Homeowners Insurance Basics
Homeowners insurance protects the home that secures your loan, which is why every lender requires it. Beyond that requirement, it protects the largest purchase of your life — and it is worth understanding rather than treating as a box to check.
What a policy typically covers
- The dwelling — the structure itself, against covered perils like fire and storms.
- Personal property — your belongings inside.
- Liability — if someone is injured on your property.
- Additional living expenses — if a covered loss forces you to live elsewhere temporarily.
How it affects your mortgage
Your insurance premium is usually collected monthly through escrow, so it is part of your total payment. A higher premium means a higher payment — which is why shopping your coverage matters. Some risks, like flood, are typically separate policies, and in some areas a lender will require them.
Shop your homeowners insurance every year or two, and ask about bundling it with auto. Premiums vary widely between insurers for the same coverage, and since it flows through your escrow, a lower premium directly lowers your monthly payment.