Homeowners’ insurance works the same way as other forms of insurance. Your premium is the amount of money you must pay the insurance company in order to qualify for coverage, and your deductible is the amount of money you must pay if your property is ever damaged. In other words, when you qualify for insurance, you’re reimbursed for any amount over your deductible, up to the policy limit. Your policy may differ from others in some ways, but you can generally expect to pay a higher premium for a lower deductible, or vice versa.

Homeowners’ insurance comes in different levels of coverage, labeled from H01 to H08, with higher numbers signifying broader and more comprehensive coverage. For example, H01 covers only a set list of perils, such as fire, wind, and hail. Higher levels protect you from other threats, like damage and theft, and can cover you against liability for injuries or accidents that happen on your property.

Determining value It’s important to know how your insurance company values your property. Click here to learn more!

Basic policies don’t usually cover larger disasters, like earthquakes or floods. For that, you’ll either need to purchase separate policies or pay for special riders, or additional coverage, which function as amendments to your main policy. Riders vary in cost depending on where you live. For example, earthquake insurance is cheap in the Midwest, but expensive in California. And the opposite is true for tornado and flood insurance.

The lowest level of homeowners’ insurance is not likely to protect you from ______. Liability Fire Hail

That’s incorrect! Basic policies cover a set list of perils, such as fire, wind, and hail, while higher levels protect you from other threats, such as liability, damage, and theft.

That’s correct! Basic policies cover a set list of perils, such as fire, wind, and hail, while higher levels protect you from other threats, such as liability, damage, and theft.