Homeowners' Insurance

Homeowners' insurance provides protection against losses from damage to an owner's home and its contents. People who rent may buy a type of homeowners' insurance called tenants' insurance or renters' insurance, which covers only the policyholder's personal property. Homeowners' and tenants' policies are package policies, which means they provide both property and liability coverage for a variety of perils. Package policies also are called multiple-peril insurance.

Homeowners' property insurance protects against losses from such perils as fire, tornadoes, vandalism, theft, explosion, riot or civil disturbance, and damage by automobiles, aircraft, and other vehicles. Homeowners' policies do not cover damage caused by earthquakes and floods, though such coverage may be purchased separately. Perils for which property insurance cannot be obtained include war and nuclear radiation.

Homeowners' policies limit the amount of coverage on such items as cash, securities, coin collections, jewelry, silverware, guns, and furs. Property owners who wish to fully insure such valuables may buy additional coverage as part of their homeowners' policies.

An insurance company typically requires a policyholder to provide proof of the ownership and the value of lost or damaged property before it pays compensation. Thus, policyholders should have evidence of their possessions, such as lists, sales receipts, appraisals, or photographs. The evidence should be kept in a safe-deposit box or other secure place outside the home.

Homeowners' liability insurance protects a policyholder if a visitor is accidentally injured while on or while using the policyholder's property. The insurance company may pay damages even if the person claiming injury does not sue the policyholder. If the policyholder is sued and found not responsible, the insurance company still pays all of the policyholder's legal expenses.