Coverage essentially refers to the amount of protection that your policy provides. More coverage means more protection — and a more expensive quote. However, it's also important to note that home insurance policies contain several different types of coverage that each apply to different things:

All of these protections come standard in the most common home insurance policy, known as an HO-3. If you have a mortgage, your lender will require a certain minimum of dwelling coverage to protect the house. Otherwise, you have the option to adjust these coverages to fit your needs.

Once you've got your personal details and a good picture of your coverage needs, you're ready to start requesting quotes from insurance companies. We recommend starting with the providers that we've identified as the best in terms of service quality, benefits and affordability. If you'd like to know what the baseline cost of coverage is, we also keep tabs on the average cost of homeowners insurance.

If you've ever had a question about how home insurance works, our experts have probably explored the answer in one of our detailed guides.

What is included in Home Insurance?

Standard homeowners insurance provides coverage in three major areas: your physical home, the belongings inside and your personal liability to third parties. These areas are covered against damage from causes like fire, wind and theft

How does homeowners insurance work?

When your house or belongings suffer damage that's caused by a peril — such as fire, wind or theft — that's covered by your policy, you can file a claim requesting your home insurance company pay for the costs of making you whole. The insurer then begins the process of verifying and paying your claim.

Do you have to have home insurance ?

If you currently have a mortgage balance, your lender probably requires that you carry homeowners insurance to protect your property. Even though there's no legal requirement for homeowners to have insurance, the lender requirement means that most people do need an active policy.

What is the best home insurance ?

The "best" homeowners insurance policy is one that provides enough coverage to protect the full value of your home and assets at a monthly rate that you can afford. Finding the best policy also requires you to understand whether you face any risks that aren't covered by standard insurance — like flooding.

Insurance companies often seek to compensate for an increase in their loss ratios by raising the rates they charge for coverage.

In states where insurers post very high loss ratios, rates tend to increase significantly in the following years. For instance, California's devastating Camp Fire in 2018 led to $16.5 billion in wildfire damages. As a result, the state's insurance industry experienced a loss ratio well over 100%, and their rate filings for 2020 reflected the most aggressive increases in the country.

Rate filings also reflect the rising cost of construction. Because homeowners insurance covers the cost of rebuilding or repairing residential structures, insurer rates are influenced by increases in the local price of materials and labor. Where states have experienced severe disasters and a spike in construction demand, shortages can lead to insurers raising their rates.

If your home insurer raises your rates year after year, there are plenty of competitors willing to offer you a quote to switch providers. So long as you aren't compromising on the amount and quality of coverage, switching insurers is one of the most effective ways to control your costs. While you may miss out on your old insurer's loyalty discount, providers often offer discounts for new customers too.

If you have a bundled policy that you want to keep, another option is to raise your home insurance deductible. While this means you're on the hook for a bigger share of the upfront costs in any claim situation, accepting a higher deductible should lead directly to lower premiums.

What if my old insurer won't renew my policy?

Sometimes an insurer will inform you that your home insurance policy will not be renewed. Depending on the reason, your options for finding an affordable alternative will vary. If you've been canceled because your property has an unusual risk factor — an old roof, for example — addressing that issue may open a path to renewal with your old provider.

Finding cheap coverage gets much harder if insurers think you live in an area that's at high risk of a wildfire or other natural disaster. In such instances, we recommend looking to either your state's Fair plan options or an assigned risk provider. While it's likely that these options will cost more than your old insurance, those costs are still preferable to rebuilding your entire house out of pocket.