Home insurance pays to repair or replace your home and belongings after covered damage, such as a fire or a break-in, and protects you if someone is hurt at your place. Renters insurance does the same for a renter's belongings. This guide explains the parts of a policy and what they usually leave out, using information from state insurance regulators and federal agencies. General information only, not insurance or legal advice: your own policy's wording decides what is covered. Facts checked November 4, 2026.
What a home policy usually includes
| Coverage | What it pays for | In a renters policy? |
|---|---|---|
| Dwelling | Damage to the house itself from a covered cause. | No: the building owner's policy covers the building. |
| Other structures | Detached buildings such as a garage, shed or fence. | No |
| Personal property | Your belongings: furniture, clothes, electronics. | Yes |
| Additional living expenses | The extra cost of living somewhere else, such as a hotel and meals, while your home is repaired after a covered loss. | Yes |
| Personal liability | Claims if you are responsible for someone else's injury or damage to their property. | Yes |
| Medical payments | Small medical bills for guests hurt at your home. | Often |
Replacement cost or actual cash value
Replacement cost coverage pays to repair or replace your house and belongings at current prices. Actual cash value coverage pays replacement cost minus depreciation, the value lost to age and wear, so it usually pays less and you pay more yourself (Texas Department of Insurance). The deductible is the part of each claim you pay yourself; a higher deductible usually means a lower premium.
What is usually not covered
- Floods. Most homeowners insurance does not cover flood damage; only flood insurance does (FloodSmart.gov, FEMA). You can buy it through the National Flood Insurance Program or a private insurer. A new flood policy generally takes effect 30 days after you buy it, so do not wait for a storm warning.
- Earthquakes and earth movement. Usually excluded; some insurers add it for an extra premium.
- Wear and tear, and lack of maintenance. Insurance is for sudden damage, not for an old roof or a slow leak left alone.
Insurance and your mortgage
Lenders require homeowners insurance so the home that secures the loan is protected. Many borrowers pay the premium through an escrow account: the lender keeps part of each monthly payment and pays the insurance bill when it is due. If your coverage lapses, the lender can buy a policy and charge you for it, after giving you notice; this force-placed insurance may protect only the lender and often costs more than a policy you buy yourself (CFPB).
Renters insurance
Renters insurance covers your belongings, your liability and the extra cost of living elsewhere after a covered loss. It does not pay to fix the apartment or building; the owner's policy does. No law requires it, but a landlord may require it in the lease (Texas Department of Insurance). Renters can buy flood insurance for their belongings too.
Make a home inventory
- List your belongings with the date you bought them, what they cost and the serial numbers of expensive items.
- Take photos or a video of every room, including closets, the garage and storage areas.
- Keep the list and receipts somewhere safe away from home, such as a fireproof box or an online account.
Frequently asked questions
Does homeowners insurance cover flooding?
Usually not. Most homeowners and renters policies exclude flood damage; you need a separate flood policy, which generally starts 30 days after you buy it.
What is the difference between replacement cost and actual cash value?
Replacement cost pays what it costs to repair or replace things today. Actual cash value subtracts depreciation for age and wear, so it pays less.
Is renters insurance required?
No law requires it, but a landlord can require it in the lease.
Does renters insurance cover the building?
No. It covers your belongings, your liability and extra living costs after a covered loss. The building is the owner's responsibility.
Why does my mortgage payment include insurance?
Many lenders collect the premium in an escrow account with each payment and pay the insurer for you, so the coverage the loan requires does not lapse.
Where can I get help with an insurance problem?
Your state's department of insurance answers questions and takes complaints about insurers licensed in your state.