Purchasing a home is a big milestone, and knowing what to expect will help set you up for success. One of the pieces to the puzzle that sometimes gets overlooked or misunderstood is home insurance, here’s some important information you should know.
What Is Home Insurance?
Sometimes bundled with car insurance, homeowners insurance offers financial protection if something unexpected happens to your home. In exchange for a monthly or annual payment (called a premium), your insurance company helps cover certain losses, damages or liability depending on your specific policy.
Most lenders require homeowners insurance before closing on a home, and having coverage is an important aspect of homeownership.
What Homeowners Insurance Typically Covers
Policies can vary, but most insurance plans include coverage for certain adverse weather events, damaged or stolen belongings (such as furniture, clothing, electronics, etc.), injury occurring on your personal property, and more. Insurance plans vary, and you’ll have to work with your chosen provider to iron out the details on what exactly will be covered.
Some common exclusions include flood or earthquake damage and normal wear and tear. These situations may require a separate policy and incur additional costs.
How Deductibles Work
Your deductible is the amount you pay out of pocket before insurance coverage kicks in. For example, if you have a $1,500 deductible and file a $10,000 claim to your insurance company, you would pay the first $1,500 and the rest would be covered by insurance. It usually works out like this: Higher deductibles correlate to a lower monthly cost, while lower deductibles lead to a higher monthly cost for your coverage.
Keep in mind: If your home ever requires a significant repair, and your deductible is particularly high, you could consider a cash-out refinance to get the cash you need to meet your deductible and get the job done.
Why Prices Fluctuate
Home insurance premiums aren’t set in stone. Rates can change over time based on a number of different factors, some related to your home and others outside of your control. Insurance prices may fluctuate due to changes in weather patterns, more claims being made in your area, rising costs of construction or labor, updated risk assessments and more. The details of your home can also affect your premium, such as the age of your roof, construction materials, and location.
Why Homeowners Insurance Matters
Although the process can be complex (and underinsurance remains a real challenge for some), real-world events show that homeowners are sometimes faced with unexpected damages that require them to make a claim. For example, a series of severe storms that struck the north‑central United States in mid‑August 2025 caused widespread roofing damage from large hail and high winds, resulting in millions of dollars in insured losses. In situations like that, home insurance can offer critical support to help families recover.
Your home is likely your biggest financial investment, and being prepared for whatever comes your way can help you make decisions with confidence and protect one of your most valuable financial assets.
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