How important is Homeowners Insurance in the US?

"What is homeowners insurance?" is a question with broad answers one can not briefly describe without missing essential pieces of information. However, defining it will be the first step one needs to take to answer the question. Homeowners insurance is one of the requisite types of insurance that provides financial protection to most losses and damages capable of tampering with the structural integrity of the policyholder's home of residence. In exchange for their monthly premium charge.

The premium charges offered by different homeowners insurance companies are fixed and can not be changed. Which, however, answers the common question people ask about homeowners insurance, which goes thus: "is homeowners insurance tax deductible?"

Homeowners insurance policy does not only cover the structures in the policyholder's home because it also combines personal insurance policy to financially protect the policyholder from losses and damages to the home's contents, personal possessions, especially valuables and accidents that may occur in the policyholder's home of residence—that is, the policy territory.

What homeowner's insurance policy covers

Homeowner's insurance policy provides coverage for property losses and damages. They cover these damages and losses in three different forms of coverage, which includes interior & exterior damages, personal liability for damage and injuries, and cost of hotels while the policyholder's home is under repair and reconstruction. Examples of its coverages include:

Interior & exterior damages

Interior damage to your home may be due to several factors that include fire, vandalism, hurricanes and other forms of disasters covered in the policyholder's insurance policy. Most homeowners insurance companies usually offer coverage for the expenses you may incur for the repair and reconstruction of your home, should these forms of disasters occur. However, home damages that result from other perils, such as floods and earthquakes, are not covered by a homeowners insurance policy.

Homeowner's insurance policy also covers the contents of the home, such as your clothing, pieces of furniture, and several others if the insured disaster damages them.

Personal liability for damages and injuries

Homeowner insurance also provides coverage for an external body that sustained bodily injuries on your property. You may face a lawsuit if you do not have homeowners insurance policy should a visitor be injured on your property.

Furthermore, homeowners insurance also covers your pet, especially your guard dog. In cases where your dog bites a visitor, your insurance company will have to cover the cost of the visitor's medical bills.

Cost of hotels while the policyholder's home is under repair and reconstruction

This form of coverage may be rare, but there are a few cases where your home may be severely damaged that you can not live and perform your daily activities in it, such as cooking, bathing and sleeping. Homeowners insurance companies usually reimburse the insured with hotels, restaurants, meals and other expenses. At the same time, the policyholder waits to complete the repair and reconstruction of their home. Furthermore, this part of the homeowner's insurance policy is also called additional living expenses.

How homeowners insurance works

Homeowner insurance usually offers coverage for four different kinds of incidents that may occur on the policyholder's property, which includes interior damages, exterior damages, the insured personal assets, and Injuries that may occur to visitors on their property.

The policyholder will request a claim from their insurance company should any of these incidents occur. The insurance company will request a deductible based on their insurance policy states before the claim payment will be reimbursed to the insured.


Suppose a homeowner requests a claim for a particular form of damage caused to their home due to the insured disaster that may cost $15,000. The insurance company will request a specific deductible payment in their insurance policy. If this deductible is $3,000, the insured will receive a $12,000 claim payment from their insurance company.

Does homeowners insurance cover all forms of damages and losses?

No! Homeowners' insurance policy does not cover all incidents that cause damages to your home. These events include natural disasters, such as floods & earthquakes, and various damages that result from an act of God and an act of war.

You will have to check if your homeowner's insurance company offers add-on coverage for specific kinds of natural disasters, such as flood insurance and earthquakes insurance, if your home is located in a state or city that experiences several kinds of natural disasters, such as a flood.

Homeowner insurance does not specifically cover mold in an old home. However, mold may be caused by water seeping into your home's structure due to a burst hot water heater or malfunctioning appliances. Hence, mold in your home will not be covered by homeowners insurance policy but rather the cause of mold.

Is homeowners insurance tax deductible?

According to the Internal Revenue Service (IRS), homeowners insurance premiums are not tax-deductible. However, the nondeductible expenses of a policyholder with a homeowners insurance policy are primarily for those who use their home for only personal purposes. However, you can deduct your homeowners insurance premiums if you use part of your home for business and if you are a landlord that owns a home and receives rental incomes.


Homeowner insurance, also called home insurance, is one of the requisite types of insurance that covers losses and damages caused to your home by various insured disasters, such as fire, vandalism, and theft. They don't cover natural disasters, like floods & earthquakes, and acts of war.

By Mo