homeowners insurance
Insurance protecting a home and its contents against damage, theft, and liability — required by most mortgage lenders.
Example
“The homeowners insurance claim for the fire damage covered rebuilding costs minus the deductible.”
Memory Tip
HOMEOWNERS — required if you have a mortgage. Covers structure, contents, and liability.
Why It Matters
Homeowners insurance protects one of your largest financial assets and is typically required by lenders before they will approve a mortgage. Without it, you could face devastating financial losses from disasters like fires, storms, or theft, potentially losing your entire home investment and being unable to rebuild.
Common Misconception
Many homeowners believe their homeowners insurance covers all damage to their property, but most policies exclude certain events like flooding and earthquakes. You often need separate policies or additional coverage riders to protect against these specific perils, which can leave you with unexpected gaps in protection.
In Practice
Suppose you purchase a home for 350,000 dollars with a mortgage. Your lender requires homeowners insurance, and you obtain a policy with a premium of 1,200 dollars per year. When a kitchen fire causes 50,000 dollars in damage, your insurance covers the repairs minus your 1,000 dollar deductible, paying out 49,000 dollars and protecting your home investment from catastrophic loss.
Etymology
Modern property insurance — comprehensive coverage for homeowners.
Common Misspellings
Compare insurance quotes and save
Related Terms
More in insurance
Other insurance terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.