Home insurance, also commonly called hazard insurance or homeowners insurance (often abbreviated in the real estate industry as HOI), is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one's home, its contents, loss of its use (additional living expenses), or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home.
The cost of homeowners insurance often depends on what it would cost to
replace the house and which additional riders—additional items to be
insured—are attached to the policy. The insurance policy itself is a lengthy
contract, and names what will and what will not be paid in the case of
various events. Typically, claims due to earthquakes, floods, "Acts of God",
or war (whose definition typically includes a nuclear explosion from any
source) are excluded. Special insurance can be purchased for these
possibilities, including flood insurance and earthquake insurance. Insurance
must be updated to the present and existing value at whatever inflation up
or down, and an appraisal paid by the insurance company will be added on to
the policy premium.
The home insurance policy is usually a term contract—a contract that is in
effect for a fixed period of time. The payment the insured makes to the
insurer is called the premium. The insured must pay the insurer the premium
each term. Most insurers charge a lower premium if it appears less likely
the home will be damaged or destroyed: for example, if the house is situated
next to a fire station, or if the house is equipped with fire sprinklers and
fire alarms. Perpetual insurance, which is a type of home insurance without
a fixed term, can also be obtained in certain areas.
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