. Between 2018 and 2024, average premiums rose 18% to 43% after inflation, depending on region.

Your claims history is part of the price, and it follows the house. Insurers pull a report called a CLUE, which lists seven years of claims on a property, even those made by earlier owners. You can get a free copy each year. Check it for errors before you shop. Buying a home? Ask the seller for the property’s report.

What if no insurer will cover my home?

Most states run a last-resort plan for owners who cannot find coverage. It is often called a FAIR Plan. Treat it as a safety net, not a bargain. It sells basic cover and costs more than a standard policy. Keep shopping the regular market while you are on it.

Entry rules are strict. In Texas, you need at least two refusals from licensed companies first. Florida’s last-resort insurer is Citizens.

Timing matters. Citizens cannot take new policies or added coverage during a tropical storm or hurricane watch or warning, and Texas’s coastal wind insurer will not sell while a hurricane is in the Gulf. Do not wait for a storm to start shopping.

What should I do if my insurer drops me?

A nonrenewal letter is stressful, but you are not out of options. Ask for the reason and check how much notice you get. Rules differ by state. In Texas, for example, you get 60 days’ notice and a written reason. Use that time to get quotes, starting the day the letter arrives.

Is it cheaper to bundle home and auto insurance?

Often, but not always. Insurers commonly discount for holding more than one policy with them, but a discount off a high price can still lose to a rival’s lower price. So compare the bundle with the cheapest pair of separate policies. In Texas, an insurer can no longer force you to buy both. Our bundling guide shows how to check your own numbers.

What to do next

1. Get a rebuild estimate. Ask your insurer or an independent agent, then set your house amount from it, not from the sale price.
2. Write down the cover you want. List the house amount, replacement cost, living-cost limit and any add-ons. Use the same list for every quote.
3. Turn deductibles into dollars. Ask what the wind, hail and hurricane deductibles equal on your house amount, and what triggers each one.
4. Price flood cover on its own. Ask your lender or insurer which flood zone your address is in. Remember that a new flood policy usually takes 30 days to start.
5. Request your CLUE report and fix any errors before you shop.
6. Get at least three quotes, including one from an independent agent. If your state has a price tool, use it. Texas has HelpInsure. Ask about discounts for alarms, sprinklers and impact-resistant roofs.
7. Keep your old policy until the new one is in force. Do not cancel until you have the new policy or a written statement of coverage.

The numbers in one place

These are limits and averages, not quotes for your house. The source list below gives dates.

Bottom line

If you do not have flood cover, price it now. It is a separate policy and it takes about 30 days to start. If your house amount came from the sale price, redo it from a rebuild estimate. If your storm deductible is a percentage, turn it into dollars, and lower it if you could not pay that amount tomorrow. If your insurer drops you, start shopping the day the letter arrives, and use a FAIR Plan only as a last stop.

Home insurance by state

Hazards, rules and last-resort plans differ sharply by state. Pick yours: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

Our methodology page explains how we use sources.