Money·2 min read

Wait…How Does Homeowners Insurance Work?

accessibility, smiling woman closing a box
Design: theSkimm | Photo: iStock
May 13, 2022

Insurance is a must-have for all homeowners.Because accidents happen. Think: slip, falls, and fires. And a homeowners insurance policy can cover them so you don’t have to take on the liability for things out of your control.But it doesn’t cover everything.

(PS: To make sure you’re getting the right policy, you’ll need to know the lingo.)

What’s not protected by most homeowners insurance policies?

A few examples:

Your growing business

If your side hustle is picking up, it might be time to add a new policy to cover those costs. Think: legal fees for biz-related accidents. Because homeowners insurance policies offer limited coverage for at-home businesses. And they don’t usually cover businesses run from a separate structure on your property.

Your Van Gogh

If you own expensive artwork, antiques, or jewelry, be sure to ask your agent if those items would be covered in case of fire or theft.Chances are you’ll need to purchase a policy add-on for each pricey possession.

Your car

This part gets a little complicated. Homeowners insurance policies usually cover personal items on your property. Even if they’re in your car, as long as it’s parked on your property. But the car itself is not covered. Hello, auto insurance.

What does homeowners insurance cover?

Slips, falls, and theft, to name a few things. And…

House fires

They’re a nightmare and a common cause for home damages. Your policy will likely cover the repairs, your hotel stay, food costs, and any other living expenses.

Natural disasters

Homeowners insurance policies typically cover damage caused by natural disasters like thunderstorms, hurricanes, or hail. Along with any living costs you need if you get displaced. But earthquakes and flooding caused by natural disasters probably require extra coverage.


Homeowners insurance policies get it if vandals get you. But policies usually have a cap for how much they’ll pay, so be sure to ask about it.

How do I choose the right policy?

Put coverage first.

Experts say one of the most common mistakes homeowners make is choosing a low-price policy, only to find out it doesn’t provide enough coverage. If you live in a flood zone, don’t skip the add-ons. Or a good flood insurance policy. Depending on your location, some states require flood insurance, especially if you’re in a flood zone.

Shop around.

Compare policies in your area to find the best deal with the right coverage for you.


No homeowner can afford to skip over homeowners insurance. But before making your selection, read the fine print to make sure all your bases are covered.

Subscribe to Skimm Money

Your source for the biggest financial headlines and trends, and how they affect your wallet.